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California Seeing ‘Profound Erosion’ of Production

State film commission pushing for increasing tax credits

Runaway production has produced a “profound erosion” of California’s film and TV production, according to a report from  the state’s film commission.

The report,  released Tuesday, asserted that the state’s four-year-old incentive program — which provides $100 million in tax credits annually and is administered by the commission — isn’t large enough to reverse the trend.

“While our modest tax credit program has had an ameliorative effect in retaining some production spending, California continues to experience a pronounced erosion of this signature industry,” the report said. “California still boasts a superior critical mass of state-of-the-art facilities, highly-skilled film crews, and the best talent, but this infrastructure is at risk. ”

CLICK HERE TO LINK TO THE REPORT

The document, authored by the film commission as a progress report on the program, noted the following trends due to production leaving California:

  • Unions are reporting high levels of unemployment among their members
  • Many businesses in California that support production have closed or have been forced to lay off employees, while others have expanded their businesses out of state rather than investing at home.
  • Many California film industry workers and service providers report “devastating” income losses due to the large number of feature films and TV series relocating to other jurisdictions.

The report also disclosed that California’s share of 1-hour network series, which are not eligible for the tax credit, had declined 89% in 2005 to only 37% in 2012.

The commission announced in June that 31 productions had been selected to receive California’s Film and Television Tax Credit — 14 features, 14 basic cable TV series and three movies of the week — including the “Entourage” movie and “Pretty Little Liars.”  California producers submitted 380 applications for the state’s latest round of California’s Film and Television Tax Credit — up 18% from last year’s 327 submissions.

The fourth season of MTV’s “Teen Wolf” will receive $11.09 million, the highest of the 31 new allocations.  Warner Bros. “Major Crimes” received the second-highest allocation at $9.1 million followed by a pair of Horizon series — “Rizzoli & Isles” with $8.55 million and “Pretty Little Liars” with $8.04 million.

SEE ALSO: ‘Teen Wolf’ Takes $11.09 Million as Top California Tax Credit

With only $100 million in credits available annually and features with budgets over $75 million not eligible, demand far exceeds supply with less than 10% of applications receiving the credit. The commission asserted in June that the four-year-old program has helped generate $4.67 billion in direct spending within the state, including $1.59 billion in wages paid to “below-the-line” crew members.

California’s credit is smaller than those of rival states with a maximum of 25% of the budget. Amid resistance from legislators from Northern California, Gov. Jerry Brown signed a two-year $200 million extension of the program last fall with those funds to be doled out in June, 2014 and June, 2015.

The new report said that once incentive programs take root in other states and countries, those locales effectively develop their long-term infrastructure with stage construction, post-production facilities and job training programs.

“For example, incentive-rich jurisdictions such as New Mexico, Louisiana, Philadelphia, Michigan, Toronto and Hungary have all built impressive multi-studio facilities over just the past few years,” it noted. “Pinewood Studios, one of the most successful movie production companies in the world, is building a multi-studio facility in Georgia, and is ramping up its education and training programs.”

The new report also warned that  without more funding for the tax credit program, California will continue to lose direct spending and tax revenues from film and TV productions — particularly in TV.

“The situation is especially dire for TV series production, given that producers are unlikely to film their first season in California without a reasonable assurance that tax credits will be available for future seasons,” it said.

The report said that the tax credit program has succeeded in attracting basic cable TV series, mid-sized feature films and made-for-TV movies but warned that if the state is not more competitive, productions will increasingly choose other states and countries.

“Once the epicenter for entertainment production, California can no longer assume this leadership position,” it said.  “Maintaining California’s worldwide leadership role as the ‘entertainment capitol of the world’ is vital to the state’s economy.”

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