L.A. Mayor Declares State of ‘Emergency’ As Movie, TV Production Flees Hollywood

Eric Garcetti Runaway Hollywood
Photograph by Art Streiber for Variety

COVER STORY: Eric Garcetti needs to convince skeptical politicians to fight against rich tax incentives from outside California

Los Angeles’ new mayor has vowed to help stanch the flow of film and TV production jobs out of Hollywood, starting with the appointment of a film czar at City Hall. But to make a real difference, Eric Garcetti needs to convince skeptical state pols to combat the lure of rich tax incentives from outside California.

Two days after this year’s Oscars, Hollywood’s councilman Eric Garcetti, then running for mayor of Los Angeles, staged a media event at Sunset Gower Studios.

Only a smattering of reporters and photographers showed up, perhaps because the gathering was to address “runaway production,” a buzzword that means little for those outside the industry and, for insiders, is a timeworn term for a chronic, unresolved problem alongside piracy and studio accounting.

But Garcetti, a series of location managers and other crew workers who spoke in late February tried convey a message of urgency: Hollywood’s homegrown industry is being ceded to other states and countries whose favorable tax credits are increasingly luring away movie and television production at an alarming rate. As competition both in the U.S. and abroad continues to grow, the state’s market share and longtime stronghold on production jobs and spending are fast evaporating.

PHOTOS: Tax Incentive Hot Spots

“I am starting to see people who have never made a feature film in Los Angeles,” Chris Baugh, location manager for Oscar winner “Argo,” which actually shot in L.A., told the small group outside a soundstage. “In fact, they are afraid to. They are concerned that it is too expensive and too difficult.”

These days studio chiefs insist that filmmakers they work with take advantage of out-of-state incentives to lower production costs, which on a single major motion picture can amount to savings of tens of millions. Those savings are crucial in a franchise-obsessed era when big-budget movies commonly cost north of $200 million to produce, while on the revenue side the DVD market has largely collapsed and cinema attendance has been generally flat over the past decade. In the current climate, most independent projects would not even be produced without incentives.

SEE ALSO: Where In the World Will ‘Star Wars’ Shoot?

With the rise in the past decade of state tax breaks for movie and TV filmmaking, California, with its own modest incentive program, can’t compete when the bottom line is the sole factor in deciding whether to shoot in the Golden State.

It is no longer a given that Hollywood is the place where movies and TV shows are produced.

The California Film Commission recently released a sobering report concluding that the state “continues to experience a pronounced erosion of this signature industry.” Although the state’s incentive program has recaptured lower-budgeted features, TV movies and basic cable dramas, California is losing out big on network TV dramas and feature films. Many local businesses that support production have closed or been forced to lay off workers, and the trade unions report high levels of unemployment among their California members, according to the study.

After decisively winning L.A.’s top elective office, Garcetti put the flight of production atop his agenda. But the challenge is not only to convince those outside the biz that the city and region, to use his word, has an “emergency” on its hands, but that the state must do more about tax breaks that are still perceived by many as a giveaway to the glitterati.

Other mayors have talked about the issue; none have cited it as a priority in their inaugural address, as Garcetti did on June 30. Suggesting that it was important to act when “my political capital is strongest,” he vowed that he would create the position of film czar, who would be responsible for making the production process as smooth as possible through the thicket of City Hall red tape, and perhaps more importantly, would be the face for an industry that has historically kept a distance from downtown. Garcetti hopes to have the czar in place by the fall.

SEE ALSO: Runaway Production: The United States of Tax Incentives

The two would presumably work closely together, much like New York City Mayor Michael Bloomberg and film chief Katherine Oliver have successfully done, to help boost L.A.’s production activity and rebrand the City of Angels as the entertainment capital of the world once again.

Earlier this year the City Council passed a set of initiatives to waive fees for TV drama pilots, which next to feature filmmaking may be the most important production category to flee the area.

Yet even if the city is ready to smooth over the bureaucratic bumps for any kind of production, it won’t change the fact that the determining factor in whether a project shoots here or in Louisiana lies in the hands of lawmakers in Sacramento, where the sense of urgency over this issues competes with many other voices and industries with differing agendas, all calling for something to be done. Now.

Capitalizing on Clout (Photograph by Art Streiber)

Garcetti has pledged to leverage his new position to be an ardent lobbyist for rescuing Hollywood production despite all the hurdles. He and his constituents must now convince Sacramento that the threat is real.

“Tomorrow we are not going to wake up with an unlimited cap on credits,” Garcetti says. “But we have to show forward progress, and I am going to be like a dog with a bone on this and stay with this. I can’t single-handedly move Sacramento, but I think we will do what works to educate our lawmakers…that this is a huge shot in the arm for our economy to land a lot of this back.”

Skeptical lawmakers can say that the state already has done what it can: its $100 million-per-year incentive program may not match those of other states (New York’s is about $420 million) but is certainly better than nothing. California elected officials renewed the program, in the midst of ever-tight state budgets, twice. The most recent renewal, a two-year extension to 2017, was passed overwhelmingly even after a state legislative analyst report concluded that the economic benefits of providing incentives would be a wash, or even a slight net loss, to the state’s coffers.

When it comes to expanding the program, Garcetti already has talked to Sacramento leaders and, he says, there is one key figure who “still needs to be convinced”: Gov. Jerry Brown.

“We had a great conversation. He doesn’t suffer fools lightly, and you better bring your data, but I did,” Garcetti says. “I showed him the impact, the multiplier effect, the benefit to the state treasury. Some studies have shown, at worst, some small debit to the state treasury, which is then multiplied many times over in economic activity. And I underscored the importance that this is a signature industry.”

Garcetti says the most unfavorable study he’s seen shows the state losing 7¢ on every incentive dollar. “But maybe that dollar is multiplied five times (by the economic activity spurred by production). If you told me I could spend 7¢ and get $5 of economic activity, or to put this in real numbers, that I could spent $70 million and get $5 billion, that is a pretty good deal.”

A spokesman for Brown said the governor was unavailable for comment. But Kish Rajan, director of Brown’s office of business and economic development, said they “will be working with industry leadership to enhance the business climate in California so this critical economic sector continues to thrive.”

This fall, the coalition that has traditionally pressed for incentives, which includes the MPAA, the Directors Guild of America, the Teamsters and IATSE, will be setting the stage for a push to expand the program in next year’s budget. A priority, says one studio executive, will be to win over powerful groups that have been opposed, such as the California Teachers Assn. The teachers’ chief argument is that budget cuts have already pinched their members, so how can the state possibly think about giving out tax breaks?

Bonnie Reiss, who advised former Gov. Arnold Schwarzenegger on establishing the production tax incentive program, says that while remedying runaway production is important, “it still has to compete with other budget priorities, and until there’s more revenue, it’s going to be a very difficult challenge to get that done in the state legislature.”

Indeed, the state’s tax credit was conceived in the cauldron of fiscal uncertainty.

For more than a decade, lawmakers, largely from the L.A. area, pressed for production tax incentives in California, but the legislation stalled. Schwarzenegger filled the California Film Commission with high profile personalities, like Clint Eastwood and Danny DeVito, in the hopes of making a stronger case. But not until his penultimate year in office did he see the incentives come to fruition —as part of an overall package to resolve the state’s budget crisis.

“Ugly Betty” had just left L.A. for New York — a psychological and financial blow representing a reversal of the historical migration of production from East Coast to West Coast. Schwarzenegger, in an interview just before leaving office, said that it came to a point where his opponents needed something, “and I just leveraged it.”

Crying Wolf (Photograph by Art Streiber)

Hollywood’s production exodus is hardly a new issue.

At a Hollywood Palladium event to press the case for action on runaway production, California’s governor, a recently elected U.S. senator and a major filmmaker showed up at a rally entitled “Is Hollywood through as the film capital of the world?”

That labor-organized event was held 43 years ago, with Gov. Ronald Reagan, Sen.-elect John Tunney and producer Robert Wise headlining the bill.

Back then, the industry was coming off a decade of retrenchment following the breakdown of the studio system and revolution in the production process, as corporations sold off backlots, and the realism of the new Hollywood demanded more location shooting not necessarily tied to the Los Angeles region.

But California didn’t lose its dominance. By the late 1990s, however, Canada’s incentives coupled with its favorable exchange rate lured not only feature film shoots but also TV movies and primetime series. The past decade saw a race among states to compete for production dollars and, despite budgets that have often left incentives to the whims of lawmakers, the givebacks have become a regular part of studios’ budget calculations.

“The assumption is, if you are going to shoot a feature, you are going to shoot out of town,” says Oscar-winning producer Mark Johnson, now also a successful TV producer with such series as “Breaking Bad” (shot in New Mexico) and “Rectify” (shot in Georgia).

Name a major movie of this summer, and chances are it wasn’t shot in L.A.: “Iron Man 3” (North Carolina), “The Lone Ranger” (New Mexico, Utah) and “The Great Gatsby” (Australia). The future looks equally as bleak when considering that Warner Bros./Legendary’s just-wrapped “Godzilla” was lensed in Vancouver, and Disney’s reboot of the “Star Wars” franchise with three new installments has already staked its home in England, which has been expanding its incentive program.

CFC’s report shows that the loss of big-budget features, which employ thousands of workers, utilize dozens of support businesses and represent several billions in direct spending, “has had the most damaging effect on California’s infrastructure.” The incentive program is not available to projects costing above $75 million.

Given a limited incentive program, even Garcetti suggests that the flight of major features has reached a point where targeting them has to be weighed against the payoff from pursuing other types of production.

With the larger degree of unpredictability of Hollywood, he says, it is important to look at things “in a larger statistical manner.”

He adds, “I want to look at how many jobs did we bring back here, how many jobs did we have and get ahead of the curve. We lost feature films. That’s sad. They may come back to some degree, but probably by and large they won’t.” But, Garcetti adds, a one-hour drama provides steadier employment than a feature film.

“We have to be smart about what we chase,” he says. “Maybe it is not the $200 million movie. Maybe it is the premium cable and the commercials. Maybe it is the videogaming as well as the smaller commercials.”

Losing Market Share (Photograph by Art Streiber)

Los Angeles is not Detroit. Studios are still making money, and some, like Paramount, NBCUniversal and Disney, have ambitious expansion plans to build out their lots.

Still, movie and TV production jobs in L.A. County fell from 117,086 in 2011 to almost 115,953 in 2012, according to the state Dept. of Finance. Those figures have bounced up and down over the past two decades, from a high of 136,680 in 1997, during a booming economy, to a low of 94,288 four years later, during a recession.

To Garcetti and others, a major source of alarm is the drop of market share, resulting in lost work and less opportunity for below the liners and support businesses that include equipment suppliers, catering companies and other outfits that depend on a steady stream of production to stay afloat. Payroll service Entertainment Partners says that from 2004 to 2011, the state’s share of total production wages in the U.S. fell nearly 10% from 68% to 59%. In 2005, the state commanded 89% of network hourlong dramas, which aren’t eligible for incentives; that figure plummeted to 37% in 2012.

The danger, Garcetti and others say, is that L.A. will lose even the steadier jobs or the infrastructure that has helped maintain what hold it has on TV production in particular. The more projects gained by another state, the more likely it is to establish an enduring talent pool. New York, for instance, provides production incentives but also established a credit for visual effects.

California is at a disadvantage in the competition for incentives not just because of the state budget but due to scale.

More than 40 U.S. states offer financial incentives as do offshore sites including the U.K., Canada and Australia. Many of those other states are starting from zero, and some don’t have caps on how much in tax rebates they give out. If California, which already has a huge production infrastructure, did that, every studio project, network TV series and TV movie would apply, claiming eligibility. So the state’s incentive program was crafted with limits, from a $1 million minimum to $75 million maximum on features, with further restrictions on drama series and an exclusion of commercials.

Even then, the demand is so great that the solution was to set up a lottery system: Winners of each year’s credit are selected in a random drawing every July 1. Producers complain that the lottery makes it difficult to plan out budgets, along with a host of other roadblocks to shooting, like the payment of so-called post-60s residuals to members of IATSE and Teamsters in California and in 13 other Western states — which can add millions to a project.

There’s also a twist: It’s not entirely clear that it is in the interest of the major studios to lobby for expanded tax credits given that, particularly on major projects, they already enjoy competition from elsewhere vying for business. Perhaps that’s why studio chiefs are skittish to talk on the record about the issue, though privately they complain bitterly to journalists about why the state doesn’t do more. The MPAA advocates for credits in California as well as other states.

“It is not in some people’s interest to see California win,” Garcetti says. “They may benefit from this competition being in as many places as possible, because it has been a race to the bottom. And I certainly won’t lead a race to the bottom.” The mayor says he will press for a fair credit, but not the highest credit.

Keeping production in L.A. and California will also take an appeal to local pride, or “knowing that you are helping out your city and your state’s economy,” says Garcetti. Councilman Tom LaBonge, who also represents portions of Hollywood, talks of appealing to the desire of cast and crew “to sleep in their own beds at night.” He hands out Made in Hollywood awards to productions shot in the area, which itself reflects that production in the film capital of the world now demands special recognition.

Walking the Walk

For Garcetti, the entertainment industry was largely a backdrop as he grew up in Los Angeles. He didn’t come from Hollywood royalty as much as it was around him.

As he followed his father, Gil, former Los Angeles County district attorney, into public life, he won his first City Council job in 2001. The seat encompassed a big chunk of Hollywood proper, and he has subsequently been around production and all of its intricacies, informing his prioritizing of production in the area.

He made several cameo appearances on TNT’s drama “The Closer,” playing the mayor of Los Angeles, in 2010 and 2011, when it seemed apparent that he was going to seek that office. His father was a consulting producer on the series, which wrapped its seven-year run last August. But Garcetti also has gotten down in the trenches on behalf of Hollywood.

Glenn Gainor, an executive producer at Screen Gems, recalls that when shooting the movie “Burlesque” in 2009, a scene in which Cher and Christina Aguilera walk across Vine Street was being blocked due to construction of a parking lot. “He got us on the phone with the contractors,” Gainor says. They worked out a construction delay, with Sony paying the cost.

Showbizzers played a key roles in Garcetti’s mayoral campaign, which started a few years ago as he began lining up donors, with a heavy emphasis on winning support from Hollywood. Jimmy Kimmel hosted several events. Will Ferrell appeared in a campaign Web video. Garcetti’s finance chairman was Sony exec Eric Paquette.

In the end, the campaign’s greatest share of support came from arts and entertainment sources, with some $1.4 million in direct contributions and to an independent committee that supported his campaign, according to a Los Angeles Times analysis.

Shortly after his inauguration, Garcetti gathered together a group of entertainment executives for what amounted to a brainstorming session. Among those present were Showtime’s David Nevins, Sony’s Paquette, Tennis Channel CEO Ken Solomon and location managers Baugh and Marilyn Bitner. “My first impression was that this was totally real,” recalls Solomon. “There is no window dressing here.”

Garcetti believes his prioritizing of the issue sent the right signal: “It struck a chord with people, because inside the industry, they have never felt they have had very strong cheerleaders,” Garcetti says. “It is easier to get a dinner with the governor of New Mexico than it is to get a call returned with the mayor of L.A.”

A Fine Line

There has been criticism of the way that the industry has lobbied for incentives in the past, particularly since the one advantage that showbiz has — its visibility — can also be a liability. Set painter Another has been that the effort has been somewhat disjointed. “You can certainly get someone’s attention with a big star or producer, but then that just kind of fulfills that cliche that this is just kind of somehow subsidizing their lives,” Garcetti says. “It is different when you bring back a truck driver who has been unemployed for eight months of the year, or a florist whose business has plummeted or has gone belly up, in to meet with someone.”

Garcetti would like to see a no-cap credit and to have it expanded to premium cable, commercials and visual effects. But even though lawmakers voted for an extension of the credit last year, a bill to provide $15 million in incentives for commercials stalled out this year. He’s also open to other ways of attacking the problem, like establishing tax breaks at the county level, although he warns to “not kid ourselves” by thinking state level incentives don’t pack the biggest punch. It will be essential to “humanize” the issue and make it relevant to “an assembly member from Eureka and a state senator from San Diego,” he says.

“We are going to fight a lot of fights,” says the mayor. “I know we are not going to win every single one of them. But if we don’t put a lot of strength toward winning a couple of battles in this war, we are just going to continue to be left behind on the battlefield.”

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  1. Steve P says:

    Although most readers of Variety are knowledgeable insiders, I’m sure many are new to the industry and, like myself, read Variety at least partly to improve their understanding of the relevant development, production, financial and political processes and issues. To that end, it’s sometimes difficult to make sense of the compressed industry-speak and jargon. Sidebars that explain key terms and concepts used in certain articles would go a long way in getting newcomers up to speed without interrupting the style, tone and flow that makes Variety what it is and a pleasure to read. For example, a sidebar for this article that briefly explains the different types of tax incentives and key relevant financial terms. Realizing that sidebars do take up valuable print space, they could be added just to the web version.

  2. JimmyD says:

    I love it!!! I hope California continues to lose productions, why, because my state is picking them up & I’m working on movies 9 months out of the year now.

  3. Mark says:

    I’d like to see what Garcetti thinks about the state of shooting in LA after he’s worked (or tried working) with FILM-LA. They’re attitude is worse than the DMV, and actually make you feel like they do not want you to shoot here. And honestly, I believe they don’t. When it’s this difficult to shoot even a short film in LA, because of the red tape, the over-priced permits and the terrible customer service (remember, we are paying THEM!), I’ve become convinced I never wanna shoot in SoCal again.

  4. So glad this comment thread was cleaned up and that the hate mongers seemed to have finally stopped flooding in. b

    As for California making it hard to do business with regulations and high taxes, yes it does. And those things should be addressed. HOWEVER, and this is key, even if the corporate tax rate was lowered to 0% and regulations were scaled back to match a “business friendly” state like Texas, runaway production would still be happening at crisis levels.

    Productions are not leaving because taxes are too high and going to states where taxes are low or don’t exist…..”tax” credits in the other states operate as cash subsidies that are used to directly fund the show or movie. A $100 million movie that spends its money shooting in Louisiana or Georgia (which offer 30% rates) will get $30 million in cash (actually just under this for a transfer or the La. buy-back, but I am trying to keep this as simple as possible).

    The other states and nations offering “tax” credits are literally funding a third or more of the production budget. In Canada, for certain work like VFX, the government will subsidize as much as 60% of each $1 spent. Spend $1 million on VFX in BC and the taxpayers will cut a check for $580,000 to help fund your project. If you think this sounds crazy, that’s because it is.

    In barely 10 years, Louisiana has paid out over $1 billion to film & TV productions. That’s a cost of $216 for every man, woman and child in Louisiana. Many would rather get a check for that amount rather have it fund movies like Oblivion or Green Lantern or Twilight. And the costs keep escalating every single day.

  5. fly4vino says:

    ” I’d take the most run-down, high unemployment areas of CA and make them no tax zones in 20-10-5 year tiers.”

    If it were just taxes the solution would be simpler. Unfortunately income taxes are just part of the problem.

    Workers Comp rates are high as LA is the workers comp capital of the universe

    Health insurance is high due to special CA regulations. Many firms want to have no CA workers

    The education system sucks due to an excess of political correctness, greed and incompetence. Thankfully many of the teachers in the classroom are awesome but nobody asked them in the rush to assure Obama that students who disrupt class will not be removed.

    Auto insurance is high (50% -100% higher than other CA areas)

    Cost of living is high partially due to the proliferation of state and local regs

    State and local laws make operating a business of any type riskier and more expensive

    City of LA pretty much runs as a collection of fiefdoms where the council member has way too much power and its’s used to extort businesses

    CA utility rates are very high and going to skyrocket as the “mandate” to purchase more green energy requires utilities to purchase any green energy first , regardless of the cost. Not surprisingly many of the friends of the left are invested in billion dollar sure things thanks to the regs, subsidies, taxes etc. A small example is the San Onofre plant where SDGE determined that there was a substantial risk that no matter what they did they would never be able to restart the plant. The ratepayers will pay, either by absorbing the costs of the abandonment of the plant and creation of alternate sources or by there absorbing higher borrowing and capital costs .

    The city of LA not only makes money on the DWP but also puts a tax on the utility bills. The higher the utility rates the more tax for the city.

    The City exempts creative types from their gross receipts tax on the first $300K of income and then taxes the remainder at 1/5 of the rate paid by an independent engineer

    What CA and LA need is a change in the culture of their governments and that’s not likely to happen.

  6. Tony Filson says:

    We’ll have to see how long CA can drive out jobs and support the massive spending. At some point “They are going to run out of other people’s money”. Why they don’t just lower taxes, create jobs and bring back companies is beyond me?? I’d take the most run-down, high unemployment areas of CA and make them no tax zones in 20-10-5 year tiers. Watch the jobs flood in!!!! Too simple? Jobs would LEAVE other states to go to CA…. Imagin that :)

  7. The democrats are in the process of doing their usual Detroit-style magic on the LA entertainment industry.

    Hollywood and the entire California media complex are currently running for the border to escape the massive taxes, huge demand for bribes (“political contributions”), and insane regulations of the hyper corrupt California Democratic Party.

  8. fly4vino says:

    Just when you think the California legislature can not get any stupider – with pressure from the ACLU and SEIU they are prepared to pass bills ending the tex exempt status for groups such as the Boy Scouts, Little League, Future Farmers etc. The Mayor should spend his time in Sacramento as the legislature and Governor are terminally stuck on stupid.

    Most crack houses run with a better grasp of reality and more economic discipline than the State of CA

  9. alexnder says:

    You don’t sound smart at all. PRESIDENT Obama has nothing to do with tax credits in California. This has been going on way longer than he has been in office. But in typical uneducated right-wing fashion, EVERYTHING must be linked to Obama somehow. Please go take your meds and sit down.

  10. It’s really easy, LA. Merely exempt your Hollywood friends from the laws and taxes and govern everyone else. Problem solved. That’s how fellow travellers through history have done it!

    • Garrison Plimpton says:

      Hollywood friends is too general, perhaps limit it to those Hollywood friends who donate at least 250k to the re-elect Garcetti campaign, or at least the California Democrat Party.

  11. justin trampford 3 says:

    There were 586 comments but Variety censoring reduced them to less than 471,

  12. Doug Mackenzie says:

    California’s tax-spend-regulate government culture from state down to local, along with its evil twin, government supported union power, are pushing businesses out of state. Why should anyone be surprised the film business is any different? The tax breaks and other incentives that these geniuses come up with will only create more animosity, line more pockets, create more corruption, and continue the cycle. Here are some answers… less government, less taxes, no more union favoritism.

  13. ryan najibi says:

    Blame it on the greedy producers are you kidding me this is where the problem is greedy producers. Plain and simple.

  14. Ogrepete says:

    Good luck to the mayor. He’s going to need it.

    California has been taxing everything that has a pulse for quite a while now. Why would someone volunteer to give up a big piece of their profits if they didn’t have to???

    Something California doesn’t seem to understand.

  15. Oh boo hoo! I don’t hear them helping all the other businesses being taxed out of the state!

  16. Keep posing in a director’s chair and holding an empty film reel. That will help a lot.

  17. Here is Jerry Brown’s physical mailing address and email address. Do something by at least writing a letter!

    http://gov.ca.gov/m_contact.php

  18. mfan says:

    As someone from another state, I think the new mayor should put political pressure on the LA Times to be more positive towards the industry and especially it’s stars. I’m routinely amazed the Times seems hostile to them, instead of lifting them up. In Portland, the city council puts pressure on the local newspaper with the knowledge that the city could ban newspapers from being sold on the streets from machines. A lot of people considet these machines clutter and eyesores, and the newspaper knows not to make waves. Sad for our civic life, but it sounds like the film industry needs the Times to lay off.

  19. John Galt says:

    It’s not millionaires who seak to degrade the taxpayer, they are the sole taxpayers. Your future rests on a single axiom, the ability to create and produce millionaires. When you have successfully destroyed the very environment necessary to produce wealth, then you are left with the slums of Detroit.

  20. It seems most of my friends are leaving California because of their crazy tax laws and attitude towards the second amendment. With what is coming out of Hollywood now, just keep the porn industry going there, and leave the rest to other areas outside the State.

  21. Wolfie says:

    thank God nobody mentioned the unions – boy, that was close.

  22. Derek says:

    I love hearing the millionaire hypocrites in the film industry that bemoan rich people not “paying their fair share” but will gladly fly to Bulgaria or Canada to make a film/production pouring millions into foreign coffers.

  23. fly4vino says:

    You could spend a $10 million of studies to determine the cause or just tell Brown and Garcetti to look in the mirror. They are not the solution but rather the cause.

    I have run across a number of employers who do not want to have any employees in CA due to the crazy laws which apply to those who do.

    It was probably 20 years ago when LA was booming that I sat through a City Council meeting. One of the liberal icons was arguing for another stupid regulation which would affect businesses. His comment – If they don’t like it let them leave LA………….. and they did – banks, manufacturing, aerospace, oil (Downtown LA used to have a Petroleum Club) , distribution. With the widening of the Panama Canal many of the cargo vessels which traditionally used the ports of LA and Long Beach will go elsewhere.

    Large companies find it is cheaper and more efficient to locate their distribution facilities in NV or AZ and truck the goods to the customers in CA rather than have distribution within the state.

    The movie business is not being singled out by CA laws, rather it’s the canary in the cage responding to the toxic atmosphere.

  24. Matt says:

    So the Mayor is advocating the idea that lower taxes bring or keep business in town. Thus keeping or adding jobs and increasing tax revenue. It’s funny how Dems selectively apply Conservative principles!

    • Derek says:

      Completely agree. Film is just another industry that is fleeing CA because of high taxes and awful regulations. If it is cheaper for a studio to film in Canada they will; just as it is cheaper for Nissan to move to Nashville.

      • You’re dead wrong on all counts. There’s only one reason why features and television — and before that, commercials, which began the stampede north to Canada in the late 90’s — are fleeing LA, and it has nothing to do with tax rates in California. Canada started the avalanche of runaway production by offering large government subsidies — paid for by Canadian taxpayers — that allowed US producers to save close to 50% (factoring in the lower value of Canadian currency) over filming costs in this country.

        In other words, Canada has been stealing this business from us by subsidizing the relocation of filming across the border — and this from a country which has a much higher tax rate than any state in the union, including California.

        The other states took notice of this, and began their own tax subsidy programs — outright governmentally sponsored thievery of private sector jobs from LA to Louisiana, North Carolina, New Mexico, Georgia, Michigan, New York, and many more.

        If Californians are too stupid (or blinded by ideology) to fight fire with fire, then maybe we deserve to lose the film and television business, and the many thousands of good middle-class jobs it provides. But believe me, the economy of Southern California will feel it if and when that happens — and once it’s gone, it won’t be coming back.

        Without all these Canadian and state subsidies, the vast majority of film and television work would take place right here in LA, where the industry as we’ve know it started. It would be no contest — but with such huge financial incentives to film elsewhere, producers would be fools not take advantage. And take advantage they do. If California doesn’t wake up before it’s too late, we’ll lose this industry. What happened to the Detroit auto industry can happen here — and it will if the kind of ignorant, ideologically-based comments here are typical of the public’s level of engagement.

  25. Hoogie says:

    What a farce. Ever heard of Hollywood accounting ? They don’t pay takes on profits.

  26. Tom says:

    Or maybe we’ll just stop giving so much money to red states?

    For every dollar we give in federal money, we get back maybe $0.75. Guess what states get more money than they take in?

    Florida, Georgia, Michigan, Louisiana… You know, the states that’re luring away Hollywood productions?

    Maybe we’ll just stop giving you all of our money just so that you can take more away from us and then yell at us for being so liberal.

  27. Lewis says:

    “No money? Everyone leaving? They should raise taxes … that way they’ll have more money and everyone will stay”. Worked for Detroit. It’ll work in Hollywood too.

  28. Michael says:

    This makes me feel sad for all the little people I know who work in, or with, the industry and have had to suffer the most. I feel sad for them because unless the Teacher’s Union’s agree this is an unsuccessful effort. Unfortunately, nothing in this state happens without them since they control the Democrat Party, and along with them, the state. They’re eventually going to run the state into the ground like they have the schools. I have spoken with so many of these people and the former teachers who have become elected officials. Not only are they ignorant concerning business – they are anti business.

    It is also unfortunate to see that the director of Governor Brown’s office of business and economic development is a political hack who doesn’t have a degree in business or economics. This is the problem with our entire system. From the President on down. Too many people with no backgrounds in accounting, finance, economics, or business statistics are being elected to, or appointed to positions that deeply involve those matters. You wouldn’t let someone operate on you who wasn’t trained as a surgeon, or someone handle your case in court who isn’t a lawyer, but the public overlooks a bunch of people with degrees in law, and history, and political science handling very serious economic matters. As long as we belittle economics and business by doing this we deserve what we get.

  29. Scott Cunningham says:

    Wow!! So all the tax & spend, pro union, activist liberals in the motion picture industry vote with their feet when its time to calculate costs? Whodathunkit?

    Yet another nail in the coffin of “Big Government”. Yes, taxes adn regulations do matter. Why would anyone involved in business do ANYTHING in California that they could effectively do elsewhere? It makes no financial sense whatsoever. The Californians have bought into the concept of tax/spend/regulate. Now they can watch one of their core business interests fade into history.

  30. Tom says:

    Its much more than the movie industry. A short trip to any of the states just to the east of California will show a significant migration out of the state of people who just can’t take CA any more. The LA area is a mess, taxes are out of the roof, there is a “do as I say for the good of diversity” gestapo in the state that makes anyone who does not agree with the opinion of the day feel threatened. I turned down three jobs with defense contractors in the state because I did not want to put up with all that. Are there still good experiences, people and money to be made in CA? Sure, but if you have the option of CA or another state that will harrass you less, a lot of people are taking their business to option B. Too bad.

  31. thomas says:

    and not one word about the unions… hmmmm.. who wrote this article? Western Cali is the new east Michigan. All moving to right-to-work states. NYC will lose out to right to work over the next few years.

  32. dan says:

    The amount of hatred at people in Hollywood for being whatever stereotype most of these commentators have in their head is sad. The problem Hollywood is facing is all too similar to other businesses in America. Which is:

    Businesses in America are being underbid and undersold abroad, period. When companies can find the work elsewhere for cheaper, they will. That’s what’s going on here. These subsidies aren’t genuine market motivations, they’re artificial. When those subsidies end, the companies will pack up and move to the next one. Whether it’s some conservative’s wet dream of ‘liberal Hollywood’ that’s taking the hit or a blue collar manufacturing job the problem is the same: foreign government handouts and tax breaks luring companies to cheaper costs elsewhere. It’s why GE, Google, Apple, friggin’ everyone handles most of their books outside this country. We don’t punish them, we don’t close the loopholes, and we don’t actively protect the people so long as the CEO’s and such that contribute most to political campaigns are fine and dandy.

    If Los Angeles can muster a cohesive plan of action to fight this then it can be used as a model elsewhere. The legal study on one approach using the WTO and tariffs is a start, unionizing could be another. I for one enjoy my job, I’m okay with the odd 60 hour work week here and there (or more, yikes), but what I’m not okay with is not finding a job at all because Canada or the UK is offering millions to lure jobs away.

    In a much broader, political sense I wish our government would spend my tax dollars on keeping jobs here rather than killing people elsewhere. Let them fight their own civil wars among themselves, put the money into our borders, keep illegals out and keep our jobs in. Let’s look out for us instead of looking to blow up everyone else.

    • This is the most accurately analysis of the situation I’ve read on here. The race is to the bottom in all industries and that bottom will always be more easily attained by moving outside the US so long as there are no consequences for leaving.Subsidies in other states and even Canada are a bit of a stop gap, and eventually the prudence of the idea will lose currency with the tax payers of those areas and come to an end. Until there is a real referendum on how corporations conduct business in the broad global context.

      The garment making industry is another good example. By moving production of clothing to third world countries with different or no regulations, companies can avoid supporting their labor force long term. A friend of mine whose family lives in the Philippines has cousins who work in factories. These were once steady union jobs in the US providing a middle class lifestyle. But over there, they are not allowed to form unions, they work 6 days a week, and all of the jobs are hired at will for 5 month contracts. Once those contracts expire the company hires a whole different workforce so individuals are forced to just float around with little ability to save and little stability.

      The US will never win (in any industry) in a race to the bottom when something like that is the bottom.

      The film industry of LA is just another business impacted by broader issues. It’s a symptom of a disease that drives things down.

  33. Atlas Shrugged says:

    The reason the film industry and people in general are leaving Califorinataxation, is Unions and Taxes, get rid of Unions and lower Taxes and problem solved. Just send me $ 1,000,000 for the GOOD advice. It will save California Billions in the long run.

  34. John Barnett says:

    Democrat politican are equal opportunity, they will screw everyone on taxes, it appears the Hollywood elite have finally caught on.

  35. I bet Gerard Depardieu was a liberal before they taxed him at 75%. Looks like Hollywood is about to go through the same conversion.

  36. Larry Kaplan says:

    Any kind of public subsidies for the entertainment industry MUST come with this important string attached: that they make genuine and impactful efforts to embrace LA’s underrepresented communities and increase diversity in an industry that is woefully behind the times in that regard.

    • Scott Cunningham says:

      Exactly the kind of silliness that drives business away in the first place. Once again, the priority isn’t saving jobs, or an entire industry, but reinforcing the nonsense of “diversity” just because it makes people feel good about themselves because they are “doing something”….

  37. James G. says:

    Tax incentive or not, shooting in LA is a FU*KING NIGHTMARE. Not just the permitting process, and not just the laws and rules that come along with it. It’s the people. Crew and actors out here are expensive and are not the most loyal people you could employ. I lost a make-up artist who had a week left on our picture, quit so she could do one day on a cable drama. I don’t blame her, but that stuff doesn’t happen (as often) in other states. People in other states are happy and excited to see “hollywood” come to town. Locations are WAAAAY more expensive in LA as they are in places like New Mexico or Louisiana. A diner scene in LA will likely cost you $1500-$2500/day. In NM, maybe $500, or even just a chance for the owner to be an extra in the movie as fair exchange. It’s not just the money, its the culture… Everybody in LA knows that movies have money to spend, and so these people will take you for every penny you’ve got. It’s more fun to shoot in a place where they are excited to have you there, are accommodating, and NOT trying to screw you in the process.

    Good luck LA, I’ll continue to elsewhere.

  38. Barry Hussein says:

    If you’re at all interested in profitability, you avoid unions and you avoid California. It’s not all that complicated.

  39. Tony Filson says:

    As the president of a TV & Motion Picture executive search firm I’m seeing many of our clients leave L.A.; produce and post in other parts of the U.S. and Canada. They are keeping sales offices for West Coast but now a lot are even moving out of L.A. to other West Coast States based on taxes. Senior sales people are well compensated and L.A. has become too tax heavy. I don’t get what CA is thinking! Media People, Media jobs and Media businesses are leaving because of high taxes. Does CA need a brick to hit them on the head. Once the studios, networks and new media companies leave…… They are not coming back as CAPEX and OPEX in L.A. is of off the charts.

    • Former Resident of California says:

      I don’t think a brick will work. Sadly I believe an implosion is needed to wake people up or elected officials who work for the people and not the vote. My prayers are with all of you.

  40. RichardRider says:

    This story assume that it’s the tax INCENTIVES that moved California producers to other states — but they give too little “credit” to the adverse tax, regulatory, housing and litigation climate that is California.

    IMHO, Hollywood producers will be influenced by state and local incentives when picking WHICH state to move TO, but such subsidies are not enough to make them leave CA. California politicians have provided that negative motivation.

    More and more, our big earners are going to realize that, by working and living outside CA, they avoid the onerous 13.3% CA state income tax. This out-migration of the “Tinsel Town” film industry will continue — and likely will accelerate. CA tax incentives (at taxpayer expense) will at best slow the rate of departure.

  41. Craigmk says:

    Way to tax Hollywood out of town!!!

  42. Dave says:

    You mean you lose revenue when you try to tax the heck out of people?

  43. Gary says:

    Its the “Unions” Pal–You may not want too admit it publicly–but that is the main reason productions are moved too “right too work States”—& Countries where Unions don’t control every part of a Movie—when it takes 2 union guys too move light–& 3 too carry a ladder–there is the problem—

    • It’s obvious that you’ve never spent a day on a television or film set, and thus you have no clue just how hard those below-the-line crews (union and non-union) work every day. When’s the last time you worked a fifteen hour day, Gary?

  44. Matt cope says:

    I went to a film industry show at the convention center & saw at least ten states with booths luring production to their state. Some with people that will take your script & find locations for you for free. Five years ago a city councilmen was caught taking money from a state for helping them set up film office in Los Angeles . Help us please mayor.

  45. Joyce Fidler says:

    As a just-retired public school teacher now moving full time into acting, I have full faith that this dynamic mayor can balance the priorities of education and the necessary entertainment industry. LA needs both to flourish if the city wants to be its best.

  46. Harry M. says:

    Glad to see the forces have exerted on Cal. and Hollywood to force them to change or die. Excessive sex, violence and lib politics in thier excuse for movies and excessive taxes. Great Day for Americans.

  47. duckandcover says:

    California dream’n

  48. Olden Baroque says:

    Turns out Hollywood is populated by a bunch of Capitalists after all. Who knew???

  49. MissyT says:

    If Hollywood goes by the wayside as an unintended result of them supporting this administration’s higher taxes and lack of jobs directly due to corruption and special interest groups – I really don’t care that Hollywood goes away. They have done absolutely nothing for the average American; they have placed all special interests before traditional America. Color me happy.

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