from: Stop-Runaway-Production.com –

In New Mexico & Saskatchewan, Film Incentive Script Is the Same: Confuse Public

An article in “The Santa Fe New Mexican” recently caught my attention.  As I have stated in recent posts, it is becoming more and more apparent that debating film incentives may be a waste of time if it can be rendered unnecessary by educating people about how state film incentives actually work. In my experience, when people understand that film incentives operate as direct cash funding from public coffers for film and TV projects rather than a simple tax reduction, support evaporates.

It has also become clear that many promoting the film industry don’t want you to understand how film incentives work.  In New Mexico, one of the ways film backers keep the public confused or in the dark is with simple word choice. New Mexico film backers call the incentive a “tax credit” and critics call it a “subsidy”:

Is it a “subsidy” or a “tax credit” when New Mexico refunds part of what a TV or film production spends in the state?

Critics repeatedly used the word “subsidy” to describe the program, similar to the phrase Gov. Susana Martinez has employed since announcing her desire to lower from 25 percent to 15 percent the refundable tax credit the state gives to production companies that meet certain requirements.

Supporters of the program, meanwhile, returned again and again to the phrase tax credit or discount, and avoided “subsidy” like the plague.

The simple choice of words has proven effective, as even many of the amateur videos produced to promote the NM film incentive showed even NM filmmakers think the incentive is merely a reduction in taxes owed, rather than the actual cash payout it is.  Sadly, even some New Mexico lawmakers are confused about how the program works:

Rep. Dennis Kintigh’s choice of words caught the attention of Rep. Sheryl Williams Stapleton, D-Albuquerque, who asked Kintigh what he thought of the tax credits, exemptions and deductions New Mexico gives to other industries…

“This is fundamentally different,” Kintigh said to Stapleton. “Show me the checks. I can show you … of checks written from the public treasury to the film companies,” Kintigh said.

Kintigh held up a state memorandum listing more than $180 million in payments to more than 110 TV and film productions over the past three years, including the $65.9 million from last year.

“There are no corresponding checks” to the other industries, he told Stapleton.

Stapleton shot back that the effect was still the same. Whether the state cut checks or decided not to tax an industry through tax credits, exemptions or deductions, the “state is getting less money,” she said.

Rep. Stapleton is totally incorrect.  The effect of a normal tax credit and a refundable film credit is NOT “still the same”.  With a normal tax break for, let’s say, an oil company, the state is collecting less in taxes…but it’s still collecting taxes from that company overall.  With a film credit, not only is the state not collecting taxes from the production company, they are writing them a check.  Rather than collecting less, NM is paying out more.

And before the New Mexico film backers dispute the assertion their program is not a “subsidy”, allow me to point out the New Mexico Film Office itself calls the film credits “cash” and boasts the state “literally sends you a check”:

Is it a rebate or a credit?  Technically, New Mexico has a “refundable tax credit.” In other words, cash for the full amount – with no brokering required. TRD literally sends you a check or deposits the amount into your bank account.

Is the credit on the full amount or just the tax portion?  The full amount. Example: you spend $95.00 and $5.00 on tax for a total of $100.00. You get $25.00 back.

There you have it.  Stop calling it a credit and a subsidy, because the film office calls it what it actually is: CASH from public coffers.  Even more upsetting than this frank admission of what the incentive actually is (a cash handout), was a tidbit from the film office about where much of the cash paid as wages to “performing artists” went in 2010:

LFC estimates, based on discussions with the film division, that payments to performing artists in FY10 were on the order of $22 million and virtually 100% of that amount would have qualified for the credit. Of the $22 million in performing artist payments, approximately 80% is paid to non-residents.

According to data from the New Mexico Film Office and the tax & revenue department (TRD), the state has paid out a staggering $270 million in cash for refunded film credits since since just 2008:

In Saskatchewan, Canada, the same silly debate on what the film credit should be called has been playing out for the last several weeks.  Since 98% of all credits issued in the province were refunded as direct cash payments to production companies, Saskatchewan Premier Brad Wall and others have begun calling the program out for what it actually is: a grant.  Film backers hit the roof when they heard this.

Just like New Mexico, Saskatchewan film backers are either totally ignorant of how the credit actually works or, worse, they are knowingly fighting the truth in a deliberate effort to cloud the debate and confuse the public.  Let’s see how this plays out…

In a comment exchange on metronews.ca, I debated a Saskatchewan film backer after he/she wrote the following:

The SFETC was not a grant, of course.  It was a tax credit no matter how Premier Wall continues to characterize it.  The money used to pay for it would not have been in the Sask coffers to begin with if the productions had not taken place.  If anything, it was a rebate on amounts paid.  The producer spends $10 and gets part of it back from the taxes on the goods and services from the $10 itself.  A child running a lemonade stand can comprehend that – the real question is why does the current government continue to dismiss the facts without even trying to address them directly.

I replied:

When 98% of the tax credits are refunded as CASH directly to a producer who paid ZERO in taxes, it is absolutely, by definition, a GRANT.  People who dispute this need to open a dictionary.  It’s a grant.  Period.

Film backer rebuttal:

Love the dramatic conclusion to your post, but it doesn’t make it any more true.  My guess is that you’ve never financed a film, television or interactive production with a tax credit in Canada before and had to take out a bank loan and attendant risk to finance it while you awaited the refund.  If you had, you likely wouldn’t call it a grant; and even it you did, you’d still be wrong.  Your argument follows the same pattern as others that suggest the program was a grant – it completely ignores the revenue side of the equation.

For the record, no one was ignoring the “revenue side of the equation”.  Fact is, the evidence showedthe revenue from production spending was, sadly, still short of the cost of the cash payouts.  In any event, I responded with the following:

So, you take out a loan (money that is not yours), often in the amount of the expected credit rebate (also money that is not yours) and repay it with the cash refund from those credits.  Using money that does not belong to you to pay for a large portion of the budget.  If that doesn’t sound like a grant to you, here is the dictionary definition:

“To bestow; confer: grantaid; To transfer; A giving of funds for a specific purpose.”

Break out that last one: A giving of funds (film credits refunded for cash) for a specific purpose (to film your project, specifically).

If you are still going to insist it is not a grant, you are at war with reality.

The film backer, sadly, did continue to insist it was not a grant, proving they are at war with reality….maybe it’s why they are good at storytelling.

There are many benefits from production spending.  It does create jobs. It can advance culture. It can support growth in the arts. It does impact many indirectly.  It has intangible qualities like boosting morale.  These are facts.

Also a fact?  Film incentives cost the public coffers more money than they return.  Film backers can, and should, argue based on the facts.  Instead, they insist on telling lies.  Madness.

If you have never read it, please DO NOT miss the Film Incentives 101 post.  Educate yourself.  I dare you.

from: FilmLA.com –

Please be reminded that all Los Angeles County Beaches will be off-limits for weekend filming beginning Saturday, May 19th through Sunday, September 9th. This year the Department of Beaches and Harbors has also announced that no beach filming may take place on Friday, May 25, due to holiday conflicts.

In addition, some beach locations will be closed to filming on weekdays. Venice Beach filming is restricted at Breakwater tower and on all Avenue towers (numbers 18 through 26) on both weekends and weekdays for the same period. Zuma Beach will be closed to filming on both weekends and weekdays as well.

The L.A. County Department of Beaches and Harbors will continue to review on a case- by-case basis all requests to use beach parking lots for crew cars or base camps for off-beach filming.

Should you have any questions about beach filming availability, please feel free to contact FilmL.A.’s Production Planning Department at 213.977.8600.

from: Richard Verrier, LA Times.com –

Annette Bening, Al Pacino, Ed Harris and several other celebrities helped power a surge in feature film shoots on the streets of Los Angeles last month, but film industry officials were hardly star struck.

Thanks to a flurry of low-budget celebrity-packed pictures, location shoots jumped 74% in April over last year, continuing double-digital gains from the first quarter of the year, according to data from FilmL.A. Inc., the nonprofit group that handles film permits for the city and county.

But the welcome news was tempered by the fact that most were features costing less than $20 million that don’t pack the same economic punch as big studio movies that mostly film in Louisiana, Georgia and other states with richer incentives.

California offers a credit of up to 25% of qualified production expenses, but the credit applies only to movies with budgets lower than $75 million.

What’s more, feature film activity, while up by double digits this year, remains a fraction of what it was during its peak more than a decade ago. And in a development that is more worrisome for Los Angeles, location filming for television shows — long a key driver of economic activity in the entertainment sector — continued to decline.

Production days for television shoots dropped 17% in April, after a 9% falloff in the first quarter, a trend that industry officials attributed to competition from states like New York, which hosted more than a dozen pilots this year. New York allocates $420 million annually to TV and movie production — four times as much as California.

“It’s a continuation of a trend we’ve seen for a long time,” said FilmL.A. Inc. President Paul Audley. “The truth is California has put its toe in the water but really hasn’t become fully competitive to bring back the large features and TV dramas that produce the most spending and the most number of jobs for Californians.”

Audley said the California Legislature’s decision last year to extend the state tax credit by only one year instead of five sent the wrong message to the industry. A bill to extend the program five more years will be taken up by lawmakers this month.

“We need to see them make a true commitment to the industry,” Audley said of the state lawmakers. “New York Mayor Michael Bloomberg routinely brags about how much business New York is taking from California.”

Although limited in scope, California’s program is having some effect in spurring local filming. Two of three new feature films that began filming in L.A. last month — the Lakeshore Entertainment comedy “Stand Up Guys” and the independently produced “The Look of Love” — each received approval for a state film credit.

“Stand Up Guys,” which stars Pacino and Christopher Walken in a story about aging con men, received approval for a $2.4 million credit, according to the California Film Commission.

“The Look of Love,” a romantic comedy with Bening, Harris and Robin Williams, received an $800,000 credit. The production, which began its 26-day-shoot early last month, has filmed in multiple locations, including Mar Vista, La Canada Flintridge, Bergamot Station in Santa Monica and Aliso Beach in Orange County.

The crew will film in Venice this week, said Mike Fantasia, a veteran location manager who has worked on big-budget movies such as “Indiana Jones and the Kingdom of the Crystal Skull” and “Green Hornet.”

“The movie is set here so it would have been hard to film anywhere else,” said Fantasia, mulling offers to work on films in North Carolina and Florida. “It’s great to be working at home…. All the big boys are filming out of town.”

from: FilmWorksLA.com –

Three Former CA Governors Make Bipartisan Case for Increasing California Film Incentive

Former California Governors George Deukmejian (R), Pete Wilson (R) and Gray Davis (D) authored a joint editorial in the Sacramento Bee this week urging state lawmakers to extend and increase the California Film & Television Tax Credit.  Now, as in the past, the strong showing of bipartisan support (two Republicans and one Democrat) for the film incentive is evident, much to the chagrin of the program’s least-informed critics.  As we wrote last year, the overwhelming level of bipartisan support is to be applauded:

Californians need to stop listening to empty rhetoric that portrays the California Film & Television Tax Credit as a form of wasteful “corporate welfare” and reject baseless claims it was influenced by campaign donations from Democrats in Hollywood.   The incentive is supported by both parties and the attempt to paint this as a partisan issue is shameful.  Instead, the overwhelming bipartisan support it’s getting should be applauded.  Finally, lawmakers on both sides of the aisle agree on at least one thing: Film Works for California.

Our former Governors agree.  In their editorial, Deukmejian, Wilson and Davis point out the huge number of Californians who work in the entertainment industry:

In California, the film and television industry is responsible for more than 200,000 direct jobs. And, it’s not just about the “in front of and behind” the camera jobs. Billions of dollars are spent by the industry annually on goods and services in California – ranging from accounting to automotive equipment, to florists and dry cleaners.

The former Governors warn that the Golden State cannot rest on its laurels, especially at a time when dozens of other states and foreign nations have enacted targeted film incentives to win film projects away from us:

California must provide comparable incentives in order to level the playing field.

 

Substantial incentives that some 40 states and several nations are offering to entice filming away from California have resulted in lost production. A report issued this year by the Headway Project underscores the importance of tax credits as a powerful determinant of production location, citing the success of Louisiana as an example. After an aggressive tax credit program was put into place, film and television production in that state soared from zero to 87 productions in eight years.

 

As competition increased and intensified, the state Legislature responded in 2009 by adopting a modest incentive program, available only to certain qualified film and television productions, that is less generous than those offered in other states. This program has had a positive impact; however, there are limitations that restrict California’s competitive strength when compared to other states and countries. According to the report, the limited size of California’s tax credit program allows for only one in every five applicants to receive credits, causing many film and television producers to pursue credits from other states.

But here’s the big news: the former Governors not only support extending the California Film & Television Tax Credit, they hint at raising the program’s annual cap (currently $100 million per year), and say the state should qualify more of the productions now fleeing to other locations:

Much more needs to be done if California is to be competitive. Not only should the incentive program be extended well beyond the 2015 expiration date, it should also be retooled to up the ante and make more film and television productions eligible for the tax credits. It is all about meeting and exceeding the power of our competitors. It is all about reclaiming California’s position as the film capital of the world.

Indeed, in 2011 alone, the amount of money filmmakers spent in California’s top five competing jurisdictions was over $5.3 billion, a staggering amount of money that could have created thousands of jobs here in California.

As the former Governors point out, the California Film & Television Tax Credit is all “about jobs and investment and jobs” (repetition theirs).  “The time to help these major industries sharpen their competitive edge is now,” our former Governors say.

Be sure and tell your elected representatives if you agree.

from: FilmWorksLA.com –

Whenever we hear about an entertainment business committed to growing and expanding its presence in the Golden State, we like to pay them a visit.  And, when Film Works learned that Lee Brownstein, founder of Santa Monica-based XcitableBoy Productions, made the gutsy decision to expand during one of the slowest film production periods on record, we knew that he and his company needed to be celebrated for their investment in California.

  Before July 2010, Brownstein ran XcitableBoy Productions from a single office in Santa Monica, which was sufficient to meet his needs for producing reality television and branded entertainment.  But given the explosive growth of the reality programming, branded entertainment and web content industries during the last ten years, it wasn’t long before Brownstein spotted an opportunity.

“When all of the new content and reality programming came around, the business model in L.A. changed,” said Brownstein.  “Brands and reality productions want a one stop shop for their production needs, and for the most part, I found that wasn’t available.”

According to Brownstein, many reality productions do their pre-production in one place, prep and shoot in another, and then do post-production somewhere else.  “As a producer of the same kind of content at XcitableBoy, I wanted the convenience of a one stop shop where I could do it all in one place.”

  Opportunity soon knocked when a large amount of  space at Brownstein’s current office park became available.  It was a large risk to invest in an expansion, but Brownstein said the economic downturn enabled him to negotiate a better price, which was critical in making the risk worth his investment.  Overnight, Xcitable Boy went from being a production company to the operator of a small movie lot.

Brownstein not only made a financial investment in acquiring the space, he spent a large amount of money to renovate and upgrade its aesthetics and technology.  “I have some background designing and building broadcast offices, including the very first office for MSNBC,”  Brownstein told Film Works. Brownstein said that while he obviously spent money on the cosmetic things that you do see, like high-quality equipment and furnishings, he spent even more on hidden things, like high speed network capabilities, advanced communication services and an electrical overhaul to handle modern production needs.

“Basically, I had a blank slate and I built the studio and production offices I found ideal to me as a producer,” Brownstein noted.  Since Brownstein has nearly finished working on XcitableBoy Production’s first feature, he is happy and “Xcited” to make the studio available for others to use.

  The new studio is a dream for reality television productions, or any medium-sized television show.  The build-out includes 4,200 square feet of  space, including a 900 square foot uncertified sound stage, three editing bays, a sound mixing room and production offices.  The lot has parking for up to 20 vehicles, a rarity in Santa Monica, and Brownstein even offers valet parking services for his clients.  A large center courtyard — large enough to accommodate cube trucks — can also easily double as a private outdoor production space.

Currently wrapping production at Santa Monica’s newest mini movie lot is an Ish TV Entertainment reality show being produced for the Oxygen network.  Brownstein said he was thrilled to host such a great client, and their business reassured him that his venture would work out.

“When the economy is horrible, it’s scary to take a big risk when everyone else is failing,” Brownstein admitted.  And while we can’t presume to know just how daunting that must have been for XcitableBoy Productions, we are very glad they took a chance and bet on Film Working for California.  Hopefully, others will follow the same example.

from: Stop-Runaway-Production.com –

Cost per job created under film incentive exceeds average annual salary in Ohio film industry…

Incompetence in news reporting is common these days, especially when it comes to covering state film incentives.  Winning the gold medal for journalistic incompetence this week is Cleveland’s NBC affiliate, WKYC.  Today, the station reported the following:

In 2010, more than 8,250 people were employed in primary and secondary film occupations in Ohio, with the industry accounting for $113 million in output.

An April 2012 report by Cleveland State University’s Center for Economic Development found that the Ohio Motion Picture Tax Credit created more than 9,000 Ohio jobs, spending $19.5 million on wages, and $53.6 million on support services in the state.

For each dollar the state invested in the tax credit, $1.20 was returned to the Ohio economy.

This same study also found that occupations in the film industry pay higher wages than the average Ohioan typically earns, with film industry jobs paying $43,535 annually and Ohio industries paying an average of $40,890.

In 2010, according to the mistake riddled CSU study, exactly 8,270 people were employed in the film & television industry in Ohio.  Why WKYC could not have just said 8,270 rather than “more than 8,250″ is unclear.  Perhaps they despise brevity.  A bigger mistake was the $113 million in output claim.  Indeed, there was $113 million in output, according to the CSU report, but it came over three years (2009-2012), not one (2010) as claimed in the news report. And then things get more ridiculous.

If 9,000 Ohio jobs were created and just $19.5 million was spent on wages by projects that got the Ohio Cash incentive, the average total wage for each job was just $2,166.  Clearly the station did not do the math, otherwise they might have noticed how ridiculous the average wage of $43,535 in the next paragraph sounds in comparison.

In reality, the actual number of Full Time Equivalent direct film production jobs created by the program from 2009-2012, as reported in the flawed CSU study, was actually just 651.  Since the cost of the program, according to the report, for the same period (2009-2012) was $29.9 million, the cost to Ohio taxpayers to create each direct film industry job under the cash incentive program was $45,929.  Huh.  How about that.  The cost for Ohio to create these film jobs cost more than the average annual wages in the industry ($43,535).  Clearly, this program is as flawless as journalistic integrity at WKYC.

With a calculator and some simple common sense (not to mention some fact checking), this NBC affiliate could have reported some accurate information.  The incompetence is breathtaking.

(If you have not read it, please read the Film Incentive 101 post for a primer on how state film incentive programs actually work)

from: FilmWorksLA.com –

Fantastic news for California film crews!

A bill that would have authorized the largest domestic film incentive allocation ever ($2.1 billion) died in the Arizona House of Representatives this week.  The proposed bill would have allowed for a 20% cash refund on all qualified production expenditures and up to 30% if producers hired Arizona labor and used approved production facilities.

Contributing to the bill’s failure was a study by the Arizona Department of Commerce that showed the state would generate too little revenue from filming to offset the cost of the program.

Also not helping was an entertaining anti-incentive video produced by the Arizona Free Enterprise Club. We’re glad this line of argument doesn’t apply to the California Film & Television Tax Credit:

from: Bob Strauss, DailyNews.com –

Whether from Humboldt County or Hollywood Boulevard, the film commissioners and industry officials who gathered Friday for the California Locations Breakfast had the same goal: Keep as much production as possible from running away to other states and countries.

At the event in West Hollywood, California Film Commission Executive Director Amy Lemisch explained to officials and producers that the state offers diverse locations, unmatched talent pools, superior infrastructure and a tax credit program for film and television productions.

“We’re here to assist and facilitate your productions throughout the state,” Lemisch told producers.

The main assistance they’re interested in, though, is how much of the next $100 million in tax credits they can get their shows approved for.

On June 1, the commission will hold a lottery to allocate the film incentive funding approved by the Legislature. Usually, 30 to 40 productions out of 150 applications are initially approved for some portion of the $100 million in tax credits. Those that don’t make the June 1 cut get put on a waiting list and can receive tax credits as some of the approved productions inevitably collapse or are delayed.

It’s far from a perfect system. Other states and countries, such as Canada, have much larger incentive pots and no uncertainty factors like a lottery. Additionally, the California program, initially approved for $500 million over four years ($200 million was allocated in its first year of existence), was only extended one year, to 2013, in the last legislative session. However, bills are moving through both the State Assembly and Senate to add another five years.Despite its drawbacks, Lemisch noted that the program has kept 165 film and TV projects in California, and those have spent $2.9 billion here – $1 billion of which went to salaries for the state’s below-the-line production workers.

Producers attending the breakfast explained that while they very much prefer shooting in-state, budget realities are the key dictator of whether they can stay or go.

“We love to shoot here,” said Robyn Snyder, senior vice president of development and production at MarVista Entertainment. “Actors love it and it’s a great crew base, and we would all love to stay home.”

from: FilmWorksLA.com –

If you are one of the lucky Californians taken along on a production shooting in North Carolina, your luck may be about to run out.  According to one media outlet in North Carolina, the state’s film incentive “caused a big problem” for the state — too much work to go around!

In an attempt to make sure more of the work goes to NC state residents rather than imported labor from California and New York, North Carolina Governor Beverly Perdue is backing a $1 million training program:

We have so many productions underway, it’s getting tough to find local crew members to work on set. Since… 2010, 25 productions have taken advantage of [local incentives]. Many of those have filmed in the state at the same time… We need more crew members, and we need them quickly. That’s why the governor has included $1 million in her proposed budget to create a workforce training program at Cape Fear Community College and in Winston-Salem.

According to Governor Perdue, the new five-to-ten-week training program will make North Carolina “unique”, because it will be “the only state in America that can promise [film & TV productions] a tailored, trained workforce to do whatever is unusual or necessary to make their production… successful and get it in the can on time.”

With all due respect to Governor Perdue, Film Works begs to differ. There’s already a place in the U.S. where generations of experienced, highly-trained film crew members have made their careers, and where world-class industry training programs draw in students from all over.

That place is California, and we love that it’s our home.

from: FilmWorksLA.com –

In what one website is calling the “greatest threat of runaway production for the U.S. film industry ever”, is news from China that Chinese industrialist Bruno Wu, head of Seven Stars Entertainment, is building a $1.27 billion production hub called “Chinawood” outside Bejing:

Bruno Wu’s Seven Stars Entertainment and the Government of the Binhai New Area, Tianjin, today announced the establishment of the “Chinawood Global Services Base”, the largest filmed entertainment and media hub in China. Targeted at the US-led global industry, with an investment of over US $1.27 billion… Chinawood will be the headquarters for a large number of financial, technical and creative companies involved in the global media world. Significantly, with around 35% of the investment earmarked for film financing, it will play a major role as a base for Chinese co-productions with North America, Europe and other countries across the Asia Pacific.

One of the primary attractions of filming (wholly or partially) in China with a co-production partner like Seven Stars Media is that it exempts the project from China’s tight import quotas, which allow only 34 US-made films to be imported annually for theatrical exhibition.

Since the US already faces stiff competition for film production from Canada, Europe, South Africa, New Zealand and Australia (among others), the announcement from China is potentially bad news not just for California film crews, but all US film crews, as well asfantastic local businesses like this one.