Governor, Legislative Leaders Reach Deal on California Movie and TV Tax Credit

Governor, Legislative Leaders Reach Deal on

California legislative leaders and Gov. Jerry Brown announced a deal on Wednesday to extend and expand California’s movie and TV tax credit, more than tripling its size to $330 million annually.

“Proud to announce a deal with Dem and Rep leg. leaders to expand, extend & improve CA’s TV and film tax credit program,” Brown said via Twitter.

The $330 million annual outlay would be less than the $400 million-per-year outlay sought by the bill’s principal co-authors, Assemblyman Raul Bocanegra and Assemblyman Mike Gatto. Nevertheless,  it will be a significant improvement from the $100 million per year currently awarded in California tax credits.

The deal reached between Brown and Senate and Assembly leaders also extends the program through 2019-20, an additional year beyond the latest version of the legislation. The new program would start in fiscal year 2015-16.

“We are just ecstatic,” Gatto said in an interview. Although the allocation is less than they had sought, “This number is three times what the current program is. We believe that this number will provide more certainty to the process. When there is a big pool like this, it greatly increases the chances that productions will receive the credit.”

Bocanegra said, “I think it is a home run for California and the film industry. We are back in the game again.” He said that what really helped in making the case for an expansion of the program were studies showing the loss of some 16,000 jobs over the past 10 years, and billions of dollars in economic activity.

State Sen. Kevin de Leon, the incoming pro tem of the Senate, said that he, Assembly Speaker Toni Atkins and Brown met on Tuesday evening to “hammer out what we think is a very good deal.”

“The total is $1.65 billion over five years,” he said. “That is an incredible number.” Although it is not as big as New York’s, he said that California will have the advantage of its weather and infrastructure. He also said that the number was significant because Brown’s office originally had sought a figure closer to $200 million.

Brown also met on Wednesday morning with legislative leaders and the bill’s authors.

A coalition of union and studio representatives pressed Sacramento leaders to greatly expand the credit and bring California closer to parity with other states, including New York, which has seen a production uptick, particularly in luring one-hour drama series from Los Angeles. The Empire State allocates $420 million in tax credits per year.

Nevertheless, a significant expansion of California’s program was viewed as a political challenge, particularly given Brown’s skepticism toward tax credits in general. Supporters are hopeful that the increased outlay, along with changes in the way that the credits are awarded, will be enough of an enticement to convince producers to keep or locate their projects in the state.

“I think we accomplished what we set out to do, which was to make a program not only bigger but smarter,” Gatto said. “I feel comfortable it will do a lot to get the filming back.”

Gatto said that what helped win over Brown was a “combination of convincing and time.” Only after the passage of a water bond bill earlier this month — to address the state’s drought crisis — were they really able to “direct the governor’s attention to this pressing need.” Gatto said that he also pointed to the more skeptical studies of the value of tax credits — like one that said that they returned only 90¢ for every dollar spent — and made the point that it still was a smart expenditure to retain jobs in the state.

“You say, ‘Hey, define me by my worst critic,'” Gatto said. “Even then, there is a small price to pay.”

The legislation cleared the Senate Appropriations Committee last week, and was expected to reach the Senate floor on Wednesday or Thursday. It then heads to the Assembly and to Brown’s desk for signing.

The legislation would expand the types of projects that are eligible for the credit, including most one-hour drama series and big-budget feature films. The California Film Commission currently awards credits via a lottery that will be replaced by a new system in which applicants will be scored based on the number of jobs that they will create.

Los Angeles Mayor Eric Garcetti, who has made runaway production one of his signature issues, said in a statement, “This legislation means that the long journey started by our work with Tom Sherak and continued with Ken Ziffren is ending in success for California’s middle class. I’m grateful to the governor and the legislature for this important measure to protect and expand an industry that is integral to our economy and our identity. I look forward to putting this legislation into action in partnership with California’s mayors, state lawmakers, the California Film Commission, the industry, and especially labor to restore California’s ability to compete for film production.”

When he came into office last year, Garcetti established an office of Motion Picture and Television Production. Sherak was named the city’s first “film czar,” and after his death earlier this year, he was succeeded by attorney Ken Ziffren. Rajiv Dalal was named the first director of the office, responsible for much of the day-to-day operations.

While a bevy of other groups, including a coalition of union and studio supporters, as well as MPAA chairman Chris Dodd, offered praise for the expansion of the credit, there was skepticism that the legislation would be enough to recapture some segments of the industry, like visual effects.

Daniel Lay, the author of the VFXSoldier blog, said last week that the problem is that an extra 5% incentive for visual effects was tied to whether a studio did principal photography in state. The problem, he said, is that Canada offers up to a 60% labor subsidy and no cap on the annual outlay. “How does this stop the bleeding for #VFX exactly?” he tweeted on Wednesday. He and other artists are leading an effort to raise money for a legal effort to compel U.S. trade officials to pursue trade sanctions against countries with such generous subsidies.

 

 

 

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  1. Rena Moretti says:

    MyTooSense: I do appreciate your lengthy answer.

    My point, however, is about economics. I’d be thrilled if Governor Brown followed economically sound economics as I don’t care the label on a politician as long as they do the right thing.

    You’re the one who is trying to ascribe labels and based on those labels, dismiss ideas without looking at them.

    The reality is that handouts – whether given by Republicans, Democrats, or Purple Pod People, the Party I support ;) – do not work.

    I realize it’s hard for people to comprehend because they are lied to again and again by politicians (sadly of all parties) who tell them that handing over “government money” (sadly in reality taxpayer’s money in the form of taxes or future taxes if it’s financed by deficits) will grow the economy.

    The people about to receive the largess, like you, scream vociferously (and resort to name calling as I suppose you don’t like the Tea party) at anyone standing in the way as they want their bacon, which I understand as it’s human nature. What I object to, is when it’s presented as “good for me” for the State to take my money and give it to you.

    It’s just unfair.

    I also reiterate that this law was made only to benefit the studios. Their gravy train is ending in other States and they want California to pick-up the slack.

    That’s why they unleashed their props, the very crew members they didn’t care a bit about five years ago when they moved production elsewhere…

    And you are playing your role very well. You see you’ll get the trickle-down from the studios’ move and are desperate (I take name-calling as a sign of desperation) to get it.

    But don’t tell me it’s “good for California” or good for anyone not receiving the largess directly.

    And don’t tell me it’s fair.

  2. Fred says:

    They must have a surplus of cash from the draconian and fraudulent illegal tactics used by the California Child Support Services that Charges single non-custodial fathers 10% interest on their support payments. Even when they are going through Chemo, Lou Gehrigs , Parkinsons, bed ridden, crippled, serving overseas in the armed forces, or even blind.

    The state officials have lied for years that they receive no benefit, when they receive the same amount in return from the feds in interest that they collect.. Meanwhile annihilating children s relationships with their fathers when they miss a payment after 30 days and lose their license or incur debt that Warren Buffet couldn’t pay back in a lifetime. I think it was only suppose to be implemented by the assembly to pay all of the illegal state worker pensions that they couldn’t afford.

    So It’s great news about the help for producers and studios. The only criteria to snatch the money is put the aspiring actor/director Mayor Garcetti in your film.

    As much as I hate to say it Sarah Palin was right. Now in California We can see Russia from our house or park bench.

    • Rena Moretti says:

      My big problem with it is that I was told “pay more sales tax of the Police, Fire and teachers get it” and now the money I paid to supposedly keep my Beat Cop on the Job is going to be used to pad the coffer of companies in trouble because they make crappy product…

      There’s only one word for it: unfair!

  3. Rena Moretti says:

    Another sad day for the beleaguered California taxpayer and the sluggish California economy…

    Not that it was a surprise.

    Well, the only surprise is that the Governor didn’t go 100 million better to show he was in favor of California business. Instead, he’ll probably try to convince people spending 70 million less was fiscal responsibility…

  4. Julienne says:

    Brown is single handedly destroying our beautiful State. He’s tuning into a massive welfare, socialist nanny State.

    • Rena Moretti says:

      It’s not single-handed. He’s got plenty of help. All the bad Mayors like Garcetti and Villaraigosa are very helpful and all the prejudiced Republicans who make it their mission to make sure Democrats essentially run unopposed to every statewide race are also quite helpful.

      Then again, you get the government you deserve and it speaks volume about us Californians to see the people we vote for. :(

    • Anthony says:

      Julienne, learn to spell….Brown has taken a huge step in turning California into the Film Friendly State it once was!!! Maybe you’ll even benefit from it…I know a lot of people that this bill will certainly help. Hard working Americans just getting the same tax benefits that other industries and countries have been receiving.

      • Rena Moretti says:

        The only people this bill is meant to help are studio executives (coincidentally – of course! – also big donors to Democratic causes…)

        The crew the studios couldn’t have cared less about five years ago were now oh-so-important… Please!!!

        As for “being film friendly”, why isn’t California “friendly to all businesses by cutting taxes for all businesses and taxpayers instead of taking more of other people’s money – remember that sales tax hike to “balance the budget”? The money is now going to the Hollywood studios…

        Other States have killed their incentive program as they belatedly discovered there was no economic benefit (duh! if you take the money from one person to give it to another where’s the economic growth?!)

        Sad California has decided to fleece its taxpayers so that Hollywood can keep producing bad projects (the real reason the studios are out of money!)

  5. Jim Johnson says:

    So Governor Brown is against Tax credits, but then extends them big time to the movie and TV industry in CA, which just happens to be a big time donor? I guess tax credits are bad, unless they are for your friends!

    Setting this blatant double standard aside, I think this is a great idea that will help the economy in CA. Other states were making it more affordable to shoot movies there. So, it makes sense to make your state more competitive. “It’s better in CA AND it’s cheaper!” That works for me.

    Governor Brown, be careful. You have just opened Pandora’s box. If this is so great for one type of industry, why is it bad for others? If offering tax credits and incentives is effective at attracting movie production BACLK to CA, why not use the same approach across the board?

    How will you be able to argue against it with a straight face?

    • Rena Moretti says:

      The problem is that it’s NOT good for the economy. Having the government picks winners and losers prevents the market from working its magic (to wit Hollywood keeps making crappy TV shows nobody watches and will continue a bit longer thanks to Sacramento).

      The Governor was right to say they don’t work and taking money out of our pockets so bad films and bad TV shows continue to be produced here takes away money from the better uses taxpayers would have found for them.

  6. blf, ny says:

    i understand that they’re “scaling” the credits up over five years. so that mean in five years, Ca will have 75% of what NY has right now. how does that compete? sounds more like brown is saying “we don’t want productions here, go away.”. NY La, an georgia are all laughing right now and clapping each other on the back.
    no balls governor. it’s what i would expect from a republican governor

    • Rena Moretti says:

      Their taxpayers ain’t laughing… They are being fleeced. The idea that you are a loser if you don’t pay companies to operate in your vicinity is economically ludicrous.

      All those handouts do is take a little money from a lot of people to give it to cronies (in that case the Hollywood studios). They don’t “create” anything. The money taken by the State for the handouts is then not used elsewhere…

      If slightly less poor economic decision-making is what you’d expect from a Republican, then their bad reputation is entirely deserved.

      A good Governor would have vetoed this economic malfeasance.

      • MyTooSense says:

        Rena, everything about your “reasoning” is utterly specious. People aren’t perfect and neither are markets–it’s bullsh*#t empty-headed Grover Norquist economics. If the free market is so perfect, explain the massive credit bubble that very nearly toppled the world economy. Unfettered, unchecked anything isn’t good for anyone. Free markets are great, but they are messy and far, far, far from perfect.

        Re the movie & TV tax credit — it absolutely does NOT go to Hollywood executives, or rich actors, or directors — it is a modest tax incentive (well less than other states) that goes to, yes, corporations — studios — who, I’ll guess by your logic, are people too. Is it perfect? No, not exactly — but you can be sure without it California would, without question, lose an entire signature industry–and with it, billions of dollars of economic impact (direct spending) and billions of additional in tourism. Why do people still come to southern California — maybe a little for the weather and the beaches, but mainly for the allure. That ineffable, elusive Hollywood glamour. Like it or not, that’s a BIG part of the “business” that is California: entertainment and tourism. They are KEY, signature industries. If we don’t level the playing field, with other states who are now into the business in a big way, the entertainment industry in California is dead — and with it, huge ripple effects.

        Why a tax credit for movies and TV? Several reasons: for better or worse, the majority of other states and regions have gotten into this game with aggressive tax credit programs — for many years CA did not have a tax incentive, and that huge sucking sound — you’re still hearing — was GIANT movies & TV shows moving to states & localities that offered incentives. This is a documented, unassailable fact. As a result of CA’s tax credit program, from approximately $300 million in tax credits — most of which haven’t even been claimed yet — the state has received, to date, $5.4 BILLION in DIRECT spending. That is direct spending in wages and other spending BEFORE any multipliers (you know what they are, right?). After a commonly applied multiplier of 2.3 (I believe) that comes to $12.42 BILLION in economic impact. These are all skilled middle-class jobs for California workers who pay taxes and grow our economy. (To be clear, movie star wages, director wages, producer fees do NOT qualify for a tax credit, nor does any such credit go to any of these people. Ever. Yes, goes to the corporations, the studios — and very often to small independent companies that produce smaller independent movies.)

        Finally, again, why movies and TV? Because a) they are hugely capital intensive (movie budgets are now climbing north of $200 million, and it’s all spent in a few months), and b) highly transportable. A movie company, or a TV show, can pull up stakes and relocate to another state or territory in a matter of days. For this reason, competition for these cash machines is highly competitive. Where luring a major bricks-and-mortar factory to CA (great as they are, and we should) may take years, luring a giant movie back to CA (where most studios would PREFER to be in the first place) can happen overnight.

        So, while it ain’t a perfect world, your reasoning, well, blows. It’s Tea Party blather, and it’s getting old. Really stale. This is an industry California desperately needs to retain. Btw, the tax credit program does not discriminate between “good” movies and “bad” movies — only are you going to shoot in California and hire California tradespeople? It’s strictly an economic stimulus, as it should be, and has nothing whatsoever to do with the quality of movies.

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