BUSINESS

Film tax credits, new media outlets help revive L.A.'s entertainment economy

Hollywood is not just having a banner year at the box office — the backlot is booming too.

California's decision last year to offer more generous tax incentives for film and TV production is being credited for a sharp uptick in location shoots across Los Angeles.

The local industry is also getting a push from Hollywood newcomers including Amazon, Netflix and Hulu as they muscle their way into show business with a flood of original programming.

One barometer: There were 2,057 shooting days for scripted television shows filmed on location in the Los Angeles region for the three months that ended Sept. 30, a 54% increase from the same period last year, according to FilmL.A. Inc.

Caterers, lumberyards, equipment vendors and other businesses servicing L.A.'s bedrock film and TV industry say they are hiring more workers, expanding offices and buying new equipment in response to the groundswell of local production. Unions representing crew members say they are operating at or near full employment and are adding new members to meet the demand.

"We're absolutely slammed here," said Robert Lamkin, whose Chef Robért catering company specializes in feeding the film industry. "We've never been this busy in California in the 17 years since we opened."

Seven of his eight food trucks are working out of Los Angeles. That's a reversal from a few years ago, when the bulk of Lamkin's truck fleet was in Detroit, Chicago, Boston, New Orleans and other cities where film crews decamped to take advantage of film tax breaks.

Now Lamkin is turning down offers to work in other states because he has more than enough business in Southern California, where he and his staff feed hundreds of crew members on HBO's "Westworld" and other new shows and movies sprouting across the Southland.

The surge in L.A.-area filming is a dramatic turnaround from only a few years ago, when local business owners and union officials were fretting over the loss of jobs as other states lured away location filming with tax credits and rebates.

So-called runaway production and fallout from the recession forced prop houses and other companies to close or file for bankruptcy protection as work dried up. Small businesses held rallies to call attention to their plight and urge state lawmakers to help their struggling industry.

A revival of these small businesses bodes well for L.A.'s overall economy. The entertainment industry employs about 250,000 people and contributes nearly $60 billion in goods and services annually, or roughly 10% of the county's gross product, said Robert Kleinhenz, chief economist of the Los Angeles County Economic Development Corp.

"This is an industry that increases the size of the economic pie here in the region, so to have more activity come back to Los Angeles will have a ripple effect on businesses large and small," he said.

Kleinhenz and other industry analysts cite several reasons for the upswing in filming, including a rise in commercial shoots from carmakers and other big advertisers, and a swath of new TV shows from cable and broadcast networks as well as Amazon, Netflix and other new media outlets.

But they also say California's new film incentives — and shifts in other states — are playing a vital role in reviving L.A.'s entertainment economy.

Under a new law that took effect this year, the state tripled funding to $330 million annually and allowed more types of projects to qualify for incentives. Producers can offset as much as 25% of spending on qualified costs, such as crew salaries.

While California beefed up its film tax credit program, other states such as Louisiana have imposed new restrictions on their programs amid debates about their cost and effectiveness. Some scrapped them altogether, as North Carolina did last year.

Evaluating California's program is difficult because it's so new — the first tax credit allocation was in June and many projects that received the credits have yet to begin filming.

Nonetheless, preliminary data suggest that the program is working in one important area: reviving local television dramas.

Shoot days for TV dramas filming in the L.A. region jumped 24% in the third quarter alone, fueled by a crop of new shows receiving state credits, including Fox's "American Crime Story" miniseries, TBS's "Code Black" and FX's "American Horror Story," which previously filmed in Louisiana, according to recent film permit data released by Film L.A. Inc. ABC also relocated its series "Secrets and Lies" from North Carolina.

"Our numbers are being substantially increased by these additional programs that have the state incentive," said Paul Audley, president of FilmL.A.

L.A. Mayor Eric Garcetti recently joined 21st Century Fox Chairman Lachlan Murdoch on the set of "American Horror Story: Hotel" to deliver the same message. "The industry is coming back here where it was born," said Garcetti, who led a coalition that lobbied for the state film tax credits.

Of course, L.A. still faces formidable global competition for Hollywood's business. The falling value of the Canadian dollar — which makes U.S. dollars go further — could still swing more production north of the border.

It remains to be seen how long California's current tax breaks will last. The current funding allocation expires in 2021 and a new administration may not be as sympathetic to helping Hollywood.

And one of the key goals of the program — to bring large-budget movies back to California — remains elusive.

Most so-called tent-pole films, such as the Marvel or DC Comics superhero movies, still shoot in Britain and Georgia, where tax breaks are more generous. California's credit only covers the first $100 million in qualified movie expenditures and excludes actors' salaries, typically a large portion of film budgets.

"I would have liked at least one tent-pole movie, but we've got many applications to go," said Amy Lemisch, executive director of the California Film Commission.

Local feature film activity remains about half what it was nearly two decades ago. Yet film shoots are expected to increase later this year when several new studio movies begin filming. Eight have been approved for tax credits, including New Line Cinema's horror sequel to "The Conjuring" and Disney's movie "The Whale."

The state awards credits based on a complex formula that weighs how much each project spends on hiring crews, vendors and visual effects. Though some studio executives have grumbled that the formula is disadvantageous to large-budget films, their appraisal is mostly positive.

"It's not a perfect program, but it's successful," said Michael Walbrecht, vice president of public affairs for Warner Bros., which received credits for two movies and two TV pilots. "Our soundstages are at full capacity."

Jim Sharp, vice president of physical production for 20th Century Fox Television, said recently the tax breaks have put California back "in the conversation where shooting locations are discussed."

The fact that most of the activity has been driven by television shows rather than movies is not a bad thing, many argue. TV dramas such as "CSI" or "NCIS" employ cast and crew over a period of several years, as opposed to a few months for a feature film.

And the new television shows have created hundreds of jobs for crew members. "We haven't seen working numbers like this in 20 years," said Ed Brown, business agent for Local 44, a 5,500-member union that represents prop makers, set decorators and other crew members.

Marcel Worch, a general construction foreman from Woodland Hills, recently landed a job on "Veep." The HBO comedy moved from Maryland to Los Angeles to take advantage of the new tax breaks.

Worch spent several years working in Louisiana, New Mexico and other states. The time away from home strained his marriage and, he said, led to a divorce from his wife. He returned to L.A. a few years ago to retain custody of his children, but couldn't find work and spent months collecting unemployment checks.

He was training for a new career as a home inspector when the "Veep" job came up.

"Right now I have a solid job, I'm putting money in the bank and I don't have to live paycheck to paycheck," said Worch, 39. "If I want to, I can take my kids to Disneyland."

The new shows are helping to drive up business for local vendors.

Lamkin's Chef Robért catering company, for example, has purchased a new building and is investing $1 million on two new mobile kitchens and trucks. The company has 60 employees and plans to hire at least a dozen more in the coming months to handle the growing volume of work.

Prop houses also are enjoying a brisk business, a reversal from a few years ago.

At Independent Studio Services, one of the Southland's largest prop houses, sales are up 25% this year over last. The Sunland-based company's chief executive, Gregg Bilson Jr., said he also operates in Louisiana, Georgia and other states, but ISS has enough work to keep the business based in California.

Bilson said he is facing a shortage of certain props, such as police uniforms and press equipment, and will have a record profit this year. ISS has annual revenue of about $20 million.

"It's a dramatic increase," said Bilson, who credits the state incentives and an explosion in new television programming. "We're making content for Netflix, Amazon, Hulu — all these entities that didn't exist before."

richard.verrier@latimes.com

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