Can Sacramento Help Hollywood?

The actor known for the phrase “I’ll be back” is trying to make good on his promise to bring Hollywood’s movie and TV shoots back to California after numerous productions have fled to cheaper locales.

Since being elected governor, Arnold Schwarzenegger -- still weeks away from assuming office -- has been raising the issue of so-called runaway production in private talks with industry representatives. And members of his transition staff already have met with studio and guild officials, according to people familiar with the sessions.

But Schwarzenegger, despite his best efforts, is likely to find that political currents and a budget mess in Sacramento will limit him to cajoling and arm-twisting rather than serving up more-concrete measures such as financial incentives.

Tax breaks, labor credits and other sweeteners are considered by many to be crucial if California is to compete more aggressively with lower-cost foreign locations such as Canada, Australia, Britain and Eastern Europe, as well as states offering incentives such as Illinois, Louisiana and New Mexico.

“I just don’t see it happening in our budget scenario anytime soon,” said state Sen. Kevin Murray (D-Culver City).

Mike Farrell, chairman of the Screen Actors Guild’s legislative committee, said his group also believed that stopping runaway production was very important. “But we understand there are other issues” that Sacramento lawmakers are sure to deem “more important,” he added.

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Sending Signals

For his part, California’s governor-elect has sent clear signals that he intended to follow up on his vow to reverse the outflow of film work.

Motion Picture Assn. of America President Jack Valenti said that he had had two recent conversations with Schwarzenegger -- one before and one after the Oct. 7 recall election -- and that Schwarzenegger specifically mentioned his desire to keep more productions in California.

“I’ve been in this job for 37 years and never had any governor of California call me twice to say, ‘I need your help and please be available to me,’ ” Valenti said.

Union officials add that Schwarzenegger’s knowledge and relationships in the business eventually should help in the fight.

“Arnold Schwarzenegger comes from the entertainment business. It’s an area he knows really, really well, and he’s expressed his commitment to it,” said Bryan Unger, western executive director of the Directors Guild of America. “But he’s got a full plate and a lot to do before he can take this on.”

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A National Problem

Runaway production continues to be a problem locally, statewide and nationally, as cheaper currencies and aggressive incentives have lured film and TV shoots. Although Canada’s currency strengthened against the U.S. dollar during the last year, the overall budget of a film shot today in Vancouver remains about 25% cheaper than if it was shot in the U.S., said Peter Mitchell, chairman of the Motion Picture Industry Assn. of British Columbia.

Even films set in the United States increasingly are being shot in foreign countries to save money. The coming Civil War drama “Cold Mountain” was shot in Romania, and the Oscar-winning “Chicago” was filmed in Toronto. Last night’s TV movie “Hollywood Wives: The New Generation” was shot in Calgary.

During the recall campaign, Schwarzenegger identified runaway production as part of a larger push to keep businesses from leaving the state. Various studies have estimated the direct cost to the United States at about $3 billion a year, most of that in California, and about $10 billion when those losses ripple through the economy.

Nonetheless, Hollywood incentives have historically been a hard sell in Sacramento, especially among legislators from areas outside of Los Angeles. Some lawmakers maintain that any tax breaks amount to a windfall for wealthy studios and producers.

What few programs do exist are vulnerable, moreover. The state’s film commission and its Film California First rebate program for filmmakers, aimed at keeping productions in state, have been hammered by budget cuts.

Hollywood’s unions seemingly scored a victory when outgoing Gov. Gray Davis last year championed an aggressive tax break aimed at stemming runaway production. But it ran headlong into opposition from the powerful president pro tem of the state Senate, John Burton (D-San Francisco). Burton and other legislators contended that it was hard to make a case for the bill when social services were being cut in the fiscal squeeze.

“There were a lot of people who were supportive of the idea” of the tax break, said Assembly Speaker Herb Wesson (D-Culver City), the bill’s author. “They just questioned the timing.”

Wesson said he was hopeful that Schwarzenegger would jump-start the drive for incentives once the state’s budget crisis eased.

Schwarzenegger hasn’t committed to any specific plan, although H.D. Palmer, a spokesman for his transition team, said the governor-elect knew the value of dangling financial carrots from his personal experience in Hollywood.

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Scoring Points

Schwarzenegger himself periodically shot films outside of the United States, notably “Collateral Damage” in Mexico and “The Sixth Day” in Vancouver. But he scored points with Hollywood’s labor community when he pushed to shift his most recent film, “Terminator 3: The Rise of the Machines,” to Los Angeles from Vancouver.

Palmer said Schwarzenegger believed that improving the state’s overall business climate by easing regulatory burdens and reforming the costly workers’ compensation system was a first step toward helping stem runaway production. But any decision on whether to push for specific incentives will have to wait until after Schwarzenegger’s team finishes auditing the state’s finances.

“While he understands the importance of being able to create incentives to keep productions here, anything in that regard is going to have to be part of the overall look at what the operating deficit is,” Palmer said.

In the meantime, Murray said, Schwarzenegger should use his celebrity to promote California production whenever and wherever possible, including promotional appearances at film festivals.

“The governor-elect,” Murray said, “would be a great salesperson to fight runaway production.”