Can California remain the world's movie capital? Filmmakers, execs weigh in on tax incentives

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Image Credit: MAVRIXONLINE.COM

“Movies” and “Hollywood” have long been twins in the American imagination, like “politics” and “Washington,” and “theater” and “Broadway.” Every major studio is headquartered in southern California, with vast soundstages taking up thousands of square feet. Most movie stars keep at least one palatial home in the greater Los Angeles area. And, of course, since 1929, the town has played home to the biggest movie event of the year, the Academy Awards.

There’s just one nagging problem: For years now, many of the year’s biggest and most acclaimed movies have barely been made in Hollywood, greater Los Angeles, or California — if at all. Thanks in part to generous tax breaks in states like Louisiana and New York — not to mention countries like Canada and Australia — feature film production in the Los Angeles area dropped an estimated 41 percent from 1996 to 2007, according to production data from the non-for-profit organization FilmL.A. That steady march of film production out of California prompted the state legislature to pass a tax break plan of its own in 2009, which Gov. Jerry Brown just renewed for two more years this week. The plan offers up to $100 million in tax credits per year, but the biggest question now is, will that be enough to bring filmmaking back to its former SoCal glory?

“It’s a great first step,” says actor-director Jon Favreau, a vocal advocate for keeping film production in California, of the legislation. A high ranking studio exec, however, puts things a little more bluntly: “I don’t think it’s spitting in the wind, but to use a baseball analogy, it’s like a single.” And Paul Hanson, COO of the independent film financing and production company QED International (which has shepherded films like Oliver Stone’s W., the sci-fi thriller District 9, and this month’s Alex Cross), is even more unforgiving. “I would say it will have minimal impact,” he says. “From what I do, the California program isn’t particularly useful to us and doesn’t make a difference in our decision-making.”

The devil, as always, is in the details. With the bill’s focus on retaining television production in the state — which employs people for longer stretches of time — the budget for eligible feature films has been capped at $75 million, freezing out the vast majority of big ticket tentpole films that have become Hollywood’s bread-and-butter. “I understand why at first you’d want to keep it smaller,” says Favreau, “because you have limited funds and I guess the idea is to spread it around. But I do think that if it’s about keeping jobs here and really recapturing all of the financial opportunities for economic growth for a community, hopefully they will be able to revisit TopTenReviews.com with that aspect of the legislation. Because there are a lot of big movies that have a lot of jobs to offer. It’s not just the amount of the crew, but it’s the amount of support in the community that comes with these jobs.”

Also at issue: the program’s lottery system, which has hundreds of applicants competing for a few dozen slots for tax breaks, slots that only get filled once a year. “We’re [talking] in October,” says Hanson. “Say we’re starting to shoot in February. There’s no way I could get California incentives [now], because I’ve missed the lottery window. If I go to Louisiana or Georgia or any of these other [states], all I have to do is file my paperwork. I know exactly what I get, based on what I’m going to spend in that state.”

California’s $100 million annual limit also puts it at odds with states like New York, which offers $420 million per year in production tax breaks. “It used to be just Law and Order and Woody Allen, but now they got a [bunch] of stuff going on in New York,” says the studio exec. In fact, other states have such attractive incentives that scripts are often massaged to fit the most financially viable location. Hanson notes that for QED’s upcoming thriller Alex Cross, which Summit Entertainment will release Oct. 19, the film’s location changed from Washington D.C. (as it was in the James Patterson novel) to Detroit. “There’s no particular incentive to shooting in Washington D.C., but there were strong incentives in Michigan and Ohio,” he says. “And Rob Cohen, our director, was very interested in shooting a Detroit story.”

Indeed, the creative components of any film drive a great deal of the decision-making, but it is rarely the only factor. “It’s very hard sometimes to make the case to shoot in a place that’s going to cost significantly more money,” says Favreau. “I went to great pains to keep the production of Iron Man 1 and 2 in Los Angeles. We were competing with heavy duty rebates around the country. It’s becoming harder and harder to justify that as certain states and countries are making it so appealing and really rolling out the red carpet for film production.” As it happens, Iron Man 3, which Shane Black (Kiss Kiss Bang Bang) is directing, is largely shooting in North Carolina; the above photograph from the set of the film was taken in Miami, Fla.

Still, the birthplace of modern moviemaking does have one major built-in advantage. “It’s not necessary for California to compete dollar for dollar with other states,” says Favreau. “There already exists an infrastructure here.”

“You’ve got tons of cast and crew, tons of facilities, tons of equipment [in California],” echoes Hanson. “You have everything here, so everyone can roll out of bed and go work.”

The inertia to stay close to home is exactly what California state senator Ron Calderon (D-Montebello) says helped drive the legislation in the first place. “When [Hollywood industry representatives] came to me four or five years ago when we did our first tax credit, [they said], ‘Just give us a sign that you want us here — give us some reason to stay here,'” says Sen. Calderon. “We wanted to stop the bleeding and create some jobs, bottom line.”

Even casual political observers, however, are likely aware that the state has not been a portrait of fiscal health. “We’re piecemeal-ing [the tax breaks] every year because of our budget situation, and, let’s face it, the politics in California — it’s very difficult to work within that political framework,” says Calderon. “When you’re cutting education, and you’re cutting in-home services, and all these safety net programs, and then you turn around and say, ‘Okay, we’re going to give $100 million to the movie industry as an incentive’ — there’s a perception problem. We were very fortunate to get the governor to sign this piece of legislation.”

Calderon says that after the November election, he plans to hold further hearings to determine how to improve the bill. “We’re going to talk about issues like removing the [budget] limit — instead of $75 million, let’s not have a limit,” he says. “Maybe removing the lottery. Providing tax credits for commercials, documentaries, and things like that.”

Like most any politically driven change, the process to make California competitive with other states will take time. “I don’t think that it’s going to change overnight,” says Favreau. “But it’s hard to turn a jaundiced eye to something where they’re making progress in a direction that I think is good for the industry and good for the state.”

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