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The Daily News of Los Angeles
Feb 28, 2005

by Harrison Sheppard

Schwarzenegger considers tax breaks for filming in California

SACRAMENTO -- Trying to fend off increasingly tough competition from other states and foreign countries, Gov. Arnold Schwarzenegger is expected to announce a plan soon to grant tax breaks for film companies to keep their productions in California.

The proposal would be aimed at "below-the-line" workers -- the carpenters, electricians and makeup artists who represent the bulk of the entertainment industry's middle-class work force and who rarely travel when productions are filmed out of state.

The governor's plan is being crafted at a time when runaway production is actually decreasing, but a Schwarzenegger spokeswoman says far too many jobs are still being lost to ignore.

"Right now California is losing production. It's losing it because it's at a competitive disadvantage to other states and other countries," said Margita Thompson. "Hollywood and the entertainment industry (are icons) that people equate with the state of California."

The governor is working with Sen. Kevin Murray, D-Culver City, and Assemblyman Kevin McCarthy, R-Bakersfield, on a bill that is still in preliminary form, with details expected to be ready within a few weeks.

Murray said the credit would be aimed at production companies' costs for below-the-line workers on projects that do at least 75 percent of their work in California. It would be particularly aimed at the types of productions the state has been most vulnerable to losing, such as movies-of-the-week and one-hour television dramas.

"Because it's a tax credit, only a film that was already shot here would get the money," Murray said. "The one benefit of this particular type of tax credit is before they get the money or before it presents any budgetary problems, we've actually already generated the jobs."

The idea, he said, is to allow California to compete with the incentives offered by other countries and, increasingly, other states.

But critics say with the state facing a $9 billion budget deficit, this is no time for California to be giving away money from the state treasury.

"In a time when we're trying to heal a sick budget, it doesn't make sense to give goodies to the governor's friends," said Doug Heller, executive director of the Foundation for Taxpayer and Consumer Rights.

"It may be when everything's back on track and our poor are well-fed and our students are well-educated, we can look at incentives to keep filming in state, but until we do that, let's get our priorities straight."

Industry experts say the governor's efforts to combat runaway production come at a time when out-of-state work is on the decline because of the lower value of the dollar and security concerns.

According to the Entertainment Industry Development Corp., filming in the Los Angeles area hit a record 52,707 production days in 2004, a 19 percent increase over the prior year. The largest gain came from television production, driven by a surge in reality programming.

Still, advocates say long-term fixes are needed because of the increased competition and anticipation that the dollar will strengthen.

Assemblyman Paul Koretz, D-West Hollywood, is also crafting a bill that would restore the Film California First program, which allowed production companies to film for free on state land and provided reimbursements for certain costs such as security.

The program was cut nearly two years ago due to the state's budget crisis but Koretz believes the state has lost revenue from cutting the program.

"It had some very enthusiastic adherents and clearly brought in filming that otherwise would've gone out of state."

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