New tax credits are bringing film production jobs back to Los Angeles

By Bonnie Eslinger

Even in sunny Southern California, November is not the best month for a day at the beach. But for several days last winter, a stretch of sand in Venice was taken over by hundreds of bikini and shorts-clad sunbathers, colorful umbrellas, beach balls and gigantic inflatable pink flamingos.

The spectacle turned out to be a bit of movie magic: a scene being shot for Disney’s highly anticipated film “A Wrinkle in Time,” based on the 1963 novel by Madeleine L’Engle.

And while the film is fantasy, California leaders say the associated production work brings real-life economic benefits to the state in spending and jobs — and that shouldn’t be taken for granted.

Long considered the entertainment capital of the world, California is in a battle to hold onto that title, as subsidies being offered by other states and countries have proven effective at luring away film and television production work.

California long “sat on the sidelines” while other places offered financial incentives, said Paul Audley, president of FilmL.A. (the official film office of the city and county of Los Angeles).

“Vancouver started this war to take the film industry away from L.A. and California didn’t respond, and I think that encouraged other states and countries to do the same,” Audley said. “It took California years to even think about getting involved, and when it finally did they opened a very modest program.”

Championed and signed into law by actor-turned-Gov. Arnold Schwarzenegger in 2009, the program provided tax credits totaling $100 million annually. That amount was less than what other areas were offering, but enough to bring back some of the so-called runaway production, Audley said.

In 2014, Gov. Jerry Brown approved a five-year reauthorization of the program that raised the incentive pool to $330 million annually. The added money — used to offer 20% to 25% tax breaks on certain production expenses — came with changes. The previously-used lottery selection for choosing projects, for example, was replaced with a system that prioritized the number of jobs offered.

A film shoot on the LMU bluffs
Photo by Coral von Zumwalt, courtesy of LMU SFTV

Audley said the revised program “has reversed a lot of the trend,” boosting the number of movies and television shows filmed statewide, with a “huge increase” in Los Angeles.

Since the revised program came online, 11 projects supported by tax credits have shot on location in Santa Monica, Venice and Playa del Rey. In addition to “A Wrinkle in Time,” these include the Adam Sandler comedy “Sandy Wexler” and television shows “American Horror Story,” “Mistresses,” “Rosewood” and “Ballers.” The projects employed about 1,300 cast members, 1,800 crew workers and tens of thousands of extras, according to FilmL.A.

LIFE BELOW THE LINE

Although the “2.0” version of the incentive program doesn’t expire until 2020, industry officials and state legislators are already starting to make a case for more funding.

In March, state Sen. Ben Allen (D-Santa Monica), chair of the legislature’s Joint Committee on the Arts, held a hearing to review the fiscal impact of and jobs supported by the tax credits and to get suggestions on possible changes.

Much of the discussion focused on what’s called “below-the-line” work, a term referring to entertainment project budget sheets and how they list expenses for workers who fall below the big-ticket costs for actors, the director, writers and executives. Film industry officials say these behind-the-scenes crew members have suffered the most from having to pack their bags and follow the work when studios choose to relocate productions to subsidy-offering states and countries.

“I know personally what a difference this has made for so many people in the state who were having to spend enormous amounts of time outside of their homes going to other places, living out of a suitcase just to be able to do their jobs,” said Allen at the start of the March 29 hearing. “So many of those jobs have come back, they’re sleeping at homes in California. We want to make sure this continues and make sure we are able to grow and expand this program going forward.”

At that hearing, California Film Commission Director Amy Lemisch underscored the program’s economic benefits. The first $800 million iteration of the program generated in-state spending of $5.3 billion, including money spent on facilities, production operations, construction, food, security, office supplies and lodging. Of that, $1.8 billion was in
wages to the below-the-line crewmembers, along with 23,000 cast members, 43,000 crewmembers and 500,000 extras, Lemisch said.

Juan Camacho, vice president of government relations at 21st Century Fox, told the legislators that he often hears from studio executives that, all things being equal, they’d prefer to produce their shows in California.

“Now, don’t get me wrong: While we’d love to have an incentive that matches or exceeds that of New York, $420 million a year, the truth is that California just needed to come near that to stay competitive,” Camacho said. “We have the best and most-skilled crews, the best vendors, and the best access to production equipment and facilities.”

Camacho provided a snapshot into the dollars that follow entertainment productions, focusing on two Fox television series that were previously shot in Louisiana and recently came back: “American Horror Story” and “Scream Queens.”

“Their combined economic impact was over $160 million,” Camacho said. “Think about that. If those projects had stayed in Louisiana, we’d have spent that much money in Louisiana.”

Fox’s “Legion,” which had been shooting in Canada, is also returning, he said.

Los Angeles-based unit production manager Richard Rothschild told the committee that he’s pleased to be working again in California, noting that he’s missed much of his daughter’s growing up due to being on the road for so many years.

He noted that one television show he’s worked on, ABC’s “Mistresses,” shot its first two seasons in Los Angeles in 2012 and 2013, before deciding to take advantage of tax credits offered in Vancouver.

Poster art for six of the 11 tax credit-supported film
or TV productions shot recently in Santa Monica, Venice or Playa del Rey

“When there was an order for a third season, the network decided that the costs in California were too high. The solution was to relocate their series outside of L.A., where they could qualify for a rebate on their production dollars,” Rothschild said. “By the way, this was a show whose story supposedly took place in Southern California.”

Lindsay Dougherty, a business manager for the Hollywood Teamsters — the union that represents such below-the-line workers as drivers, animal trainers, mechanics and prop warehouse workers — recalled a five-year stretch when her work as an on-location transportation dispatcher took her out of state.

“I actually didn’t live in my apartment that I paid rent for,” she said. “I had no animals, no relationships, and certainly no children, because I lived out of a suitcase.”

JOBS WORTH THE FIGHT

Reining in runaway production is also good news for film students, said Ken Ornstein, head of production administration at the Loyola Marymount University School of Film and Television.

“Theoretically, this means there are going to be more potential jobs for these kids when they graduate,” said Ornstein, whose credits as a producer include 104 episodes of “Melissa and Joey” and more than 140 episodes of “Everybody Loves Raymond.”

“And more productions means more opportunities for students to get exposure to that activity — just being on set and seeing how a crew of 125 works as opposed to a school crew of 10 or less, that’s beneficial,” he said.

The incentive program, however, is not without its detractors.

Some say lowering the costs of doing business in California would do more to help keep entertainment production in state — along with other industries, according to a legislative white paper on the program produced a few years ago.

Opponents also question whether the subsidies are just throwing away money to productions which had already planned to shoot in California, even without the tax offset.

There’s also the concern that the intensifying competition between states will just spur a “race to the bottom,” leading to more financial incentives being given away with no corresponding increase in return.

The state’s Legislative Analyst Office reported in 2016 that while about one-third of the film and television projects that received incentives under the “1.0” version of the program would probably have been made in California anyway, “We suspect that this level of ‘windfall benefits’ to some credit recipients may be low compared to other tax credits, which would suggest that the first film tax credit program targeted the types of production vulnerable to being filmed outside the state relatively well.”

In a phone interview with The Argonaut, Allen said data collected on the program shows that it is effective in generating jobs and dollars for the state that would otherwise be lost to other locales.

He noted that Ava DuVernay’s “A Wrinkle in Time” (which stars Reese Witherspoon, Oprah Winfrey, Zach Galifianakis and Mindy Kaling, among others) is projected to spend $44 million in wages to below-the-line workers.

Asking whether Hollywood, with its big-spending ways, really needed the state’s money sparked an impassioned response from the senator. TV and film production in California generate $30 billion dollars annually in economic activity, he said, an amount worth fighting for.

“All this infrastructure, all these people, all this heritage that we have here in Los Angeles — we were losing that work to these other states,” Allen said. “So it’s not a matter of whether they need the money or not. It’s a matter of whether the work is going to happen here or not, and whether or not we’re going to allow an industry that’s been a tent pole — a critical industry for California for nearly a century now — to disappear.”

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