California\u2019s legislation on film production credits was established as a defense system to incentivize production in-state. \u201cThe motion picture and television industry is responsible for 191, 146 direct jobs and $17.0 billion in wages\u201d in California, according to the Film Commission of California<\/a>. In an interview with the Los Angeles Daily News<\/i><\/a>, Louis Friedman, producer of 2013\u2019s Lone Survivor<\/i>, believes production planning around tax credit is \u201c\u2019the single most important financial decision made\u201d and it \u201caffects both the creative look and financial bottom line from day one.\u2019\u201d This production season is bread and butter for the highly skilled \u2013 and highly populated \u2013 pool of artists, technicians, and other crew people in the state.<\/p>\n However, that legislation has served as a model for other states\u2019 and regions\u2019 incentive programs to surpass. In California, the program was \u201ccrafted with limits, from a $1 million minimum to $75 million maximum [in regards to overall budgets] on feature films, and further restrictions on drama series<\/a>,\u201d not to mention a lottery system that deals with the high demand. This leaves out a lot of areas of production, as major tentpole films\u2019 budgets soar higher and higher and TV shows take bigger and bigger slices of the market. Sensing this sitting-duck situation, the film lobbies of other regions responded.<\/p>\n Canada was the first big player to encroach on Hollywood\u2019s territory in any serious way, putting into law their first production tax incentive in 1997 (just one year after the \u201call-time high in 1996\u201d of film productions in Los Angeles, noted by \u00a0FilmWorks). For awhile, Variety <\/i><\/a>reports, \u201cit was only lower-budget series for cable that set up shop outside of Southern California\u2026usually in Canada\u2026[b]ut now the network-studio congloms play a kind of incentive sweepstakes\u201d and pit California cuts against out-of-state cuts. As Variety <\/i>points out, \u201cthese days studio chiefs insist that filmmakers\u2026take advantage of out-of-state incentives\u2026[whose] savings are crucial in a franchise-obsessed era when big-budget movies commonly cost north of $200 million to produce.\u201d<\/p>\n States like New York, North Carolina, Louisiana, Michigan, and many others got into the game. Kevin Klowden, director and managing economist at the Milken Institute\u2019s California Center, estimated a total loss of \u201c4500 production jobs\u2026between 2005 and 2012,\u201d compared with the \u201c7900 production jobs the state should have gained<\/i> during that period.\u201d New York now has a $420 million annual cap on tax credits, compared to California\u2019s $75 million cap, and has begun to offer additional incentives for productions that complete post-production work in New York as well. Stan Spry, founding partner of up-and-coming management and production company The Cartel, knows this reality very well: \u201cTax incentives and rebates have been a massive part of our financing plan. We\u2019ve been able to finance up to 40% of production budgets due to incentives\u2026why stay in LA when you can save almost half the money somewhere else?\u201d<\/p>\n Another industry professional, Michael Karnow, creator of SyFy\u2019s Alphas<\/i>, mentions for that show \u201cwe shot in Toronto to save money,\u201d but out-of-state locations \u201ccould end up being an asset. It can turn out to be very exciting to turn a problem into an opportunity, and not only let the benefits be financial, but creative.\u201d He mentions Breaking Bad<\/i> as such an example, one of the most groundbreaking shows of the last decade\u2026almost completely shot in New Mexico, and tailored specifically to the state. It\u2019s interesting to note the original pilot of Bad<\/i> was written to take place in Southern California\u2026until AMC heard those incentives calling.<\/p>\n This competition, though, now faces the same question that California does: what exactly are the economic benefits of these incentive programs? Other states and countries realized Hollywood was a state of mind, and put into action measures to replicate that mindset for cash-desperate filmmakers. At its peak around 2010-2011, 42 states were offering over $1.4 billion combined in tax credits to productions, hoping to reap economic gains. However, it helps to recall that California\u2019s incentives were built to keep productions inside of its already-developed infrastructure, not to lure runaway production away from Michigan or New Mexico. Historically, California remained the center for production because it housed the developed pool of workers, artisans, and talent, aged like fine wine. Other states don\u2019t have that history, and therefore may not have the job force or economy in place that would benefit from film and television productions.<\/p>\n Take Michigan: leading up to 2011, $57 million had been given out annually to productions each year, with high profile movies like Oz<\/i>, The Ides of March, <\/i>and Transformers 3<\/i> basing their filming in the state. The problem here became that the Michigan Film Office did not have to disclose the true costs\/benefits of the program. Responding to fervent state government criticism, who believed the program wasn\u2019t bringing the economic growth its proponents promised, the program was scaled back in 2011, capping total credits at $25 million and changing the classification of the credits from tax breaks to grants. Michigan legislature, led by Gov. Rick Snyder, now \u201cobligates the [Michigan] Film Office to report back on the specific movie projects that it finances; and to openly declare the criteria it uses to award subsidies,\u201d according to the Tax Foundation<\/a>. Snyder argues this new criteria makes transparent expenditures that were once \u201chidden in the tax code.\u201d The Tax Foundation analyzed Michigan and other states\u2019 specific programs, and ruled the incentive programs \u201cdistort[ed] the allocation of resources, provide[d] only temporary jobs and benefit[ed] special interests at the expense of the taxpayer.\u201d Other states have scaled back recently as well, with only 35 states offering incentive programs currently.<\/p>\n However, there’s still been a huge increase of programs spanning the globe, and California and its competitors face a race to the bottom. New Los Angeles Mayor-elect (and therefore Prime Minister of Hollywoodland) Eric Garcetti is well aware of this possibility. \u201c\u2019We lost feature films. That\u2019s sad. They may come back to some degree, but probably by and large won\u2019t.\u2019\u201d Instead of competing neck and neck for the most generous incentives, Garcetti wants California to stay ahead of the curve, focusing on creating an environment for a wider spectrum of media production. His plan is to remove the $75 million cap, and make incentives a more viable option for premium cable shows, commercials, visual effects, and even videogames. Garcetti admits he\u2019s seen unfavorable studies, projecting the state seven cents on every incentive dollar spent, but believes there is an unseen multiplier in effect due to California’s historical place as the home of production, and that productions spur economic activity up to five times that incentive dollar\u2019s worth.<\/p>\n Garcetti has charmed his way into many meetings in Sacramento already, but he is facing strong opposing arguments from other neglected California groups. A coalition, made up of the MPAA, the Directors Guild, the Teamsters, and the IATSE artisan union, will work to \u201cwin over powerful [opposing groups]\u2026such as the California Teachers Assn.\u201d Groups like the teachers believe more Hollywood tax cuts are merely \u201cgiveaways to the glitterati,\u201d similar to the arguments that shut down other states\u2019 programs\u2019 momentum. The Tax Foundation rebuffs Garcetti’s and groups like FilmWorks’ arguments about the film and TV’s \u00a0key place in states’ economies, believing state legislators should make sure they’re not just lining the pockets of “one particularly vocal and connected industry.” While it is certainly true that the Clooneys and the Spielbergs don\u2019t need much pocket padding, California is a unique economic home of the production worker, and Garcetti wants to make sure it stays their home. An ally, assemblyman Mike Gatto, quoted in Variety<\/a>,<\/i> says, \u201c\u2019incentives offer a return on investment that has more to do with individuals\u2019\u201d than studios. \u201c’This is about the regular, workaday people who make a living from production.\u2019\u201d<\/p>\n Despite questions of its long-term economic worth, California undoubtably has a large group of uniquely skilled workers that are facing the possibility of major disruption and possible migration. Garcetti’s planned innovations are important to the future of the state now that Hollywood has proved to not be as stationary as it once appeared.<\/p>\n \u00a0<\/span><\/p>\n Interviews with:<\/p>\n Stan Spry, Co-Founder and Head of Production, The Cartel Management & Production, West Hollywood, California<\/p>\n![\"film-stats-chart-011111\"](\"http:\/\/j469.ascjclass.org\/wp-content\/uploads\/sites\/22\/2014\/02\/film-stats-chart-0111111.jpg\")
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