California’s revised film incentive program generates $1.5B in spending

Results from the first year of the state’s new, more generous Film and Television Tax Credit Program were released Thursday by the California Film Commission. Overall, the first fiscal year (July 1, 2015 - June 30, 2016) of the new 2.0 system generated $1.5 billion in in-state spending, $600 million of which went to below-the-line wages. (Salaries of highly paid above-the-liners such as A-list actors, directors and producers do not qualify for California tax credits). That spending was from only $230 million in tax credits; the full $330 million annual allocation didn’t kick in until July 1 of this year, according to the Film Commission, which administers the plan designed to keep productions, along with the middle class jobs they generate, from leaving the state.

The missing $100 million went to fund the final round of the state’s previous production incentive program, which allotted that much in tax credits per year. The old program allotted $100 million per year instead of the current $330 million.

According to local labor organizations cited in the CFC report, the revised program resulted in a 12.45 percent increase in BTL hours worked in the first quarter of 2016 compared to a year earlier. SAG-AFTRA logged a nearly 20 percent bump in background actors employment, and San Fernando Valley-based trade unions Teamsters and IATSE locals are seeing full employment and membership spikes, which their rosters haven’t enjoyed for a decade or more.

Assemblyman Mike Gatto (D-Los Angeles), who co-authored the legislation to increase film subsidies, said the report shows progress is being made.

“When I drafted AB 1839 with my colleague Raul Bocanegra, we focused on creating more jobs, maximizing spending in the state, and protecting one of California’s signature industries,” Gatto said in a statement. “The estimates in the Film Commission progress report shows that we are well on our way to achieving our goals.”

The 2.0 program replaced the uncertain lottery system that determined which projects got 1.0 tax credits with a more targeted, jobs-generating ratio ranking selection process. Much higher-budgeted – and higher spending - productions such as studio tentpole movies and hourlong network TV dramas became eligible under 2.0 as well.

Though no $100 million-plus budgeted feature films took advantage of the new program in Year One, the report notes that six television series did relocate to California last year because of the incentive. Among those shows were FX’s “American Horror Story,” which relocated form Louisiana, ABC’s now-canceled “Mistresses” came from Vancouver and HBO’s “Veep” relocated from Maryland.

Only four such shows, which tend to supply longer-term employment than other production sectors, returned to the state from elsewhere over the entire seven years of the previous program.

While it’s still too early to determine if the overall benefit to the state’s economy is worth the greater investment Sacramento is putting into 2.0, the report also noted that the more limited funding of the 1.0 program cost the state substantially, while enriching heavily incentivized places such as Georgia, Louisiana and British Columbia.

“Of the projects that were denied California tax credits and were subsequently produced, only a small number elected to shoot in California,” the report said. “The overwhelming majority of projects denied credits were shot outside the state, in jurisdictions where tax credits were available. From 2010 – June 2016, such ‘runaway’ projects accounted for more than $3.7 billion in production spending outside California.”

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