The California Film Commission held a breakfast last week to give 22 of California’s location offices an opportunity to pitch their services to producers and location scouts in a “speed-dating” round-table format.
CFC executive director Amy Lemisch gave an update on the status of the State’s incentive program. “Since the program began in June of 2009, $300 million in tax credits have been allocated to 116 film and television productions. This resulted in $2.2 billion in state spending that included $728 million in wages for below-the-line crews. By the end of postproduction, these 116 projects will have hired over 25,000 crew, 6,000 cast and 170,000 background players,” said Lemisch.
The Production Tax Credit Program offers $100 million dollars per year in tax credits with $10 million set aside exclusively for independent films. There is a 20% credit offered for feature films with a budget of $1-75 million, TV movies and mini-series or any television series produced for distribution on basic cable. A 25% credit is available for independent films with budgets from $1-10 million and for any television show that wishes to relocate their production to California.
Certainly the California’s credits are helping bring production back to the state, and with its established film community and facilities, the differences between the 25% tax credit offered in Pennsylvania and even the 30-35% offered in Louisiana, may be offset by what is readily and dependably available here.
The larger question remains whether or not the film incentives are ultimately good for the states that offer them. Numerous studies on both sides of the argument show that the incentives can bring both a boon to the economy and some disturbing long-term effects.
Some of the arguments used against the incentives in other states may actually be defused in California’s case. In a Nov. 17, 2010 report by The Center on Budget and Policy Priorities, Robert Tannenwald states that one of the reasons that film subsidies don’t work is, “A large portion of the jobs they create, especially those with the highest pay, are filled by non-residents. Most locations in the United States (other than Los Angeles and New York City) lack ‘crew depth’”
He goes on to say that, “Some supporters of film subsidies argue that exceedingly generous subsidies will become unnecessary once states create self sufficient ‘media clusters.’” But the odds are against any state creating a media cluster that is viable with small subsidies, or no subsidies at all.
Among film subsidy enthusiasts, adherents to the “cluster” argument believe that the growth process jump-started by state film subsidies will become self-reinforcing. They argue that more and more producers will choose the state as a location in part because the local labor pool has the necessary training.
Considering the fact that California, and more specifically Los Angeles, already more than qualifies as a “media cluster” and has more than sufficient “crew depth” one wonders if having the film incentives available through 2014 (and possibly longer if bill AB1069 passes, which would extend the incentives through 2019) would be enough to wrest production back to the state to stay.
The effects of not having that crew depth and cluster can be seen for better or worse in Delaware which released information on March 16 regarding a new, $85-million high-tech facility in Chester Township, that is already open for business on small projects and is expected to be producing larger projects by the end of this year, and the muddled news about the fate of Albuquerque Studios which filed bankruptcy in July of 2010 after glowing reviews, (and high incentives), for filming in New Mexico were not enough to save it from potential foreclosure.
Meanwhile in California, Disney/ABC Studios at The Ranch is in the process of building new studios on 56 acres in Santa Clarita with five pairs of sound stages and state-of-the-art functionality, effectively adding on to the existing cluster.
In 2002 only five states had incentive packages, but by the time that California joined the race in 2009, all but six states had incentive packages on the books. The question is, is this a race to the finish or what Mark Robyn, staff economist from the Tax Foundation, a non-partisan, non-profit tax policy research firm calls a “race to the bottom.”
“This war of one-upmanship is what economists call a race to the bottom. In the context of state taxes, a race to the bottom is an unhealthy form of tax competition, where states compete to offer the best subsidy to one individual industry. The outcome is a bad one for all involved, except of course for the industry you’re competing for.”