Michigan and New York have fired a double-barreled blast in the war for Hollywood dollars as TV and movie money continues to bleed out of California to states that offer production incentives.

Michigan recently passed legislation that effectively gives filmmakers 42 percent of their production costs back, while New York just tripled its film production rebate to 30 percent of local costs.

Louisiana and New Mexico, thanks to their successful incentive programs, got nearly $1 billion last year in spending on film productions poached from Los Angeles.

Entertainment-generated jobs and tax revenues continue to hemorrhage from Los Angeles.

"We need to do something before we become the next Detroit and have one of our biggest industries leave the state," said Amy Lemisch, director of the California Film Commission.

While that may be hyperbole, Los Angeles this month lost an estimated $1 billion in direct and indirect income and the state missed an estimated $71 million in employment and sales tax revenue due to runaway film productions. Those numbers come from Jack Kyser, vice president and chief economist of the Los Angeles County Economic Development Corp.

Feature film production dropped 6.4 percent in 2007, and was down 7.4 percent in 2006, according to FilmLA, which bases its numbers on film permits issued in Los Angeles County. Some of that slip in production can be attributed to the four-month-long writers strike, but the numbers are in keeping with a steady downward slide that's been going on for more than a decade.

Aggressive incentives

Suffering from years of downsizing by the automakers, Michigan Gov. Jennifer Granholm this month signed into law the most aggressive incentive plan to date.

Michigan's plan gives film studios a credit of up to 42 percent on production expenses in the state. For example, if an out-of-state production company spends $10 million on production in the state, the state will cut a check for up to $4.2 million.

What's more, Michigan allows producers to defray costs of up to $2 million for actors and directors, even those brought there from L.A. Most other states limit salary incentives to labor and service costs as a way of stimulating local employment.

To stay competitive with neighboring states such as Connecticut, Maine and Rhode Island, New York lawmakers approved a measure this month that allows film and television producers who shoot in New York City a rebate of up to 35 percent of production costs under certain circumstances.

Louisiana and New Mexico, while not as aggressive as Michigan or New York, already have come a long way in encouraging more permanent investment in their states. These and other states have already sunk deep roots into the film and television industries by offering tax breaks for developers who built studio facilities or, as in the case of New Mexico, have used taxpayer money to build facilities that they then offer up at a vast discount to visiting production companies.

"Incentives absolutely drive the business both in jobs and in creating the necessary infrastructure to establish a long-term economic base for local film and television production," said Amber Havens, Louisiana Film Commission spokeswoman.

There are now 41 states that offer film and television production companies financial incentives, up from 32 just a year ago.

Other than working to streamline the local permitting process and allowing qualified productions to use government-owned land and buildings free or at a reduced rate, California and Los Angeles offer no financial incentives to producers.

"We just can't seem to get people to understand this is not an issue of tax breaks for the Hollywood elite, it's an issue of jobs," said Stanley Brooks, a Los Angeles-based producer and chairman of the California Film Commission.

Building awareness has been made all the more difficult because the last comprehensive study on the economic impact of runaway film production was completed in 2005 and focused on flight to Canada. That problem has been mitigated by the weakening of the dollar.

Budget problems

Even California legislators who have long been at the forefront of state-sponsored incentives plans say that the state's budget crisis means there won't be a push for action soon.

"With a $16 billion hole in the budget it's no time to be going to the members and talking about incentives," said Assemblyman Paul Krekorian, D-Glendale, who has been calling for California to become more competitive with other states. "On the other hand, if we had begun doing something 10 years ago, we wouldn't be facing this issue today."

Krekorian and Assemblywoman Karen Bass, D-Los Angeles, co-authored legislation that was passed by the Assembly last summer. It would have created a $140 million incentive program, but was rejected by the state Senate and now lies dormant in an appropriations committee.

Bass is expected to work with other lawmakers in re-engineering the bill and to move it forward sometime next year.

Krekorian said that when the bill is reintroduced, it may morph into something entirely different, combining a number of tax incentives and grants that would take into consideration the varied elements of California's entertainment industry, rather than focus solely on film and television production.

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