State Film & Television Tax Credit Provides Base on Which CA Can Build

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Earlier this month, two committees of the California State Assembly held a joint meeting to discuss the state’s Film & Television Tax Credit Program. Amid widespread agreement that the program merits expansion in the new legislative session, the California Film Commission presented facts about how the program now in effect has benefited the state.

Enacted in 2009, California’s film incentive program was created to help stem runaway production, a problem that had reached (and retains) epic proportions. As the CFC’s report noted, at the time of its creation the incentive program was designed to target productions “most likely to leave the state” because of incentives offered in other states and countries. Over the program’s first five years, this limitation-by-design brought a mixed bag of success and lost opportunity for California.

First, to the good stuff. The California Film and Television Tax Credit, despite its limitations, still brings a healthy dose of film projects, spending and jobs to the state. According to the report, one year’s worth of program funding at $100 million will attract about 45 participating projects, and “generate an average of $792 million in direct production spending, including $250 million in payroll for below-the-line workers.”

Furthermore, the CFC says, “for every $100 million in tax credits allocated, productions will hire an estimated 8,500 cast and crew members and utilize 10,000 vendors.” Background actors (extras) will also benefit from 67,000 work days. Over five years, the amount of wages paid to Californians by qualifying film companies is close to $1.5 billion.

Impressive stuff, but there’s a downside. These numbers would look even better if the current California incentive weren’t so limited in scope.

Runaway production remains a problem for California, and these days the most at-risk projects are those unable to qualify for the state’s current program. Under current regulations, feature film projects with budgets exceeding $75 million do not qualify for California’s film incentive. New one-hour network television dramas also do not qualify, unless they’re relocating in from somewhere else. The consequences of this are direct and measurable:

California’s share of network 1-hour TV series, which are not eligible for the Program, experienced a dramatic 58% decline, from 89% of all network 1-hour production in 2005 to just 37% of network production in 2012.

According to the CFC, each year there are many applications for the film incentive from television productions that currently shoot out of the state but want to come to California. However, history shows that only productions lucky enough to receive state credit actually relocate to the Golden State.

This is further evidence of what it often stated anecdotally: many, if not most, producers would prefer to film, spend and hire in California, but cannot justify this to their financiers if the state isn’t market competitive.

Evidence continues to mount that California can easily outmatch major competitors like Georgia, Louisiana or Canada for only a fraction of what they offer in incentives. When California chooses not to compete, observes the CFC, its long-term competitiveness declines:

While production companies routinely relocate their relatively small creative teams (producers, actors, directors, writers) to another state for the duration of a film shoot, very few production crew members (drivers, camera technicians, carpenters, make-up artists) from California are hired… skilled California crew members end up training the local workforce so that fewer California workers are needed on subsequent film shoots. This process has helped create a pool of skilled local crews across the country and around the world.

California’s Film & Television Tax Credit Program, already distinguished by its impressive return on investment, offers hope of future film prosperity. Solutions to the problem of runaway production are available, if we want them. That’s a message we’ll be taking to Sacramento.

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