Higher taxes, the high cost of commercial real estate and a lack of government subsidies are moving jobs to other states and preventing lucrative companies from doing business in California.
Over the past few years, one of California’s top industries, entertainment, as well as many others have packed up and left the state, creating regional high unemployment rates and vacant commercial real estate buildings.
Los Angeles is known as the entertainment capital of the world; however, the entertainment business is moving to states with lucrative tax incentives.
Louisiana ranked first in the most live-action films made in 2013, while California came in fourth, based on a study by FilmL.A., a non-profit film office in Los Angeles. Entertainment workers now call the Bayou State “Hollywood South,” with more than 300 film and TV productions shot there since 2006.
Fifteen years ago, Hollywood was responsible for making 64 percent of the top 25 live-action films; however, California’s share of the same had fallen in 2013 to just 8 percent, according to FilmL.A.
Louisiana has a tax incentive program that offers a base incentive rate of 30 percent with no annual cap on the amount spent on filming in the state; in addition, the state has an extra 5 percent tax credit on each resident’s salary.
In contrast, California has an annual cap of $100 million. Film projects in excess of $75 million are completely ineligible for tax incentives. However, a bill, AB1839, in the state Senate would increase the budget and raise the annual cap to more than $100 million.
Louisiana and Georgia are the only states with no cap on their tax film incentive programs, according to the Economic Impact of Louisiana’s Entertainment Tax Credit Programs report. The programs that have no overall caps in place tend to be the most successful, the report said.
From 2010 to 2013, 77 films with a combined budget of $108 billion applied for California film tax incentives unsuccessfully, according to FilmL.A. Most of them filmed outside California where film tax incentives were available.
As a result, L.A.’s entertainment businesses are closing.
“Some companies are staying in business by opening satellite offices operating in other states,” according to Philip Sokoloski, vice president of integrated communications at FilmL.A.
Burbank is the home of a thousand entertainment businesses, according to the Burbank Records Department. The Media District in Burbank has a Class A office vacancy rate of more than 26 percent, according to Cushman & Wakefield.
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