By proposing reimbursements for film companies that shoot in Los Angeles, Mayor James Hahn is plunging into a furious bidding war among cities and states looking to attract filming through incentives even as local officials acknowledge they may never undercut their competitors.
Hahn, in the midst of a runoff contest with City Councilman Antonio Villaraigosa, has proposed 5 percent reimbursements on below-the-line costs for production companies that shoot at least 75 percent of the production in Los Angeles. The subsidy would top out at $625,000 per production and the city could cap total reimbursements at $15 million in the first year.
With the proposal, which Hahn unveiled at a campaign stop in Hollywood, Los Angeles enters the increasingly competitive sweepstakes among cities and states that are offering broad incentives such as interest-free loans, tax credits, exemptions from sales and use taxes, and income tax rebates.
"Other cities, other states and other countries are luring our film industry away with powerful financial incentives," Hahn said at a press conference. "I'm fighting back with incentives of our own to make an offer that will be hard for filmmakers to refuse."
Villaraigosa was quick to attack the proposal and the timing. The real question, he said, is "why Hahn waited until the fourth year of his term to announce a plan to keep film production in Los Angeles."
Some in the entertainment industry said the mayor's measure offered only limited relief, given that $625,000 is a relatively modest savings on productions that sometimes run into the tens of million of dollars. They also note that while production continues to leave the area for cheaper locales, Los Angeles still leads the nation in the number of production days with its massive studio and talent infrastructure.
Still, others were enthusiastic about the additional incentive.
"I think that anything Los Angeles can do to promote filming here and be competitive in the world environment is going to help L.A.," said Hudson Hickman, senior vice president of television production for MGM Television Entertainment.
"For 80 years, Los Angeles had a virtual lock on production in this country and in the world. That's no longer true. This (relief) might be modest, but it opens the doors for something further," he said.
In fact, Los Angeles officials said they were awaiting a similar tax relief proposal from Gov. Arnold Schwarzenegger. A Schwarzenegger spokesman, Vince Solitto, said the governor is committed to introducing a relief package this year but had no details.
Response to New York
Bill Carrick, a Hahn adviser, said the mayor's proposal comes largely in response to measures in other cities and states that threaten to lure filmmakers out of Los Angeles. In the past six months, New York state has introduced a 10 percent break and New York City has instated its own 5 percent cut.
"Some of this is a reaction to that," Carrick said. "New York clearly is targeting the kinds of productions that we covet here in L.A. the bread and butter of the industry."
The competition among states and cities has heated up as the U.S. dollar reaches a 12-year low compared with the Canadian dollar, slowing the exodus of film productions to Canada despite aggressive incentives by provinces there. Earlier this year, Manitoba and Nova Scotia boosted their tax breaks to 45 percent, while Ontario offers 30 percent breaks.
More worrisome for Southern California producers are Louisiana, New York and other states that have dangled tax credits and other incentives. New York City landed five television pilots this year for the first time in a decade, a feat attributed largely to the combined state and city relief measures.
New Orleans and other parts of Louisiana also have become increasingly popular among filmmakers, with the city and state each offering tax breaks. The state, for example, gives a 15 percent credit on all production costs, a 20 percent credit on payroll expenses for Louisiana residents, and an exemption from the state's 4 percent sales and use tax.
The incentives have been credited for a boom in film production in Louisiana, where money spent on production skyrocketed from $12 million in 2002 to $337 million in 2004. That included the Oscar-winning film, "Ray."
Officials from L.A.'s Entertainment Industry Development Corp. and the California Film Commission acknowledge that the city and state probably will never match the deep tax breaks and credits offered elsewhere in the country.
"I don't think we would have to match, dollar for dollar, every incentive program offered somewhere else because we do have some location advantages here," said Steve MacDonald, president of the EIDC. "We do need to be aware of what some other jurisdictions are doing just to stay in the competitive ballpark."
Officials in New York City's Office of Film, Theatre and Broadcasting did not have statistics on additional production since the city tax breaks took effect Jan. 1. But they said that tax relief played a major role in attracting the five television pilots to the city's largest studio company, Silvercup Studios.
Gary Kesner, Silvercup's executive vice president, said the incentives were meant to keep New York-based television shows and movies in town, rather than to steal them from Los Angeles. For example, the Fox Broadcasting Co. pilot "Jonny Zero," which is set in New York, would have headed to Canada if not for the tax credits.
"The point of this was not to poach on L.A.," he said. "When you see a New York show, the hope is that it will be shot in New York. Toronto is not the same as shooting in New York."
At the same time, Kesner noted the potential for other cities to compete more aggressively against Los Angeles and New York for productions once they develop a critical mass of trained workers, sound stages and other facilities.
"Other jurisdictions have jumped on the bandwagon and you have the infrastructure being developed in those places, not only the physical infrastructure but also the talent infrastructure, for studios to operate there," he said.
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