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Deadline Looms as Sacramento Moves to Extend California Film and Television Tax Credits

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Felipe Fuentes
Legislation to extend California’s $100 million-a-year Film & Television Tax Credit Program by two years through 2017 is heading into the home stretch in Sacramento, following the return to work by legislators a week ago. The program is designed to keep film and television productions and jobs in Hollywood and other parts of the state that might otherwise go to one of over 40 states now offering some kind of production incentive to lure shoots.

Efforts to get a final bill passed by Aug. 31, when the current session ends, are now in high gear. But, with only two-and-a-half weeks remaining, there are a number of procedural hurdles to be cleared. Foremost is reconciling two mirror measures that have been advancing in the state Assembly and Senate.

“It would be a horrible crime if this program was not extended in Sacramento,” said Ed Duffy, Teamster Local 399’s business agent for the casting directors and location managers represented by the union, who has been a point man for getting an additional two years tacked on to the incentive program. “Right now we’re pretty optimistic that all the i’s will be dotted and t’s crossed in time to get a bill,” he noted. “But given that politics is involved, you can never be totally sure.”

A final vote by the Assembly on AB2026, introduced by Assemblyman Felipe Fuentes (D-Montebello) is expected this week. Last week the Assembly appropriations committee, chaired by Fuentes, unanimously passed a two-year extension of the tax credit. The level of funding was maintained at $100 million a year.

The Fuentes bill originally called for a five-year extension to 2020, as a way to create stability for the program over a longer stretch. But some legislators balked at a $500 million price tag on legislation to help out the state’s entertainment industry at a time when California, facing the need to close a $16 billion budget deficit, has made big spending cuts in government education and health care programs. The main opposition has come from the California Teachers Association.

If, as expected, the bill gets approved by the Assembly, the legislation then moves to the state Senate where a separate bill, SB1167, authored by Sen. Ron Calderon (D-South Los Angeles, District 30) is pending. That Senate legislation is also ready to whittle down the extension from five to two years. Passage by the appropriations committee is necessary before a vote takes place, which is expected sometime in the last week in August. The legislation must also get the blessing of the Senate president pro tem and go to the finance desk of the governor for evaluation, since it is a revenue measure. Gov. Jerry Brown has until the end of September to decide whether to sign such legislation, but so far he hasn’t tipped his hand.

In 2011, the four-year-old tax credit program was thrown a lifeline with a one-year extension that the governor signed at the last minute. That is set to expire in 2013 unless the legislature adds another two years to the program. Opposition by Brown would shock Hollywood supporters of the two-year extension, but the symbolism of seeming to give a handout to showbiz fat cats when California is in dire financial condition, may also weigh on the governor’s decision.

With only $100 million in tax breaks to hand out each year, the California Film Commission, which administers the program, conducts an annual lottery to randomly pick a handful of winners from the far larger number of applicants. The most recent lottery was held  June 1. Only 28 film and television shoots got funding, out of 322 requests, nearly double the previous year’s number.

In the backdrop to the current legislative push in Sacramento are several recent reports which have concluded  that the $100 million in incentives has been multiplied many times over in terms of impact not just on industry revenues and jobs generated, but on  the local economy as whole. A June publication by the Los Angeles-based Milken Institute, “Film Flight and its Economic Impact on California,” concluded that California’s incentive program, “has been a success in terms of being fully subscribed and having a demonstrable impact in arresting the decline in filmed entertainment spending and employment in the state.” But the report also noted “key concerns” including “the program’s limited funding relative to demand.”

For her part, Amy Lemisch, head of the California Film Commission, noted that Body of Proof, a television show that had moved from Rhode Island to Los Angeles because of the tax credits, had spent money with 1,200 different vendors, according to the show’s producers. “Even I was surprised that one show could generate so much business activity,” she said.

At the same time a recent report on first-quarter activity in the Los Angeles area from FilmLA, the permitting agency, noted that while feature film shoots held steady there was a 15 percent decline in the number of days for television shoots, on top of a 9 percent drop for the same period in 2011. “For many years, we’ve relied on television to backfill the hole left by the flight of feature film production from the L.A. region,” observed Paul Audel who heads the non-profit organization. “Television has been our bread and butter, but with Sacramento’s inaction to stem our losses, other states and countries are eating off our plate.”

The coalition of Hollywood unions and the Motion Picture Association of America the trade group for the entertainment companies – which has lobbied strenuously to get the tax credit program extended, also laments that the $100 million size of the program pales in comparison to what other states spend to attract film and television business.

And in another development that has recently roiled Hollywood, New York State recently tripled the tax-credit offered for postproduction from 10 to 30 percent, with a top of 35 percent for work done in economically distressed areas in upstate New York. Since the state began offering tax credits to support the film and television industry in 2004, over $1 billion has been handed out, with estimates that producers wound up spending more than $7 billion in New York over that period. What makes the latest N.Y. expansion worrisome to those in Hollywood is that it targets postproduction activities like film editing and special effects work, another local mainstay that is now more vulnerable to poaching.

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