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Arnold to the rescue

Governator to rein in runaway prod'n with tax lures

Arnold is looking to terminate runaway production.

The California governor is completing his long-awaited legislative proposal to match the generous tax incentives from other states and countries that have been drawing the movie biz outside of the Golden State.

While exact details have yet to be worked out, plan is expected to give tax credits for productions that spend at least 75% of their budget in California, with a relatively high maximum credit.

Incentives won’t reach the levels of some particularly competitive states, most notably Louisiana. But staffers in the governor’s office and the California Film Commission, who crafted the proposal, are confident that if California’s credits come close to those of other states, the added advantages of lower travel costs and a better talent pool and climate will make up the difference.

“The governor believes strongly that one of the reasons people voted for recall was to bring business back to the state,” said Bonnie Reiss, a senior adviser to Gov. Schwarzenegger. “The entertainment industry affects many different businesses in California, big and small.”

Schwarzenegger knows he will surely be criticized by those who claim he is favoring his old friends in the industry, but he’s prepared to throw his full political heft behind his proposals, insisting it will benefit the entire economy.

Move comes as many states have been stepping up their efforts to draw lucrative film and TV productions. While Canada has become a major player and recently started to fade, states including Louisiana, New Mexico, Illinois and New York have recently passed tax incentives that make shooting there significantly cheaper, even with added costs of travel and per diems.

While stars and directors travel for shoots with no cost beyond inconvenience, it has been California-based below-the-line staff, as well as ancillary businesses, that have suffered primarily from runaway productions.

That has translated into lower sales and income tax revenue for the state, which is why Schwarzenegger is hoping his plan will eventually prove to be cost neutral, as it spurs more filmmaking activity.

Working with the governor’s entertainment industry advisory group — which includes reps from all the studios and guilds — the governor’s office is confident it will receive support from the entire Hollywood community when the legislation is introduced in spring.

“The governor’s office and film commission have already reached out extensively in the industry,” confirmed DGA assistant exec director for government and international relations Kathy Garmezy.

Lobbying effort will also include ancillary businesses impacted by film and TV production, ranging from dry cleaners to hotels, with economic impact studies done on individual districts to help prod legislators.

Schwarzenegger has already corralled high-powered, bipartisan support in Sacramento, with Los Angeles State Sen. Kevin Murray, head of the Senate Democratic Caucus, committed to author it in the house, and Republican leader Kevin McCarthy set to play the same role in the Assembly.

California Film Commission, which includes friends of the governor such as Clint Eastwood and Danny Devito, will play a key role in promoting and administering the incentives.

Proposal will be part of the massive revised budget that Schwarzenegger submits to the Legislature in May. Governor is expected to push hard for it in budget negotiations with the legislature, which often extend past the June 30 deadline into the summer.

In order to minimize the plan’s impact on the state’s sizable budget gap, it will take effect as soon as the next year’s budget passes, which will be effective July 1. But the state won’t start issuing tax credits for those productions until Jan. 1, as they are completed. Officials are hopeful that means extra revenue from productions spurred by the credits will have already begun to pay for their cost.

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