Report Calls on Film Agency to Hike Permit Fees

The agency created to keep movie production in Los Angeles County should charge filmmakers 10% more to film here in part to cover “excessive” spending by its former chief, who has been indicted for embezzlement, according to an audit released Friday.

The Entertainment Industry Development Corp. also needs to work harder to appease residents affected by location filming and needs to improve its services to the industry, according to the management review.

The 55-page audit commissioned by the EIDC executive committee identified more than $1 million in expenses paid since 1997 to former President Cody Cluff, who is now awaiting trial on charges of embezzlement, forgery and misappropriation of public funds.

Cluff was unable to provide “any meaningful explanation regarding the details for the majority of items we inquired about,” according to the audit.

Board members embraced the proposal to make the agency more responsive to the community, but opposition immediately emerged to boosting film permit fees from $450 to $495.

“My position is we should not, at this point, raise fees based on the excessive spending by the [former] president,” said Los Angeles City Councilwoman Wendy Greuel, a member of the executive committee.

“We need to make sure we keep film production in L.A., not turn it away,” she added.

The audit, by the accounting firm KPMG, identified the EIDC’s operational structure as flawed and its financial position as precarious. It said the agency may need to borrow money in addition to raising fees to meet its expenses.

Cluff was indicted Aug. 20 by the Los Angeles County Grand Jury on charges of embezzling $150,000 over a six-year period for travel, strip clubs, country club memberships, yoga classes and other personal expenses.

Questioned expenses identified by auditors included $145,972 in political contributions, $36,000 paid to a high school attended by Cluff’s children, and $18,000 paid to the Pittsburgh Film Office, which is headed by a woman who was romantically involved with Cluff.

The auditors also traced a $20,000 wire transfer to a bank in Utah that Cluff said was used to pay for a disc jockey for a social event. No other information was included on the expense.

“Clearly, on the surface, some of these look like personal, rather than business expenses,” said Keith Comrie, a management consultant hired by the executive committee.

The agency has also incurred $1 million in legal bills during the last year. The audit cost $300,000.

The fee increase “is necessary to keep an adequate cash reserve so that if there is any swing in the business it can be accommodated and we can pay our bills,” Comrie said. The agency spends about $6 million a year.

The report suggested that film revenue should improve, but the board faces difficult challenges that “include possible need to obtain a bank line of credit to finance possible temporary periods of negative cash flow.”

The proposed fee increase also troubled City Controller Laura Chick, who has been critical of the agency’s spending and operations.

“I’m always concerned when additional fees or cost increases are proposed,” Chick said. “The movie and television industry is one of the most important pistons in Los Angeles’ economic engine. I would caution the EIDC board to carefully examine any proposed fee increase.”

Last year, production companies tallied 44,415 filming days in Los Angeles County. As of last month, there have been 28,725 filming days so far this year.

Film industry representatives have favored reform. Several said they wanted to review the detailed recommendations, including the argument for a fee increase, before weighing in on the audit’s conclusions.

“Our primary focus right now is to move forward with the restructuring of this office, which is critical to facilitating and coordinating location motion picture and television production in the city and county of Los Angeles,” said Melissa Patack, vice president of the Motion Picture Assn. of America.

Mayor James K. Hahn said he would be cautiously evaluating the audit recommendations.

“As we look to the future of the EIDC, we must take a balanced approach that meets the needs of the film industry, and at the same time addresses community concerns,” Hahn said. “I’m very pleased that we are on the road to reform and look forward to working with all the stakeholders on next steps.”

The audit recommended 27 changes in the agency’s governing structure. Suggested reforms include scaling back the EIDC board from 49 to 32 members and slashing the number of elected city and county officials serving on the board from 24 to six. The report also recommended adding three citizen board members to address public concerns about filming in Los Angeles neighborhoods.

With reform, the agency’s future is brighter, it concluded.

“Filming activity in the metropolitan Los Angeles area has remained strong and looks to remain so for the foreseeable future, thereby providing assurance that revenue levels will remain relatively stable, if not improve,” the audit said.

Cluff has pleaded not guilty to the criminal charges.