Stating that “the future of California’s creative culture and economy depends on it,” 28 members of the California Democratic congressional delegation weighed in on runaway production, urging the state legislature to approve, and Gov. Jerry Brown to sign, an enhanced tax credit to keep film and TV production from fleeing the state. “We fear a day, not too far off, when the film industry in California is hollowed out and it becomes easier to produce a movie or television show in New York or Louisiana than in California,” the delegation said in a statement sent to California Senate President pro Tem Darrell Steinberg and Assembly Speaker Toni Atkins. “As production moves out of our state, skilled human capital will relocate along with it, and our greatest competitive advantage, our talented workforce will move elsewhere. If that happens, it will be a tragedy for our state’s economy and our cultural history.”
A bill to reauthorize and enhance the state’s existing tax credit (AB 1839) passed the state Assembly in June and awaits consideration in the Senate. The amount by which the tax credit would be increased has not yet been determined. The current tax credit expires next year. “This is a critical moment for California’s economy and our history as the epicenter of the film and television industries,” said Rep. Adam Schiff (D-Burbank), who is leading the delegation’s push for new credits. “Hundreds of thousands of jobs hang in the balance. If we fail to take decisive action to enhance the state film tax credit, we run the real risk that many well-paying jobs will be lost for good to states with far more generous credits.”
LA Mayor Eric Garcetti, who has been leading the city’s efforts to push for expanded tax incentives, joined the delegation in warning about the dangers of not passing new incentives. “Of the 54 big-budget feature films in 2012 and 2013, only one shot exclusively here in the State of California. And, in terms of Los Angeles, feature film production has dropped nearly 50% over the last 15 years,” he wrote to the delegation. “It’s a crisis, make no mistake, but it’s one we can solve, and this legislation will help level the playing field against the other states that are taking jobs away from working Californians.”
Here’s the full letter:
Dear Senate President Steinberg and Assembly Speaker Atkins:
As members of the California Congressional Delegation, we write to ask that you reauthorize and enhance the California film tax credit during the 2014 legislative session. We appreciate your past support for reauthorizing the film tax credit, and believe that it is time to make the credit competitive with other states that are aggressively attracting film and television production from throughout California.
As you know, California’s film tax credit will expire in 2015. The expiration is a moment to consider the growing body of evidence that the tax credit programs in other states are increasingly making California financially uncompetitive as a production location. A June 2013 study by the California Film Commission found that feature film production in the state is far down from previous highs due to runaway production. The Office of the Legislative Analyst recently found that only 52 percent of film and television jobs are located in California, down from 65 percent just a decade ago.
The losses are particularly stark in production sectors that are ineligible for the state film tax credit. The California Film Commission study found a 58 percent decline since 2005 in California’s share of one-hour network drama production – productions that are ineligible for the production credit. And for large budget features, the costs of which far exceed the current $75 million eligibility cap for the current film tax credit, production in California has become a rarity. Where in 1997, 16 of the 25 largest grossing films were primarily shot in California, in 2013 only 2 of 25 were produced in California.
A competitive film tax credit is a net win for our state, creating jobs, generating economic activity, and increasing tax revenues for the state and municipalities. Studies conducted by the Los Angeles Economic Development Corporation and the Headway Institute both estimated that for every dollar allocated to the film tax credit, the state and local governments saw a net positive impact in their tax revenues. According to the California Film Commission’s “Progress Report – July 2013,” each $100 million in credits resulted in $792 million in economic activity, creating roughly 8,500 new middle class jobs.
As you consider reauthorizing the existing credit, we urge you to enhance it to be more nationally competitive. Among the enhancements to the current credit that would help are substantially increasing the overall pot allotted, raising the cap that prevents blockbuster films from competing, and allowing hour long television dramas to qualify for the credit. We urge you to work with the legislature and leaders in the state to prioritize cost effective and competitive reforms that create jobs.
We fear a day, not too far off, when the film industry in California is hollowed out and it becomes easier to produce a movie or television show in New York or Louisiana than in California. As production moves out of our state, skilled human capital will relocate along with it, and our greatest competitive advantage, our talented workforce will move elsewhere. If that happens, it will be a tragedy for our state’s economy and our cultural history.
We urge you to take this opportunity to protect a vital economic engine for our state, and we stand committed to do our part to protect the competitiveness of US filmmaking at the federal level. Thank you for your consideration.