Despite Tax Credits, California Loses Big Biz

Hollywood Sign
Gary Minnaert
Hollywood Sign

Over 20 of the 39 pilots being shot by the TV networks are *not* shooting in California. The Golden State needs all the business from movie and TV productions that it can get. Hit hard by the recession, California topped 10 percent unemployment last month, is facing massive budget shortfalls, and has one of the highest foreclosure rates in the nation. And losing TV production is even worse than losing film production — a movie shoot is a one time tax boost, but a TV show that lasts is the gift that keeps on giving, generating tax revenue and jobs for years and years.

California is fighting to keep productions in the state. Just last month the state approved a $500 million, five year tax credit incentive program. Unfortunately, the restrictions on who qualifies for those incentives are pretty limited. Targeting hour-long basic cable shows with budgets of at least $1 million, it excludes half-hour TV shows, game shows, talk shows, news programs, documentaries and reality shows, the latter of which represent a growing chunk of TV airtime.

It seems the state doesn't realize how much damage its rules are inflicting on its future business. The new 20-25 percent tax incentives on below-the-line costs don't kick in until July 1. The problem? If a studio shoots a pilot outside California this fall, then moves it back to the state once the incentive takes hold, the studio won't be able to reap the benefits. Why? Because it shot its pilot elsewhere. But, an existing TV series qualifies for the higher 25 percent credit if it was previously filming out of state and decided to come back. What confusion!

As if the runaway TV business weren't a big enough problem, the movie industry is also pulling back...and out. Movie studios are making fewer movies, and budgets are tighter, so they're more likely to look north to Canada's exchange rate or overseas to tax incentives. And if they do stay in the U.S., studios are hunting around for the best deal, which is unlikely to be in California these days. Add to that the ongoing labor sagas (the producers association and the Screen Actors Guild still haven't renegotiated their contract), and studios parent companies tightening their purse strings, there are only a handful of major films in production in L.A. right now.

The box office is booming, so you'd think that would help the Southern California economy. But unfortunately it's bad times all around

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