EXCLUSIVE: With little more than three weeks left in the legislative session, Kevin De Leon is demanding big changes to efforts to expand California’s $100 million Film and TV Tax Credit Program. If the influential state Senate Appropriations Committee chairman doesn’t get his eleventh-hour way, I’ve learned that he intends to kneecap the multi-sponsored Film and Television Job Creation and Retention Act before it reaches the Legislature’s floor for a vote this month. “Following a long meeting this weekend, and numerous conversations over the past year, Senator De Leon has decided he will not support the extension of the current lottery allocation system,” said a curt email that went out earlier today from De Leon’s Chief of Staff to politicians and industry leaders.
Causing chaos in Sacramento today, the sudden shift from the LA Democrat comes less than a week before the committee he chairs is set to have a vital hearing on the Act and its effort to triple the annual allocation to at least $400 million. “His conclusion is that the existing credit has too many weaknesses to be substantially expanded this year. At least not in the range the advocates are currently pushing,” Dan Reeves stated for his boss, who has long been a big supporter of efforts to expand the 5-year old program.
“This is pure political brinksmanship and extremely irresponsible,” a studio insider said to me of the senator’s move. Later this afternoon, Reeves sent out a more subdued email for De Leon requesting a “stakeholder” meeting on the tax credit topic on August 7 in the state capital. “We were blindsided by this,” said another insider, calling the first email sloppy and stupid. “This is either a cheap ploy to make a deal on another issue or they really are trying to kill the bill.”
The timing of Reeves’ initial email certainly could cut either way. As well as the widely supported Act going before the Appropriations committee, Gov. Jerry Brown and the legislative leadership have been set to soon start negotiating over the tax credits. Brown has not come out in support of the Act, which was overwhelmingly passed by the state Assembly on May 28 despite having no dollar figure attached. The Act passed its first test in the state Senate on June 25 when it got a 4-0 vote from the body’s Governance and Finance Committee.
The essence of De Leon’s objection to the bill introduced in late February by Assembly Democrats Mike Gatto and Raul Bocanegra is that it keeps the lottery system of allocating tax credits in place. While De Leon is far from the first to criticize the lottery system his proposed solution is to bring in an oversight board that would determine subjectively who got a piece of the tax incentive pie. “That’s what they have in Louisiana, and look how that’s turned out,” a source said, referring the two-year sentence the then-head of the Film Commission got in 2009 for being caught arranging for a local producer to get credits after being delivered a $60,000 bribe. “To be blunt, the senator believes the current system, while beneficial in terms of ease of administration, is a crap-shoot for the taxpayers and arguments that alternatives are too cumbersome simply doesn’t fly with him,” says Reeves’ email today, citing “greater protections for taxpayers and maximizes job growth.”
Additionally sources tell me that De Leon wants productions to apply for tax credits in other territories including Georgia and Louisiana before applying in California. The purpose of this reverse engineering seems to be to ensure that the productions will not be made in the Golden State if they do not get the credit here. De Leon’s aide also says his boss wants credits to go to “productions with the greatest job-creation value, and finally, wants to see a sub-pot dedicated to landing production currently out of state.” Proponents of current efforts to expand the tax credit have long included provisions to make films budgeted over $75 million and network pilots now eligible for incentives, which they currently are not.
The offices of Sena. De Leon and Assemblyman Gatto did not respond to the matter when contacted by Deadline. De Leon is scheduled to become President Pro Tem of the state Senate in October.