Los Angeles may still be the center of the universe when it comes to film and television production. But while that universe is expanding, the center is shrinking.
In 2005, the Los Angeles County Economic Development Corporation and the California Film Commission collaborated on the definitive study to determine how badly runaway production was hurting Hollywood. It determined that the state of California loses more than $10 million in tax revenue when a movie budgeted at $70 million or more is made elsewhere; for a 12-episode dramatic TV series, the state loses more than $3 million.
The film and television industry in Los Angeles County alone generates approximately $28-30 billion in revenue for the local economy, so each runaway production takes another small bite out of the pie.
Since that study, efforts have been made to push through legislation that would provide tax breaks to film companies to stay in the region. So far, no luck. And meanwhile, Hollywood has discovered it has a lot of competition for that “center of the universe” title.
“I would use this example: New York would never let its signature industry get away. It would never allow Wall Street to leave,” noted Wendy Greuel, a Los Angeles City Councilwoman and former DreamWorks executive who has been active in trying to get the state legislature to act on the issue. “I believe the city of Los Angeles and the state of California have to work to keep our signature industry.”
Much of the resistance to the idea of creating tax incentives for film production comes from California state legislators who either represent other industries in the state and therefore are reluctant to give Hollywood a sweetheart deal, or because the state budget is such a mess that politicians are loathe to give tax breaks when the coffers are empty.
But Greuel says the Los Angeles financial experts she has consulted have determined that the more jobs that are created, the more tax revenue comes into the state. Also, she said, 41 states now offer some kind of tax incentives to film and television production companies, up from 32 last year, so there is more urgency than ever to do something.
“Before, Canada was our biggest competition,” she said. “L.A. could argue that we have the highest quality facilities and the best trained workforce. Now you see other states and localities have created a workforce that is trained. They have created sound stages. They have created infrastructure.”
Film empire in the Empire State
Unlike California, New York has taken a proactive approach to keep its film industry, due mostly to the threat of competition from neighboring states. Connecticut, for instance, offers a 30 percent tax break to film and TV productions. Rhode Island, Pennsylvania and other nearby states have established similar programs.
So New York reacted. In April, legislation went into effect that provides a 30 percent tax break for all below-the-line production costs (just about everything except actors' salaries) in the state. Combined with New York City’s offer to give an additional five percent to productions that shoot within the five boroughs, applications to shoot in the state in general and city in particular are up.
“After a year of our neighbors offering much more aggressive programs than we, we saw a dramatic drop in feature film production — and an increase in our neighboring states,” said Pat Swinney Kaufman, executive director of the New York State Governor’s Office for Motion Picture and Television Development.
“There was a great agreement for the need to (enact tax incentives),” she added. “It wasn’t about New York vs. California. It was about New York maintaining our position in the film business.”
New York did what California is unwilling to do, and it is reaping the economic benefits. The last study commissioned three years ago by the city and done by the Boston Consulting Group estimated that film and TV production is a $5 billion industry in New York City, employing over 100,000 people and driving 5,000 production-related businesses. Those numbers are certain to spike as the result of the recent tax breaks and the influx of new productions.
In the first quarter, under the old program, the state film office received nine applications to film a movie or TV show. Since April 23, when Governor David Paterson signed the bill authorizing the new tax breaks, to this week, it received 32 applications.
“There was a perception problem, a hassle factor,” she said. “There was a feeling that the city was not film-friendly, that the facilities were not what the industry would hope for.
“We focused primarily on customer service. We have dedicated ourselves to being a one-stop shop for all production needs,” Oliver said. “We wanted to simplify the process.”
One of the highest-profile projects to take the city and state up on their offers — and say goodbye to Los Angeles — was “Ugly Betty,” the hit ABC series. Co-executive producer Richard Heus estimates that “Ugly Betty” will save more than $8 million a year by moving from Los Angeles to New York.
The series also had a creative incentive to move. The pilot was shot in New York. The story takes place in New York. And there was a feeling among the show’s creators that it belonged there. But for financial reasons, the show moved to L.A. after the pilot was shot — until the new tax breaks in New York changed the landscape.
“When the tax incentives provided (the show’s creators) a financial way to do it, it was an emotional no-brainer,” Heus said. “They literally jumped at it.”
Heus also feels that, although some productions are fleeing California, Hollywood still rates as king of the industry.
“If you subsidize 10 shows here (in New York), if that amounts to $80 million here, it might amount to $8 billion in California,” he explained. “I don’t know how you do that.
“The impact for offering incentives puts a heavy burden on the taxpayer. Living in California, I don’t know how you pay the bills. I can’t imagine how you fund that.
“California has been so dominant. Hollywood has reasserted its physical dominance like it hasn’t in a long, long time. Look how many movies and shows are done there every year. The numbers are in the hundreds. The numbers in other cities are in the tens.”
Kaufman, of the New York Governor’s Office, agreed. “California has the crew base, all that talent. It has massive infrastructure. California has a very strong hold on the industry. It has the bulk of the decision-makers. If you look at California production days … they’re very strong.
“It just became more financially attractive to be in New York. We didn’t go out trolling to steal shows from Los Angeles.”
It is difficult to get a recent read on lost productions in and around L.A. because the recent Writers Guild strike threw the entire production schedule out of whack. Also, although there has been an increase in the production of reality shows, those shows don’t create the same amount of revenue as scripted dramas or sitcoms.
Still, Councilwoman Greuel doesn’t seem willing to sit by and let the problem correct itself. She has been working closely with Karen Bass, speaker of the state assembly and a fellow board member of the California Film Commission, to push an incentive plan so that Hollywood can continue to be competitive.
“It’s about dollars and sense,” Greuel said. “We can’t bury our heads and think the industry will just stay here while other cities and states make lucrative offers.
Michael Ventre is a frequent contributor to msnbc.com. He lives in Los Angeles.