When it Comes to Runaway Production, California Needs to Get a Clue

When it Comes to Runaway Production, California Needs to Get a Clue

from: FilmWorksLA.com

Since the two-year extension of the California Film & Television Tax Credit now sits on Governor Brown’s desk, we decided to publish an excellent letter supporting the program

It’s time for California to wake up.  California is under attack.

In the late 1990′s, Canada devised generous film incentives in the form of tax credits as a weapon to wage economic war on the U.S. in an attempt to capture one of the planet’s most valuable and prized industries: the U.S. motion picture and television industry–”Hollywood”.

The majority of big-budget movies and an increasing number of scripted television shows are no longer filmed in the state.  With rare exception, blockbuster movies with budgets from $75 to over $300 million have completely vanished in a freakishly short period of time.  When productions leave the state, it’s referred to as runaway production.

Some critics of California’s film incentive argue it is an unneeded and wasteful handout to productions that “would have filmed in California anyways”.  This belief demonstrates a frightening disconnect from reality.   To ask “what would have filmed here anyways?” ignores the fact that, increasingly, nothing the film incentive targets films in California at levels anywhere close to those just before other states and nations began enacting film incentives.

In a few short years, the number of Canadians working on U.S. productions doubled from 25,500 to over 53,000 as spending soared.  The spectacular effect film tax credits had in causing runaway production was quickly copied around the world and in over 40 U.S. states all eager to get a piece of the pie.  California’s natural comparative advantages allow the state to fend off a handful of competitors, but not this many.  When all of them get a piece, none of it will be left for California.  If the state does not fight now, there will soon be nothing left to defend.

In the past, many factors contributed to runaway production and the causes (cheap labor, exchange rates) were natural, rather than by design.  Regrettably, this has blinded many in the state from accepting the current reality.  Since the late 1990′s, film incentives have been the predominant, if not sole, factor causing runaway production.  They are weapons designed for no other purpose than to cause runaway production and they are spectacularly effective in doing so.

For example, the year before Louisiana enacted its inventive (2002), production spending was just $3.5 million; in 2010, it was over $674 million, which represents a mind blowing 19,000% increase.  Ten years ago, movies filmed in Louisiana went there to shoot exteriors and returned to California to shoot interiors built on sound stages.  Louisiana did not need or want to build sound stages before 2003 because it wasn’t trying to relocate Hollywood.  But since it started to in 2003, they have built dozens of sound stages thanks to another incentive to build infrastructure in the state.  Luring productions is just part of the process to relocate an entire industry.

The particular means of attack causing runaway production require a specific means of defense.  Bringing a knife to a gun fight will not work.    Against film incentives, California’s only means of defense is the California Film & Television Tax Credit.  And since it took effect in 2009, California’s film incentive has been a very effective defense.  In 2010, the decline in on-location feature filming in L.A. increased after four straight years of decline.  Feature film (movie) production days were still down 62% from their high in 1996 (this is up slightly from 2009’s record low).  Had incentivized films not accounted for 26% of all Feature (movies) activity, 2010 would have been the worst year on record for the L.A. region.

Some argue the incentive cannot be justified at a time when the state is slashing public services.  And who does not lament such cuts?  Asking for an extension of the film incentive is not a matter of want, it is a matter of need.

California is in dire straits, in part, because it has allowed the competition to dismantle one of the most valuable industries on the planet, which had been housed almost wholly in Southern California.  The film and television industry’s massive concentration in Hollywood made it the global economic powerhouse it is.  U.S.-produced Hollywood films control the global box office the way Chinese produced goods dominate shelves in Wal-Mart.

And yet, astonishingly, it’s somehow acceptable for some to let a signature state (and national) industry get dismantled?  Is it any wonder why California’s economy is in ruins?  If we don’t stop the bleeding, we will never get back on our feet.  The movie industry has pumped hundreds of billions of dollars into the California economy going back almost a century.    We know what the problem is.  We know what caused it. And we know how to fix it.  The California Film & Television Tax Credit isn’t just a solution to this problem, it’s the only solution.

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