As Filming Leaves, so Do Benefits for Taxpayers

California loses more than $10 million in tax revenue when a larger-budget movie costing about $70 million is made elsewhere.

A mid-size film, costing about $32 million, shot out of state means about $4 million in lost taxes. For a 12-episode drama, state coffers lose more than $3 million.

The findings from the Los Angeles County Economic Development Corp. are contained in the most detailed study to date on the effect to state revenue of runaway film and TV production. The 20-page report, to be released today, is timed to coincide with the latest legislative proposal in Sacramento that would offer tax incentives to encourage producers to keep shooting films, TV shows and commercials in the state.

“The real threat ... is that this major economic engine could gradually leave the state, one project at a time,” the report warns.

Previous lobbying efforts for production sweeteners have been thwarted by legislators concerned about the effect on the budget, and by critics who argued that they would provide an unfair handout to Hollywood. In 2002, then-Gov. Gray Davis proposed sweeping incentives that were ultimately shot down.

The sponsors of today’s report, a coalition of labor and industry groups, are seeking to rebut that claim by showing how much working-class families and taxpayers benefit from filming.

“The general response out of the bureaucrats in Sacramento is that this is a corporate welfare tax break,” said economist Jack Kyser, the co-author of the report. “They don’t understand that runaway production represents a loss of jobs, as well as state and local taxes.”

The incentives legislation is expected to be pushed by Gov. Arnold Schwarzenegger, himself a former $20-million-a-picture actor. It would provide a 12% tax credit on a feature film project’s spending in California, with a cap of $3 million per production. Television movies, which have thinner profit margins, could get an additional 3% credit.

Assembly Speaker Fabian Nunez (D-Los Angeles), who is sponsoring the bill, said incentives were needed to protect working Hollywood.

“What this really comes down to is: Are we willing to make a bit of a sacrifice to generate more middle-class jobs here in California?” he said. “This is not a tax credit bill for the big movie studios, but for those that operate on the margins.”

Proponents are hoping to convince legislators that Los Angeles and California face growing competition for its film and TV business from other states and countries.

Although television work is surging, feature film activity and jobs in Los Angeles have steadily declined over much of the last decade as a result of runaway production and a consolidation of companies.

The report notes that states such as New Mexico and Louisiana have been especially successful in luring away film production with tax sweeteners.

Director Taylor Hackford said he shot the Oscar-nominated film “Ray” in Louisiana because of a $3.7-million tax credit.

“I wouldn’t have been able to make that film without that kind of help,” Hackford said. “I want California to wake up.”

The study also shows that 236 features were shot partially or exclusively in California in 2004, representing 39% of all productions that year. The remaining 61% of films were shot exclusively, or in combination with, other states, Canada and the rest of the world.

“This has been a front-burner issue for us,” said Screen Actors Guild President Melissa Gilbert. “It’s really vital that we bring the work back here so that we can increase the job opportunities for our members.”

Today’s study does not give an overall financial estimate of losses because of runaway production, but instead focuses on the tax and employment benefits to the state. During a previous push for incentives in 1999 a report commissioned by the Screen Actors Guild and the Directors Guild of America concluded that about $2.8 billion in direct film and TV work fled the U.S. in 1998, costing 23,500 entertainment jobs.

“This isn’t about investing in the film industry, per se, it’s about investing in job creation in California,” said Jean Prewitt, chief executive of the Independent Film & Television Alliance.

Today’s report seeks to underscore the vital role entertainment plays in the state economy, noting that 245,900 people work in the business and earn about $17.2 billion annually.

“This is just the bare minimum to show how important an industry this is for California,” said Amy Lemisch, executive director of the California Film Commission. “We don’t want to lose it.”

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Reel benefit

Here are examples of the number of jobs and taxes generated in California by each type of production.

*--* Production Production Number State Type spending of jobs* taxes Commercials $561,000 7 $47,000 Movie of the week 4,400,000 102 640,000 1-hour drama (12 episodes) 26,800,000 719 3,100,000 Low-budget film 1,700,000 59 215,000 Small-budget feature 15,400,000 304 1,784,000 Mid-budget feature 31,600,000 565 4,060,000 Larger-budget feature film 69,700,000 928 10,590,000

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*Full-time job equivalents, including part-time work

Source: Los Angeles County Economic Development Corp.