Hollywood Continues to Flee California at Alarming Rate

California Tax Incentives
James Walton

When Paul Audley took the job as president of FilmL.A. in late 2008, he was astounded to discover that physical production on the $70 million pic “Battle: Los Angeles” wasn’t being done in Los Angeles.

“It stunned me that the movie was shooting in Louisiana, and that the state of California was letting this happen,” he recalls.

In the subsequent five years, the situation has only worsened, despite the film production incentive program California enacted in 2009, which provides for $100 million a year in tax credits for what’s usually 20% of production costs. That’s significantly smaller than programs offered by other states such as New York, which offers $420 million a year in credits for 30% of production costs.

The trend has been mounting for high-profile films set in the Golden State to be filmed almost entirely outside California, due to lucrative tax breaks elsewhere that producers can’t turn down. One key component of new legislation to strengthen California’s incentive program, introduced Feb. 19, would raise to $100 million the current budget cap of $75 million on eligible productions. To drive home the need for state support, attendees at a Feb. 22 rally in Burbank held by Hollywood unionists were handed petitions to send to Sacramento citing that only one of 41 big-budget feature films shot in 2012 and 2013 was shot entirely in California.

The latest example of a locally set runaway is New Line’s upcoming earthquake thriller “San Andreas,” in which a helicopter pilot played by Dwayne Johnson rescues his daughter in San Francisco after a 10.0 quake. Except for six planned days of shooting in San Francisco, the entire $100 million movie will be made in Australia at the Village Roadshow Studios in Gold Coast, Queensland.

In December, “San Andreas” was granted a portion of Australia’s $20 million film fund set up specifically to attract overseas movies. Additionally, the film benefits from offsets from the Queensland Production Incentive Scheme, as well as local payroll tax rebates and federal rebates. Queensland officials have estimated that the movie will pump $30 million into the state economy, employ 70 local production crew, and provide roles for more than 2,000 extras.

“It’s frustrating to get only a few days shooting in San Francisco, but it’s better than nothing,” said San Francisco film commissioner Susannah Robbins. “Once again, the producers are going to where they’re getting the best incentive.”

There were even fewer days — four — shot in San Francisco for Legendary’s upcoming tentpole “Godzilla,” with most of the filming being done in Vancouver and Hawaii. Fox took a similar tack with its forthcoming summer release “Dawn of the Planet of the Apes” and that pic’s 2011 predecessor “Rise of the Planet of the Apes,” both of which were shot primarily in Canada with a few days of establishing shots in San Francisco.

“Producers tell us, ‘I’d love to shoot here but I have to go where the incentives are,’ ” Robbins notes.

Robbins has been touting San Francisco’s rebate program — which provides for up to $600,000 of production costs including rentals, street closures, permit fees, payroll taxes and police officers — in order to overcome the ingrained belief that such programs don’t exist in California. “We had eight productions use the rebate in its first six years, and we’ve had seven more since July.” San Francisco has a tradition as an iconic film location, with such titles as “Bullitt,” “Dirty Harry” and “Vertigo” having filmed in the city.

Further south, not a frame of “Rock of Ages,” set on the Sunset Strip, was shot in Los Angeles, although filming did take place in Hollywood — Florida, that is — at the Hard Rock Casino, along with a six-block section of North Miami Avenue in downtown Miami, decorated as a late-1980s version set of the Strip, replete with the Whisky-a-Go-Go, Frederick’s of Hollywood, Tower Records and the Angelyne Billboard.

Even the ruins of a future Los Angeles shown in “Elysium” were shot in Mexico and Canada.

Steve Dayan, who serves as vice chairman of the state film commission and secretary-treasurer of Local 399 of the Intl. Brotherhood of Teamsters, spoke at the Feb. 22 labor rally, promising his union would be willing to repeat its 1999 action of encircling the State Capitol in Sacramento with 200 Teamster trucks — a tactic used to campaign for incentives. “We are not going to let other states poach our jobs,” he said, evoking loud applause from the 700-plus attendees.

Audley’s agency is tasked with troubleshooting and simplifying the permit process. He’s been pressing the point that although location-based feature production increased by 18% in Los Angeles last year, to 6,900 days, that number is only half what it was in 1996. And the growth is not coming in higher value projects. Audley said. “(Other states are cherry picking the best stuff away from us,” he noted.

Dayan admits that producers have been substituting locations for as long as films have been shot. “Downtown L.A. has been used for New York City many times,” he said. But he noted that production costs on big features are now so high that it’s impossible for producers to shoot in town.

“We’re making the argument that by creating and retaining jobs, the new legislation would pay for itself,” he explained.

While statistics abound that show the extent of the economic impact of locally set runaways, on another level, the issue is emotional. The Feb. 22 rally featured an impassioned declaration by Maria Elena Durazo, secretary-treasurer of the Los Angeles County Federation of Labor, who pledged that organized labor will back the push for an improved film incentive.

“We are going to stand with you to make sure Hollywood does not become Detroit,” she declared. “I’ll be damned if we’re going to stand by and see the last film industry worker here turn out the lights. Hell, no!”

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  1. Dave says:

    Aussies are paying $30mil to create 70 temporary jobs and a couple days of fun for 2000 extras… seems legit.

    • ken says:

      You misunderstood that paragraph entirely… Aussies are paying a portion of 20mil to bring in an estimated 30mil, plus 70 production crew jobs (doesn’t say 70 jobs only) and 2000 extras (who knows if they’ll get paid). But, yeah – comprehension.

  2. denniswingo says:

    This is what you get for putting a bunch of progressive know nothings in Sacramento.

    Quit voting to slit your own throats!

  3. lautermilch says:

    I’m in Hollywood, Florida (near Miami) and they are now shooting a lot more in this area. We are glad to get it as the snowbirds (Canadian tourists with money) found they got treated better and had more buying power elsewhere and don’t flock here for the winter like they did in the past. Just the free market at work.

    • lmp says:

      I love the freestyle economic theory flopping going on here. Actually you are getting more work in Florida because your state is subsidizing it. See details here: http://www.entertainmentpartners.com/production_incentives_results/?jid=215&FLORIDA Free markets do not include subsidies to business. So in fact Florida is NOT practicing free market economics. The problem is that if Florida stops that subsidy to film companies it will lose just about all of it’s film work. The reason film work has left California is that California has NOT offered a generous film subsidy. Now California is finally deciding to improve its program after losing the film work to other states with more generous subsidies. Strangely the traditionally conservative states started this whole mess by being the first to offer these tax payer funded prizes to the production companies. Also, amazingly the population of these states seems to be clueless about what’s been happening.

  4. Dorothy Persiflage says:

    An excellent, thoughtful – and correct – posting! Thank you.

  5. duhhh says:

    Maybe they need to market themselves to film makers who make Hispanic movies?

  6. luxomni says:

    Not just the incentives. It is the even more the lack of impediments .

  7. JohnM says:

    CA should tax them for leaving.

  8. JohnM says:

    We know, this is how you roll.

  9. Chace says:

    FilmLA is actually a great help to producers. They’ve opened closed doors for me several times…..but to the article’s point, tax incentives in Southern states are simply higher than CA. You may ask yourself, why should GA, NC or Lousiana’s residents fund film production? Because the $$$ brought into that states economy is enormous. Ask GA, NC or Louisiana. Huge huge success story for crew folks, rental houses for cam and light equipment, local actors, local business, etc…and all this comes back in taxes too. CA was simply too slow to adopt tax refunds. The 2nd thing CA is fighting are exchange rates with other countries. Cape Town, for example, is something like a 10:1 exchange rate….not to mention talent buyouts which for TV commercials can be huge. (You can thank SAG for that which is a WHOLE other problem with shooting in the state$$$). Guys, this is not a liberal or conservative issue…..it’s simple math. This message brought to you by a Republicsn in the film biz.

    • Chace says:

      …..furthermore, CA is very expensive to live in, not just to shoot in. I’ll give you an example…..location fees. This is something FilmLA deals with everyday. If I rent a house for a day in LA in a nice neighborhood, it’ll cost my prod co anywhere between $7-15,000 a DAY to use that house. The same home in one of those Southern states would cost between 2-4000 a DAY probably. Now apply that math to all aspects of production and before you know it, it costs $175-200,000 a DAY to film with a proper crew, permits, cops, on and on and on. I can film with the same size crew in the South for 100-125K a DAY…..simple math. Now add in 30-40% tax refund and there u have it. It’s a very easy decision and why film production in the South is EXPLODING. Welcome to the new reality. My advice to film people in LA is consider moving to New Orleans, ATL, Shreveport or NC. In the near future, you can add ALA and MS to the list. I feel bad for my LA friends, but it’s the new economic reality.

      • The Shaman says:

        It helps alot when they get free tax payer money. And when you have scripts about being in a swamp. Its hard to find that in CAlifornia. Look they filmed LOTR in New Zealand. Is the studio going to move there? No and they aren’t moving to Louisana. They will make a great show. Take their free money and come home to where the weather is nicer.

  10. Jeff Bodean says:

    If we’re to complain about this “runaway” phenomenon, then blame technology. Namely, Chromakey sets, CGI and inexpensive high-end cameras like the RED. A green-screen set works just as well in Albuquerque as it does in Hollywood. You don’t need to shoot in downtown LA to create footage of a scene in downtown LA. And you no longer have to pay Panavision to camp out at your location to have high-end cameras. As for these “incentives” they are only available to the highest-end productions. Rich benefits for rich businesses. Read the text of any of them as a small or independent production company: it’s legalese for eff you.

  11. taosnow says:

    All you have to do…is take a shot from a helicopter to establish the story takes place in LA…and shoot the rest in Florida….

  12. sktuc says:

    I think it’s ironic that Hollywood makes fun of and criticizes Conservatives but when it comes to saving money on Taxes well , Hey let’s Film in a Conservative State where the Taxes are less.

  13. CDA says:

    Too late. LMAO

  14. The Iconoclast says:

    By all means take money from middle-class working stiffs and give it to the studios so they will shoot in California.

    • natxlaw says:

      I believe what you meant to say is, send the jobs out of CA so the folks formerly known as working stiffs can get on unemployement at the expense of the folks who are still working. Sounds about right to me.

  15. anoan says:

    FYI Unions are actually what is needed in VFX.

    Did you notice the VFX protest at the Academy awards ?

    Do you know that VFX and digital production are 90% or more of many feature films like Avatar, Hobbit, Gravity etc… ?

    with all the kudos going to people who barely have anything to do with the creation of the work…….

    There is a video worth watching titled LIFE AFTER PI,

    In Canada there is a 58% tax incentive, meaning the Government subsidies on each VFX worker are 58% of their salary, ……………already paid.

    So jobs are sucked out of everywhere.

    What’s worse is some of these new Canadian companies are playing games with people.

    ie one company tried for 20 years to get recognition and work on major productions. It couldn’t.

    So they hired a very experienced, talented guy from overseas with amazing production credits, they offered him a great title (which they illegally changed later), 20% reduced salary (plus the 58% incentive)……then they used that guy’s work to get recognition with studio producers.

    They got a major project.

    As soon as they had the project, in this case, Game of Thrones, they prematurely ended the contract of the new guy.

    The new guy had to pay hotel bills, and was stuck with a year’s lease on an apartment he rented.

    The industry is now costing people to work in it, by student loans, lack of employment stability, illegal VFX society politics etc… etc….

  16. When I was growing up in the 70s and 80s Southen Calif was the promised land. Every young person in the world wanted to live there. I did from 2000-2001 because of the city’s high cost of low living. LA resembled a large city in Brazil not the U.S. with it’s rich white people and poor black and brown people. I suspect studios are have issues trying to get young talented people to leave New York or Chicago and move to LA. When I lived there everyone wanted to move to Las Vegas or Phoenix or Seattle. SAD

  17. Brian Dzyak says:

    Right, the Plutocrats demand money from taxpayers before they’ll do anything.

  18. Come on Hollywood as Biden said time to get some skin in the game. Stay in the US and pay the higher cost that your political hero’s say is fair. Don’t be hypocritical.

  19. Ti says:

    Steve Dayan “We’re making the argument that by creating and retaining jobs, the new legislation would pay for itself,” he explained.
    Hmmm, sounds A LOT like Reganomics or “trickle down economics” as the left called it. Steve wants CA to give tax breaks to the ultra-rich film companies! How UNFAIR! (sarcasm)
    I guess the left is just slow to catch on, this was proven successful back in the ’80’s.

    • Brian Dzyak says:

      Uh, hardly. The 80’s began with a recession when St. Reagan slashed taxes to unsustainable levels. Then Greenspan and Reagan agreed to raise taxes eleven times, only on the Middle Class, still pushing the “Trickle Down” lie. Any “prosperity” in the 80s was due to Reagan spending like a drunken sailer on the national credit card with no way to pay for it. It’s called a bubble, like the one that caused the Great Depression.

      Conservative ideology and policy have been undermining this nation since 1980.

      • AuggieX says:

        A democrat saying Reagan spent to much. Ironic. You probably also think anyone who wants to cut spending and balance budget is an Right Wing Nut Job. Ironic. jimmy Carter left Reagan with a economic and military system that needed complete overhaul. You want to blame Reagan for recession less than 2 years into term, but probably blame Bush for 2014 economy which you can not lay at the feet of any of his policies. ironic.

  20. Brian Dzyak says:

    Union thug?

    You’re a douchebag living off the advances that “Union Thugs” provided you, like the five day workweek, overtime and vacation pay, safety regulations…

    • Brian Dzyak says:

      Socialism? Socialism is when a nation’s government owns the means of production. Meaning, the government would have to own a company that makes something, then sell that product to the public. That is socialism.

      So please explain to the class precisely what companies the US Government owns, what products it sells, and how Labor Unions (when people like you and me combine our voices to ensure fair pay and safe working conditions) contain “socialism.”

      • Jay Guevara says:

        For some reason my reply went astray. Search on “Conrail” to see a list of government-owned corporations.

  21. bobinnc says:

    North Carolina is open for business.

  22. ragu4u says:

    Hollywood needs to learn how to share the wealth and play nice with others. They have cornered the market in film making for waaaay to long. Let the rest of the country (the Midwest) dip their beaks a little.

    • Brian Dzyak says:

      Sure, all you need to do is convince your local and/or State Government to not only not tax the Production Company, but also hand out free money to the Production Company paid for with taxpayer funds. Also, agree to not allow “union thugs” to be employed so that unskilled desperate labor can have the jobs never caring about safety or daring to complain about anything.

      That’s how you get “jobs” into your area in today’s Conservative Utopia.

      • Kyle says:

        Brian, I’m in GA. I am an IATSE union thug and a conservative. I applaud your political leanings, and I’d like to thank you for the plethora of gigs you and your ilk have provided us low skilled guys from the South.

  23. Brian Dzyak says:

    Who will pay for your schools and infrastructure with no tax revenue coming in, jp? And what about those “no regulation” States, like Texas which allowed a plant to explode right next to a school…or coal plants the pollute your water?

    How would that Conservative “low tax no regulation” Utopia work out for you?

    • Nanny Mo says:

      Dude, the productions are LEAVING. That’s the problem, they aren’t paying for Cally’s infrastructure. They are LEAVING, thus NO MONEY. Are you smokin’?

    • Chuck Wagon says:

      That no regulation State called Texas you speak of has one of the lowest unemployment rates in country. We are 14th largest economy IN THE WORLD just behind Russia and ahead of Australia. The “low tax no regulation” is working out pretty well for us. Thank you for asking.

  24. What do you expect. The impact of political decisions, including taxes, that are supported by groups should certainly be held accountable to them. Special dispensation removes any consequences. This is the only way political decisions supported by groups can be moderated by the groups affected by those decisions. Goose…Gander… ?

  25. Brian Dzyak says:

    Taxes are at all time LOWS, Franky. The LACK of adequate taxation has consequences. Thirty + years of CONservative policies have undermined all the progress that had been made from 1932 until 1980.

    • T-Bone says:

      California is so conservative. Same with Detroit…And Chicago.

    • Pedro says:

      READ THE ARTICLE. They are going to other states and countries due to lower costs. Taxes translate to higher costs. What kind of alternate universe do you live in?

  26. Brian Dzyak says:

    This is what happens when Conservative ideology meets real life. When you remove regulations meant to level the playing field, the Plutocrats take over and real people don’t matter anymore.

    All Conservatives care about are short-term profits for themselves, everything else bedamned.

  27. Brian Dzyak says:

    Conservatives are to blame entirely. When this nation had tariffs in place as well as sensible tax policies, everyone thrived. But with GATT and NAFTA as well as lower taxes and more loopholes and less regulation, we all suffer.

    This falls squarely on the shoulders of Conservatives.

    • Andre says:

      No – that prosperity occurred because the rest of the world was in shambles due to 2 World Wars. Aside from Pearl Harbor (which is not on the mainland) – the US had no physical damage.

    • Kyle says:

      It’s a shame to see people so adamant and so wrong at the same time. I could spend hours explaining socioeconomics to you, but it would be counter productive to my own well being. I’m just glad most people out there agree with you. I will say one thing, though. If government is the answer to everything and higher taxes are a good thing for the economy, why does the economy make gains and why does the treasury take in more tax revenue when taxes are LOWERED?

      • lmp says:

        @ Kyle
        Wait a minute Mr.Know it all… I thought you were a Georgia guy. Don’t you also benefit from a state government with a more aggressive incentive program than California is proposing? It’s a shame you don’t come clean about the government benefits you are currently reaping. See how much business you keep if Georgia’s film incentive lapses.

      • lmp says:

        I can see your a dreamer but don’t you also benefit from a state government with a more aggressive incentive program than California is proposing? It’s a shame you don’t come clean about the government benefits you are currently reaping. See how much business you keep if Georgia’s film incentive lapses.

    • Doctor Hartley says:

      I agree with you to a certain degree that free trade agreements have hurt some industries especially those NOT requiring highly skilled labor where an equivalent product can be made with lower labor costs (ie apparel, toys, plastic parts, etc); however, It has also helped some US industries such as farming and services sector. In your biased partisan thinking you failed to acknowledge that NAFTA was pushed and signed into law by the Clinton administration and had almost as many democrats support it as republicans. You might remember a certain presidential candidate named Ross Perot who also was very vocal against it and shockingly he was also a republican. Guess that doesn’t fit nicely into your democratic progressive utopian society. As a testimony to your great logic you can at least point to the super healthy Californian economy as competing states and countries are able to better compete due to lower regulations and lower costs and lower taxes. That is the essence of Federalism where people have the freedom to choose the state where they do business and shockingly they often do so based upon lower financial and regulatory reasons. At least you have someone to blame for that as well, our founding fathers!

  28. Lonald says:

    Productions are highly portable, so the competition will be extensive and pervasive. It will be impossible to get the genie back into the bottle. Every city will and can put up with the occasional shutdown of streets and businesses – it’s a novelty event for them – and thus will not have a problem with forgoing offsets. Heck, you let the people affected have bit parts and that’s payment enough for many!

  29. Ronnie Van Zant says:

    Please continue to come down to Louisiana and Mississippi to film movies. We’re happy to have you and you’ll enjoy some great food.

  30. Ross says:

    Runaway poduciton comes about when it becomes TOO EXPENSIVE to shoot locally. L.A. is an EXPENSIVE place to shoot a movie. Paying bureaucracy to get permits (they do economic impact studies) to shoot is inefficient. New York too. The bureaucrats weigh it like this. “If you shut down THIS street for shooting you have to pay the local businesses on this street their lost revenue for the days they shut down. In addition you will also have to pay the city for extra Police security.” Spielberg said this in the 90’s “Los Angeles, California priced itself out of the market.” Even Michael Bay had to beg to shoot at Hoover Dam for “Transformers.” He was trying to keep work in town, local, and it was made DIFFICULT for him to do so. Subsidies had nothing to do with that!

    • Brian Dzyak says:

      Well, no. It’s not “too expensive” to shoot in LA. It’s too CHEAP to shoot in Atlanta and New Orleans. When a government stops charging for permits and hands out subsidies to a business, it doesn’t mean that the previous location was “too expensive.” It just means that it is now less expensive to shoot somewhere else.

      When that happens, you look at why it is less expensive elsewhere and the reason is “incentives” on the backs of taxpayers who don’t know what’s really happening.

      Shutting down a one-of-a-kind location like Hoover Dam isn’t like asking to shoot on a random street someplace. Geographically, it is a fairly major artery through the desert and the detours required if a production company suddenly owned it for a few days would be significant. It’s not that it was just “too expensive.” You can’t get “Hoover Dam” in Atlanta or New Orleans.

      And imagine you had a business unrelated to the film industry, like a clothing shop. Now a film company wants to come to that street and shut it down for a week effectively cutting your store off from the normal flow of customer traffic. Would you prefer that the film company “buy you out” or that they be allowed to effect your business that way?

      Subsidies and lack of proper permits have EVERYTHING to do with why production is not in LA. The day the tax bribes dry up in Georgia, Louisiana, and elsewhere is the day you’ll see homesick producers, directors, and actors back in LA for everything where the infrastructure already is well established and where most of the experienced crew have built lives.

  31. Josh says:

    The answer is using current trade laws to impose duties/tariffs on work that is drawn out of the country due to subsidies. Will cost a fraction what subsidies will and wont be wasting taxpayer money.

    Adaptvfx.org

    • Andre says:

      Brian – you are miscalculating one thing. If/when those incentives dry up… those places could very well have their own home-base infrastructure built and ready. In fact – that is exactly what’s happening. The talent is mainly in LA and NY.. but ppl travel with no problem you know.

    • lmp says:

      Tariffs start trade wars. This would be nice but not even close to likely. Whether we like it or not we either compete for the business or not. Dreaming is nice but if we don’t take action now we can’t hope to stop the bleeding.

  32. VFX Soldier says:

    Australia is one of the target countries for our legal effort to implement anti-subsidy duties on subsidized film work that is injuring the domestic film industry.

    Instead of trying to outbid other countries at their game why not discipline the system?

    Read more about our legal effort:

    Adaptvfx.org

    • Reality Check says:

      Can’t discipline Louisiana with a CVD. Can’t change a favorable exchange rate or lower local labor rates with a CVD. It will just cause people seeking cheaper alternatives to set a different bar.

  33. The filmmaking industry will still be referred to as “Hollywood” – the major studios are still centered there, and execs can still afford to live there by exporting the work and importing the money (with no significant tax imposition). And the workers who are forced to chase the projects around the world get no such consideration as independent businesses

  34. Brian Dzyak says:

    The only way to solve this problem for EVERY industry that faces “runaway” production is to file a class action lawsuit in Federal Court based on US Code – Chapter 41: EXTORTION AND THREATS.

    Studios/Production Companies (and other industry companies, like Boeing) essentially use extortion to exact tax “bribes” from local and State governments in exchange for “manufacturing” jobs. Essentially, the spoken and unspoken conversations go like this: “Give us X in tax incentives or we’re taking our movie to a State or Nation that will.” That is extortion.

    Then the State or Nation follows with a “FU” or a “Sure, we’ll give you $X in tax breaks and maybe even toss in $Y in outright subsidies.” The “place” gets a movie in their backyard for a couple months, a few people get paid, the labor gets taxed (to pay for schools, roads, police, etc.) while the Corporation walks away with lower taxes, no taxes, and/or cash in their pockets.

    Taxpayers are getting scammed and don’t even know it all because it looks like a good thing when jobs are done. It’s a race to the bottom where we all lose but the Corporations and CEOs win big.

    Watch this footage of a Louisiana hearing on tax “incentives” as they admit that the “incentive” program operates on a loss.

  35. lmp says:

    Your are wrong and uniformed but it appears those sorts of things don’t bother you.

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