There they built a mighty industry that pumped out hundreds of movies each year and, later, thousands of television shows that have captured the world’s imagination. Now, they’re running away from here.
Primarily due to production tax incentives offered in 41 other states and numerous foreign territories, fewer and fewer shows are being shot in Southern California. States with rich credits such as Georgia, Louisiana and New York have increasingly been siphoning work from our once-dominant region since the turn of the new century.
According to director and managing economist at the Milken Institute’s California Center, Kevin Klowden, the number of production jobs in California decreased by about 4,500 between 2005 and 2012.
Based on the industry’s overall growth rate, California should have added 7,900 jobs in that period — marking an actual total loss of about 12,400 positions. The state had an average of 115,000 total production jobs over that period.
Planning to shoot out of state has become the new normal for studios and producers, and the situation has accelerated in the past five years as competition for production widens throughout the world.
“Investment tax credits and cash rebates are wholly driving the fiscal production direction of our industry,” said Louis Friedman, line producer for the Afghanistan-set war movie “Lone Survivor.”
“It’s the single most important financial decision made in the earliest preparation of bringing a script to life. It wholly affects both the creative look and financial bottom line from day one,” Friedman said.
That film saved $4.5 million on its nearly $40 million budget by shooting in New Mexico, which offers tax credits of 25 percent to 30 percent. That’s more than it would have saved with California’s incentives — if it qualified at all under California’s lottery system, a risk many producers don’t want to take.
“It’s become a very competitive market and, yes, production incentive is definitely part of the equation now when we’re making location decisions,” explained MaryAnn Hughes, vice president of film and television production planning for Walt Disney Studios.
“Honestly, I don’t think that there is a production where we don’t at least look at the locations where they have viable production incentives.”
For example: in December, James Cameron announced that he will shoot three “Avatar” sequels in New Zealand (substantial portions of the original were made in El Segundo and Playa Vista). At the same time, the Wellington government instituted new regulations that could earn the productions 25 percent rebates on at least $431 million that is expected to be spent there instead of here.
With up to 30 percent, uncapped refundable tax credits for in-state production spending, Georgia and Louisiana have lured major motion pictures such as “The Hunger Games: Catching Fire,” several “Twilight” sequels, “Django Unchained,” “Flight” and many more in recent years. New York, which can also return upwards of 30 percent to productions, has a $420 million annual cap on tax credits.
Compare that to what California has offered since 2009: a tax credit of 20 percent, or 25 percent for independent films and relocating TV series, capped at $100 million per year.
The Empire State’s relative largesse was undoubtedly a factor in bringing “The Tonight Show,” which has broadcast from Burbank since 1972, back to Manhattan when Jimmy Fallon takes over from Jay Leno this year.
“A show as iconic as ‘The Tonight Show’ leaving L.A. isn’t so much an economic blow as it is a blow to the city’s ego and its pride,” Klowden said in an interview when the move was announced in March 2013. “And it shows a lot of people that L.A. is not as necessary in the entertainment industry as we used to be.”
New York is a bigger factor in a more troubling metric.
“In 2005, there were only seven one-hour television series shot on location in New York,” Vans Stevenson, the Motion Picture Association of America’s senior vice president for state government affairs, pointed out. “Today, there are 19.”
California’s market share of one-hour network series – the highest-spending and most steadily employing sector of the TV business, which doesn’t qualify for the state’s incentive – shrunk from 65 percent in 2005 to just 36 percent in 2012. Things look significantly worse for SoCal regarding the nine-figure budget blockbuster movies that generate hundreds of jobs.
Of the 26 highest-budgeted studio tent-pole films made in 2012-2013, only six were partly filmed in California and just one, “Star Trek Into Darkness,” entirely so, according to Stevenson from the MPAA, the lobbying and trade organization for the six major studios.
A feature can’t cost more than $75 million if it wants to even apply for California tax credits. Many other types of productions such as commercials, sporting events, music videos, porn, animation, reality programs, documentaries and most half-hour television shows are not eligible for California’s program.
None of this has escaped local politicians’ attention. Seeking to curb runaway production, some Sacramento lawmakers will push this year to expand California’s $100 million annual tax credit program. Assemblyman Raul Bocanegra, D-Arleta, wants to make the annual program “substantially bigger” than its current cap, he said.
While Bocanegra hasn’t said how big California’s annual pot should be, he introduced legislation to expand the program last year and said that he will reintroduce the bill this year.
Other lawmakers, like Assemblyman Mike Gatto, D-Burbank, want to look at including premium cable shows, like HBO programs, hour-long network dramas and big budget films, in California’s tax incentive program.
Los Angeles Mayor Eric Garcetti came into office last summer pledging to do something about runaway production. He appointed a film czar for the city, former studio executive and Academy of Motion Picture Arts and Sciences President Tom Sherak, to help persuade Sacramento politicians to increase and expand California’s incentives and show his colleagues in the industry that shooting near their Burbank offices and Beverly Hills homes is worth it.
“We have been beaten down in the past,” Sherak said of efforts to improve California’s tax credit program. “We have heard, ‘No, this is just for the fat cats.’ Bottom line is, the people we are trying to help are not fat cats, whose jobs aren’t going to change by going somewhere else. It’s taking care of the people here that concerns us.”
Some argue, of course, that production tax credits are, well, wrong.
“Compared to all the businesses that are leaving (the state), Hollywood is an insignificant entity,” argues Kris Vosburgh, executive director of the Howard Jarvis Taxpayers Association.
“Keep in mind: These people in Hollywood, they’re excellent at public relations. They’re going to use the small worker as a human shield, saying ‘Look! We’ve got 50,000 people here, their jobs are in jeopardy!’ Well, it’s not the state of California that’s putting their jobs in jeopardy. It’s the studio heads who are basically using this as an opportunity to shake down the politicians. And the politicians, they’re easy. They like to have celebrities come to their fundraisers or donate to their campaigns.”
It’s apparent that the production flight has caused havoc among the vast production crew and vendor communities that have thrived in Southern California for most of the last century.
“We’re approximately 25 percent unemployed now, and we are right in the peak of what is traditionally television season,” said Ed Brown, business agent for North Hollywood-based Local 44 of the International Alliance of Theatrical Stage Employees, the union which represents property craft workers (set decorators, prop makers, construction coordinators, etc.).
“I would speak about feature season, but there is no real feature production going on throughout the state of California to speak of,” continued Brown, who noted that from 2010 to 2012, Local 44 lost about 1 million contribution hours for health benefits due to underemployment, members moving out of state for steadier work or seeking new careers.
“There are some low-budget projects that are being produced, but they create a lesser number of jobs. And the applicable contract applies to the budget of the production. Network television shows pay a higher wage than a lower-budget production, be it either a cable television show or a low-budget feature.”
Any rank-and-filers from California thinking of heading Down Under for the big “Avatar” shoots had better think again. Although Cameron is declaring himself a resident Kiwi, Film New Zealand, the country’s film commission, likes touting the fact that most local production workers are independent contractors, and there are no union fringe benefits nor payroll taxes charged for local labor.
That noted, an exodus of expertise and infrastructure from Southern California is underway.
“In the last five years, we have created small LLC companies in New York, Massachusetts, Georgia, Louisiana, New Mexico and London,” said Gregg Bilson, whose Sunland-based Independent Studios Services has supplied props, weapons, graphics and more to the industry since 1977. “In that span, a full 50 percent of all of our revenues now come from these small entities outside of California.”
“There are friends of mine who have had to sell their houses and move to Atlanta or New Orleans,” observed Tim Hillman, a location manager who recently came off a seven-year run on “CSI: NY” (shot out here) and who is now working on the upcoming sitcom “Growing Up Fisher” — with a team less than half the size of what he’s been used to.
“I am fortunate enough to have people that know me who like to work with me, so they’ll call me to see if I’m around,” Hillman acknowledged.
“That’s worked out pretty well for me, but the time between phone calls has gotten a lot longer and the frequency of the phone calls has been a lot less. There are people who aren’t as established as me whose phones don’t ring for months.”
So they leave for busier climes.
“As the state has waited to get into the competition, we now have other centers that are also drawing away our vendors and crew,” observed Paul Audley, president of the nonprofit location permit facilitator FilmL.A. “Now, in addition to the money, those places are becoming close to equal on infrastructure that’s available.”
Producers and analysts agree that anything that can be done to make L.A. more production-friendly – lower or waived fees (like the City Council recently passed for television pilots), easier permitting, more welcoming merchants and neighborhoods – is welcome. But they also insist that more competitive and stable state incentives, rather than ones that go up for legislative debate every year or two, are the key to keeping shows here.
“The incentive itself is not complete, there’s more it could do,” Milken’s Klowden said. “Network television is not included, big-budget movies are not included, and they both should be.”
“It’s fair to say, all things remaining equal, we would like to be able to keep our productions in California,” said Disney’s Hughes, who acknowledged studio supervision and crew/infrastructure base remain superior here.
The company’s current release, “Saving Mr. Banks,” was one of the few major studio features made almost entirely in Southern California. It was also one of the few that qualified for the state’s tax credit.
Bob Strauss, Dakota Smith
L.A. Daily News
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