Does California need to “save” its film industry? California Gov. Jerry Brown has measures sitting on his desk that would extend the state’s film and tax credit laws into the 2016-17 fiscal year.
Two measures, similar in effect, were put on the governor’s desk on the final day of the legislative session, Aug. 31. State Sen. Ron Calderon’s (D-30th District) SB 1197 and Assemblyman Felipe Fuentes’ (D-39th District) AB 2026 are attempts to halt “runaway production,” the industry’s term for film and TV work that gets done outside the state or country. Brown has until the end of this month to sign.
According to a study by the L.A. County Economic Development Corp., during its first two years, the film tax-credit program will create more than $3.8 billion in economic output, support 20,000 jobs and could return as much as $200 million to state and local governments. Sounds like a no-brainer, right? Not so fast.
A film tax-incentive program isn’t necessarily the most popular measure for a politician to back, even in — or especially in — California. Many residents reason that film production would remain in California regardless of incentives and don’t believe the industry should get preferential treatment.
Eric Witt is a film incentives and finance consultant who used to be the chief of staff of former Gov. Bill Richardson of New Mexico. During that time, he worked with Gov. Richardson to develop one of the most successful state tax-incentive programs for film and television. He says the incentives are important for California.
“There are a lot of moving parts — policymakers, people working in the industry, said Witt. “They’ve never had to come together like this before.”
According to Variety, California currently provides $100 million in annual tax credits for productions, with a 25% credit. This is smaller than many other states’ programs, and the demand for credits is high. Last June, a lottery was held to select 28 projects to receive the tax breaks from the more than 330 applicants.
Witt observed that people assume that the business is already rooted in the state, and therefore, doesn’t need any more assistance. “It’s a protective game in California, as opposed to an attractive game.”
Witt is a former executive vice president of Finance at Dino De Laurentiis and co-founder and CFO at Asylum Entertainment, so he knows his way around the film industry. But as a native of New Mexico, he was drawn to the challenge of bringing the film industry to his home state.
“We’re widely seen as an industry leader with our program, not only nationally, but internationally,” Witt said. “We have trained crew in New Mexico — the largest outside of New York City and Los Angeles. We also have four-year universities to develop above-the-line talent.”
“As of late we’ve had ‘The Avengers,’ ‘Lone Ranger,’ in the state,” he said. “And we currently have ‘The Last Stand,’ with Schwarzenegger, and ‘Breaking Bad,’ the TV series.”
A study by payroll-accounting companny Entertainment Partners reportedly shows that California has lost 90,000 showbiz jobs and $3 billion in wages between 2004 and 2011 as a result of runaway production, Variety reported. The tax incentives have stopped the bleeding for now but could pick up if the measures are not approved.
So does New Mexico’s success mean California’s loss?
“No, if New Mexico wins, I don’t think Hollywood loses,” Witt said. “The U.K., Australia, even China is making a push to take production away … it’s about bringing back stuff that was leaving the U.S.”
“Media production is only going to increase,” he added. “I don’t see it as New Mexico directly competing with California. It’s about keeping films in the United States, not having them go to Canada, the U.K. or Australia.”
But now that the measures have passed the house, will the governor sign by the end of the month deadline? Witt is hopeful.
“I think the film industry in California would like to hear that they’re still supported.”