Industry News :: Los Angeles Fights Back as New York, Iceland Steal Movie Shoots

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By Edvard Pettersson

April 24 (Bloomberg) -- Hollywood is fighting to stop an exodus of filmmakers who are being lured from Southern California by subsidies and tax breaks.

Labor unions, studios and independent producers are urging California lawmakers to support tax credits for local production, after a bill sponsored last year by Assembly Speaker Fabian Núñez failed to pass the state Legislature.

The group wants California to match incentives being offered by more than 20 other states. Countries from Iceland to Chile also are chipping away at Los Angeles film and television production, the county's third-largest industry. Feature shoots have fallen 32 percent since 1996, according to Film L.A., a non- profit group that arranges local film permits.

``Just as New York would never let Wall Street leave the city, we can't let the film industry leave Los Angeles,'' said Los Angeles City Councilwoman Wendy Greuel, 44, who is seeking to eliminate fees for filming on city property.

It's a big target for other states. Spending on film- industry payroll and purchases in California was $34.3 billion in 2002, 60 percent of the U.S. total of $56.6 billion, in the most recent figures from the Washington-based Motion Picture Association of America.

The number of days spent shooting movies, television shows and commercials in Los Angeles rose 4 percent last year, according to Film L.A. That compares with a 35 percent increase in New York City, after passage of 2004 laws that refund filmmakers as much as 15 percent of production costs for crew and equipment. The city also offers free permits, parking and police on location.

Affordable New York

Cities including New York, where Warner Bros. this year filmed the pilot TV episode of ``The Traveler,'' are courting producers more aggressively.

``It wouldn't have been worth it'' two years ago, said Lisa Rawlins, vice president of studio and production affairs at the Warner unit of New York-based Time Warner Inc., the world's biggest media company. ``Pilots are always shot economically.''

One challenge for the industry is to convince legislators from other parts of California that subsidies aren't a handout. Retaining production will provide economic benefits to the entire state, said Amy Lemisch, director of the California Film Commission, a state agency spearheading the lobbying.

A feature film with a $17 million budget generates about $1.8 million in sales and income tax for the state, the Los Angeles County Economic Development Corp. estimates.

Livelihood for Thousands

Film, TV and commercial production provides jobs for 241,000 people in Los Angeles County, including camera operators, drivers, carpenters and makeup artists. The industry trails only tourism and international trade, according to Los Angeles County Economic Development. Including music, the county has about 30 percent of all U.S. entertainment employment, with New York second at 10 percent.

Until recently, Los Angeles unions and politicians focused their concern on Canada, where a favorable exchange rate and government incentives helped attract scores of movie projects. As the Canadian dollar has risen and made location shoots less of a bargain, filmmakers have turned to other sites.

New Mexico offered tax breaks, cheap hotel rates and a $7 million loan to lure the 2004 romantic comedy ``Elvis Has Left the Building,'' said Bob Darwell, 42, a Los Angeles entertainment lawyer who helped Capitol Films arrange the financing.

Transferable Tax Credits

Louisiana offers a transferable 25 percent tax credit on money spent in the state. As most filmmakers aren't based there, they sell the credit to a broker who resells it to a Louisiana company. The state also offers a 10 percent credit on salaries paid to Louisiana residents and a 4 percent sales- and use-tax exclusion that reduces the cost of equipment purchases.

``We have a very simple incentive package that can save 12 percent of the production's cost, we have trained crews that speak English, and if we don't have a piece of equipment, we guarantee that it'll be there in 24 hours,'' said Einar Tomasson, project manager of Film in Iceland Agency, in an interview this month at a conference in Santa Monica, California, that also drew film commissioners from as far away as Chile and Australia.

The California Senate last year failed to vote on a bill by Núñez, a Democrat representing central Los Angeles, that would have provided tax incentives for local movie production.

Rather than trying to get the incentives passed as a standalone bill, Núñez will seek to include them in next year's budget, said his spokesman, Richard Stapler. Budget negotiations for the fiscal year starting July 1 will begin next month.

``We get a lot of input from groups and individuals in the industry to keep this a front-burner issue for us,'' Stapler said.

Local Action

The Los Angeles City Council, meanwhile, plans to waive usage fees on some city-owned locations. Pending a report on the financial impact, the council is expected to vote on the measure in the next several weeks, Greuel said in an interview.

Fees for shooting on city property range from about $300 a day in a park to as much as $2,000 for four hours at the downtown Los Angeles library, said Elizabeth Kaltman, a spokeswoman for Greuel. The city received about $2.5 million from those fees last year.

Los Angeles also exempted writers, actors and directors who make less than $300,000 a year from the city's business tax, as part of a Jan. 1 overhaul.

The city's efforts alone won't be enough, said Steve MacDonald, president of Film L.A.

``Most of the cities L.A. is competing with already don't charge for filming on city property,'' said MacDonald, 44. ``It's a state issue. The reason we're losing production to other states is the tax incentives.''