Califronia Tax Incentives Sacramento Capitol
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Assembly hearing filled with emotional pleas regarding state incentive program

Union members and business owners on Wednesday shared anecdotes of losing production work to other states with ever-sweeter incentives, as a joint Assembly committee held a hearing to kick off a push to convince other California lawmakers to expand the state’s production tax credit.

While their pleas for action were at times infused with emotional calls for action, if the past is any guide critics of tax credits are likely to question their effectiveness and whether they are needed. On Tuesday, the Los Angeles area film permitting agency FilmL.A. reported that in the third quarter of this year, location shooting in Los Angeles grew by 9.5%, with gains in feature film production offsetting a decline in TV shooting.

After the four-hour hearing at SAG-AFTRA national headquarters, Assemblyman Raul Bocanegra (D-Los Angeles), chairman of the Assembly Revenue & Taxation Committee, addressed the potential for a mixed message.

“I think the data speaks for itself,” he said. “I think what you heard from the economists is that California is losing its market share of production to other states and other countries. I think that what we have to do is be mindful and re-evaluate if the program we have on the books right now, which is set to expire in a couple of years, is still a good one. A bounce to the economy is always great, but let’s be mindful that this is a long-term investment for the state of California.”

He and Assemblyman Ian Calderon (D-Whittier), chairman of the Assembly Entertainment, Sports, Tourism & Internet Media Committee, are crafting the details of legislation to expand the state’s incentive program, which currently provides $100 million per year for productions, a figure that many in the industry say is insufficient to meet the demands and competition from other states.

“I think that there are going to be fluctuations (in production figures), and I don’t think you use that as an excuse or a reason to not continue to make the investment,” Calderon said. “The investment is clear. For every dollar we put in, we get so much back. So if it is going to increase, why do we want to lose that and why do we want to risk a decrease?”

At the hearing, he said that the state “can no longer hesitate” to boost the program.

After FilmL.A. released its figures, the org’s president, Paul Audley, issued a statement cautioning that “we don’t lose sight of the big picture.” He noted that many of the gains came in lower-budgeted projects that don’t employ large crews or spend much in the region.

“For feature film production to be where it once was and should be in L.A., production would need to increase by 125%,” he said. “Until Sacramento acts to level the playing field, we won’t see the kind of growth and prosperity that California families are counting on.”

Amy Lemisch, executive director of the California Film Commission, noted that the state has lost out in particular on big-budget blockbusters and tentpoles, as well as network and premium cable drama series. They fall outside the category of those eligible for the credit.

Bocanegra and Calderon said that they are still gathering information for their legislation and reviewing details, such as how much they plan to propose expanding the tax credit program. At the hearing, Los Angeles City Councilman Paul Koretz called the situation a “war” with other states and countries, and that a proposal should be a “dramatic increase” in the credit to $1 billion per year for the next two or three years.

As a former state assemblyman, he said that he also recognized the hurdles in convincing lawmakers in other areas of the state. While John Burton was a leader in the State Senate, he noted, “he never understood this issue,” Koretz said. “He thought (the credit) was welfare for the Arnold Schwarzeneggers of the world.”

Much of the hearing was devoted to stories of crew members being forced to look out of state for work, or to grapple with a substantial loss of income.

David Elliot, construction coordinator and member of IATSE Local 44, told the committee that last year, he had “no work in California.” Instead, he had to travel to Atlanta to work on “Hunger Games 2,” but could bring only four of his regular staffers with him. One of the crew members who was left out ended up losing his house as he couldn’t meet his payments, which were based on earnings for working 40 weeks per year.

“I’m sure you’ve heard the expression ‘Don’t bring a knife to a gun fight.’ We are bringing a limp noodle to a gun fight,” he said of the state’s incentive program, adding that what is needed is to not necessarily match other state’s incentives but to “meet them halfway.” The state’s advantages, like its current production base and good weather, are enough to make up the difference, he said.

Kevin E. Fortson, senior VP of production for Warner Horizon Television, said that a problem is that other states offer “multi-millions of dollars difference” in incentives, and that California’s program also was hobbled by a lottery system that makes it difficult for producers to plan ahead. Applicants are picked at random, with the money depleted on the day of the lottery, July 1. One of the Warner Horizon shows, ABC Family’s “Ravenswood,” missed out on the state’s credit and, although it was placed on a waiting list, had to locate in Louisiana because of the certainty of that state’s offering.

He, too, said that even if California’s incentives didn’t match other states, it could make the difference in the decision of where to locate. “Just getting in (California’s incentive program) would be enough for us to suck it up,” he said.

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