Mayor Proposes Incentives for Filming

Mayor James K. Hahn on Thursday announced a plan he hopes will keep Hollywood in Hollywood -- by paying film production companies to shoot in Los Angeles.

Hahn’s proposal, which was inspired by a program that New York City adopted in December, would use as much as $15 million in public funds to reimburse companies that make a movie in Los Angeles, paying them 5% of their production costs or up to $625,000.

The mayor, who announced his initiative outside Sunset Gower Studios in Hollywood, said he would propose that the city set aside the money in next year’s budget. He predicted that the city would be more than compensated for the cost with increased tax revenues and economic growth if producers were enticed to stay in Los Angeles.

The City Council would have to sign off on the plan as part of its approval of the city budget. But with city officials struggling with shortfalls and desperate to hire more police, some council members said the proposal had caught them off-guard.

“This is half-baked. This is late. This is in the 11th hour,” said Councilman Martin Ludlow, chairman of the council’s entertainment committee. Ludlow, who supports Hahn’s opponent in the mayoral race, Councilman Antonio Villaraigosa, said entertainment industry officials have been pushing the mayor to adopt such incentives for years, but he resisted them.

“At a time when Los Angeles is fighting to hire more police and firefighters, recklessly proposing this in the middle of a budget crisis not only jeopardizes its passage, but alienates many who may be inclined to support it,” he said.

Councilwoman Wendy Greuel, who was an executive at DreamWorks before her election, said, “Anything we can do to save our signature industry, to keep it here, to keep jobs -- we should look at all alternatives.”

Although Hahn’s proposal involves the city budget, the announcement came from his campaign staff and not his mayoral office. And campaign aides, not city staff, were at the event.

Campaign strategist Bill Carrick said the campaign organized the announcement because it did not want it to appear that Hahn was using city resources for campaign purposes.

Villaraigosa’s campaign, nevertheless, issued a statement that called the plan “election year spin.”

“The bottom line on this is this is something the man should have done his first few weeks in office, not his last,” said Ace Smith, Villaraigosa’s campaign manager. “The fact that the entertainment capital of the world is following New York and not leading it is pathetic.”

Also absent from the mayor’s announcement were entertainment industry members. Hahn stood alone in front of television cameras, and only one representative from the industry was introduced at the event, a Teamsters union official.

But although some in the entertainment industry said they were surprised by the proposal, many welcomed it as an important gesture from a city government that some say has seemed to take them for granted.

“It’s important that these issues are discussed during this campaign,” said Steve Caplan, senior vice president of the Assn. of Independent Commercial Producers. “We welcome any ideas to attract and retain productions in Los Angeles.”

If enacted, the proposal would be the city’s second break for the entertainment business. In November, the council agreed to reduce the tax on gross receipts to save small- and medium-sized film production $2 million annually.

Writers, directors and other industry workers who make less than $300,000 a year will pay no taxes. The changes take effect in July.

The proposed $625,000 payout is just a fraction of what it costs to make and market a movie, estimated last year to be about $98 million. But Steve MacDonald, president of Entertainment Industry Development Corp., which helps coordinate filming in Los Angeles County, said it could have a “significant” impact on filming in Los Angeles.

City officials estimate that the entertainment industry injects up to $30 billion a year into the local economy and employs more than 200,000 workers.

But in recent years, lured by tax incentives and cheaper costs in other states and countries, productions have been decamping, taking thousands of jobs with them.

“We want to make sure we keep this industry thriving in Southern California,” Hahn said. “We’re making an offer that we think is going to be very difficult for filmmakers and TV producers to refuse.”

Last year, however, film, video and television production in Los Angeles actually reached record highs. Entertainment Industry Development Corp. issued permits for 52,707 location production days -- one day representing a single day of work on a single project -- a 19% increase over 2003.

But some, such as MacDonald, said officials must remain vigilant to keep productions from being lured to New York, Louisiana, New Mexico and other countries.

Hahn said he hoped that his proposal would be augmented by state incentives that Gov. Arnold Schwarzenegger wants to see in the budget.

That is what happened in New York last year, when the state adopted a 10% tax credit for productions last summer, and the city followed with an additional 5% tax credit.

In Los Angeles, only so-called below-the-line costs would be eligible for reimbursement. They are the costs involved in actually making the movie, such as salaries for people who operate cameras, set up lights and drive equipment to the sets. Above-the-line costs are things like multimillion-dollar salaries of movie stars.

On many projects, below-the-line jobs are held by union workers. Hahn is counting on union support in his reelection campaign.

Also on Thursday, Assemblyman Keith Richman, a Republican from the San Fernando Valley and a co-chairman of Bob Hertzberg’s mayoral campaign, announced that he was endorsing Villaraigosa.

Times staff writer Jeffrey L. Rabin contributed to this report.