Film tax breaks start

NORTH HOLLYWOOD — Experts are hoping for an economic jolt from a group of schmucks and a Chihuahua, among other players.

The films “Beverly Hills Chihuahua 2” and “Dinner for Schmucks” were named Tuesday as two of 25 projects that will receive state tax breaks meant to curb the effects of “runaway productions,” which could lead to an economic recovery in Glendale and Burbank.

The California Film Commission selected the projects and will offer the incentives to 30 movie and television productions this year that opt to shoot within the state, instead of pursuing generous tax incentives to locate elsewhere.

Analysts, business owners and officials have blamed the problem of runaway productions for draining major studio spending from California and forcing cutbacks at the array of area businesses that serve the entertainment industry.

Economies in Glendale and Burbank are so tied to the industry that experts don’t expect a major turnaround from high unemployment rates — 9.9% in Glendale and 9.2% in Burbank — until studios begin spending on local projects and funneling funds to businesses like caterers, rental houses and cleaning services.

But California’s new incentive program, worth up to 25% of production costs for qualifying projects, may change that, said Jack Kyser, chief economist for the Los Angeles County Economic Development Corporation.

A film that meets the program’s requirement of costing less than $75 million to produce might seem insignificant compared with $200-million blockbusters, but will still create a significant number of jobs, Kyser said.

A $32-million project, for example, would create 141 direct jobs and 425 other jobs through increased activity at companies that benefit from entertainment industry business, Kyser said.

Because of the plan, businesses will begin to see a boost at the end of the year and into the beginning of 2010 as program participants begin to spend locally, said Kyser, whose corporation predicted the incentive plan would help spur a rebound in local economies.

Without the program, California would be in danger of losing large numbers of entertainment jobs to other states, possibly leading to the demise of a vital state economic engine, said Democratic Assemblyman Paul Krekorian, who created the plan.

“What I fear the most is not just losing the physical infrastructure, but also losing our human infrastructure,” said Krekorian, adding that out-of-state production work draws jobs from the area that damages local economies.

Krekorian held a news conference at 20th Century Props in North Hollywood to announce the 25 program participants and to emphasize the dangers of runway productions for the area.

The prop house, the largest in the nation, is currently in the process of auctioning off its pieces, including chandeliers from “Planet of the Apes” and “Moulin Rouge.”

The company is closing its doors after 40 years, largely because runaway productions have led to steep drops in business that were eventually too harsh to withstand, said founder and Chief Executive Harvey Schwartz.

Krekorian argued that the state would be in danger of losing a critical and iconic industry altogether if it didn’t initiate the five-year, $500-million program.

Experts agreed that incentives in other states worth up to 30% of production costs have endangered California’s ability to retain jobs.