Gov. seeks film tax breaks

Halper and Lifsher are Times staff writers.

Gov. Arnold Schwarzenegger wants millions of dollars in tax breaks for film and television companies that shoot productions in California, according to a copy of the proposal obtained by The Times.

The proposal, part of his plan to stimulate the state economy, is similar to Schwarzenegger’s previous bids for such a tax break. The Legislature has rejected those efforts in the past. Some lawmakers and tax experts call the idea a giveaway for companies that were unlikely to move out of state.

Film industry officials say the tax credits are essential to keep California competitive, especially as the value of the dollar rises and Canada once again becomes an economical place for production companies to locate. California is one of only 10 states that do not offer financial incentives to movie and television companies.


The governor is expected to unveil the proposal this week, after the Legislature opens a special session to address the state’s fiscal crisis.

The tax concessions would probably cost the state at least $100 million a year. They are being proposed at a time when the state budget is $10 billion in the red, less than halfway into the fiscal year. The tax cut could be overshadowed by billions of dollars in sales tax hikes the governor has told education officials he wants lawmakers to approve.

Administration officials say the cut is necessary to stop the industry’s migration out of state. As an example, they cite the recent departure of Disney’s hit television series “Ugly Betty,” which relocated to New York.

Five years ago, 66% of all feature film production took place in California. Last year, the state claimed just 31%. About 250,000 Californians work in the industry.

The governor’s proposal tries to address the critics’ concerns by extending the tax breaks only to new shows and those relocating to California from elsewhere. Productions already in California and unlikely to move elsewhere would not qualify.

“I would be surprised if they could figure out how to do that,” said Lenny Goldberg, executive director of the nonprofit California Tax Reform Assn. in Sacramento.


He suspects that companies the tax break is not intended to help would find ways to take advantage of it.

Goldberg also is troubled by the way the credits would be structured. Even companies that pay no state taxes could cash in.

Proponents of the governor’s plan, meanwhile, say they are keeping their expectations in check.

“We’re sort of skeptical of this happening because so many times it’s been dangled out there, and so many times it’s disappeared,” said Barry Broad, a Sacramento lobbyist for the International Brotherhood of Teamsters, which represents thousands of film industry workers.

Broad also questioned the timing of the bid. He said his union did not support the tax break if paying for it would require more deep cuts in government services.

But filmmakers say the state’s dismal finances should bring more urgency -- not less -- to the proposal.

“Desperate times call for desperate measures,” said Stanley Brooks, president of Once Upon a Time Films in Santa Monica and chairman of the California Film Commission.

Brooks, whose company produces television movies and miniseries, said the tax credits would boost local production, creating jobs that would bolster the state economy.

The GOP lawmakers who typically line up behind tax breaks have been wary of the governor’s concept in the past. The tax concessions would aid an industry dominated by deep-pocketed Democratic political contributors.

And Republicans have questioned whether they would create the jobs that Schwarzenegger and other backers promised.

Some state legislators from outside Southern California have said that tax breaks for the film industry would do nothing to help their constituents.

Kevin Klowden, an economist who tracks the California entertainment industry for the nonprofit Milken Institute in Santa Monica, said legislators often failed to realize that the industry was spread across the state. He said major studios in the Bay Area, such as Pixar Animation Studios and Lucasfilm, provide thousands of jobs and secondary economic benefits.

Even so, he said, “film production normally is viewed as a Southern California thing, a Los Angeles thing.”