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

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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