Filed in: Featured, News, Union Roundup, Visual FX

The ‘Special Effects’ of Tax Subsidies

January 22, 2015 08:59 | By

The Vancouver skyline.

The Vancouver skyline.

Being part of the showbiz cognoscenti, you no doubt already know that plucky group ADAPT – the Association of Digital Artists, Professionals and Technicians – has finally decided to give up its pluck, after all, and, citing a lack of money, has given up its attempts to get the U.S. Government to pursue trade actions against unfair production subsidies in other countries.

Relying on the same American government that hands out subsidies to oil companies, corporations that export jobs abroad, and large agribusinesses, to name but three recipients of tax dollar largesse, was an iffy strategy at best.

Especially since it’s a Federal government that presides over 40 States that compete against each other with production subsidies of their own (though little for the postproduction work that seems to be fleeing America’s borders).

According to a statement on the VFX Soldier blog, whose founder Daniel Lay, was also one of the leaders of ADAPT, money was a key consideration. “Some members of our community donated money to help fund the effort, but most did not.”

He noted that the group, “as opposed to the MPAA and the studios had no lobbying funds nor a trade association to help persuade lawmakers to take up our cause. Without government support, there was no additional pressure to raise funding from our industry.”

Lay opined that one reason for the dearth of financial support may have been “how rapidly the industry in California collapsed as work moved to Canada. This left many out of work without money and others being forced to move to Canada. Others were able to take advantage of the recovering economy and move into other industries, which made them reluctant to help an industry they probably would no longer work in.”

Vancouver's Lions Gate Bridge. (Photo by Aemil Folgizan).

Vancouver’s Lions Gate Bridge. (Photo by Aemil Folgizan).

Interestingly, on the same day ADAPT announced it was folding, and Lay was mentioning work moving to Canada, the CBC had an article on its website announcing that “Vancouver has the second most unaffordable housing market in the world after Hong Kong, according to a new study of major property markets.”

“Vancouver’s affordability ranking in 2015,” it continues, “is the worst it has ever been in the survey’s 11-year history.”

Given how many post houses are popping up in Vancouver specifically, is this coincidence?

The Wall Street Journal doesn’t think so. While not addressing VFX-job-flight specifically, their Washington Wire section recently ran an article asking “Who Benefits From Film and Television Tax Incentives?”

One of their answers? “The first to profit are developers and their real-estate agents. In the race to have most flexible settings and infrastructure at the ready, film tax subsidies often put worthless properties back into circulation as studios. Developers have also been known to flip abandoned factories and nearby blighted houses, anticipating an influx of middle-class migrants looking for work.”

The analysis speaks of the rapid “gentrification” of neighborhoods in such areas. Of course, there has scarcely been a concomitant reduction in L.A. real estate prices. There are, of course, other economic forces at work in each city, and across each border.

The article touches on some of those forces, as well, mentioning a second set of winners: “Because Hollywood-based production companies owe taxes in the states where they film, the largest subsidy programs have created credit-trading markets.”

Aside from the ratcheting-up of real estate prices in newly desirably neighborhoods, then, “the projected size of tax-credit windfalls has also benefited hedge-fund investors who can bundle failing film projects and still make a profit from the sale of the tax credits.”

The actual movies themselves are an afterthought in this economic scheme, although as we are currently drenched in Award Season, it’s comforting to think otherwise. “Neither of these stakeholders,” the WSJ analysis concludes, meaning the real estate and hedge fund speculators, “in film policy care about the films made or the ‘industry’ jobs that are often cited – truck drivers, caterers, extras, and assistants, for example – as evidence of policy success.”

The upshot, then means that ADAPT was always tilting at windmills, however noble or righteous their cause. To put it simply, they were up against much bigger money, the transnational kind, from the get-go.

Lay, however, got back to Below the Line with a statement after his ADAPT blog post went both live, and viral: “No matter what the solution is for the VFX industry, it would need to be agreed upon by the major U.S. studios. This was the only way besides a total stoppage of work that would bring the studios to the negotiating table and begin to change the business model. It will only be a matter of time before the global VFX workers see the same negative effects from subsidies.”

But of course the studios are all divisions of larger corporations themselves. When Lay talks about the theoretical trade sanctions the U.S. Government might have imposed, in that Philip K. Dick-like alternate universe, he emphasizes it was the best alternative to a “total work stoppage.”

But will the VFX industry – heck, any industry – see such a stoppage in the present, still-panicked-under-the-surface economic clime?

As for “global VFX workers see(ing) the same negative effects from subsidies,” well, one might wonder how the people scrambling to rent flats and land mortgages in Vancouver are doing.

But whether anybody is going to start walking out in mid-render while applying finishing touches to the next superhero tentpole remains a very open question. Someone in some newly formed middle class in a different hemisphere will be glad for the work.

The folks in Dunbar-Southlands, Echo Park, Kensington-Sunrise or Studio City may have to start taking in boarders. Those other kind of “borders” look to remain rather permeable – in terms of job flight, and restless capital – for some time to come.