California celebrates the success of expanded movie tax credits passed last year which have prompted shows like “Scream Queens” to move from New Orleans to Los Angeles. That’s more bad news for Louisiana, where movie/TV production has been blindsided by the short-sighted politicians
Producer Ryan Murphy, actress Jamie Lee Curtis, L.A. Mayor Eric Garcetti
Photo: California Film Commission/FLICS
She has been known as the original "Scream Queen" since the hit 1978 horror film Halloween, so it was a natural when prolific producer Ryan Murphy approached Jamie Lee Curtis about two years ago to be one of the stars in his new Fox television show Scream Queens.
Curtis is a fan of Murphy, whose many credits include Glee, Nip/Tuck and The People V. O.J. Simpson: American Crime Story, and immediately wanted the role. “Then I found out it was (being shot) in New Orleans,” recalled Curtis, “and I said, ‘No.’”
Her reason, Curtis explained on May 21 at the 9th Annual Film In California Conference in the Studio City neighborhood of Los Angeles, was, “because I have a kid who needed me to be at home with him.”
Curtis eventually worked out an agreement to spend four days every two weeks in Louisiana playing the part, before rushing home to be with her son.
Then came the news that thanks to the expanded California Tax Incentives program enacted last year, production of the second season of Scream Queens was being relocated.
“If you felt a minor tremor,” added Curtis with a smile, “it was me hearing the news that we were shooting in Los Angeles, California, the place of my birth and my home.”
“That means I get to use one of my favorite people even more,” said Murphy, “because she can work in the city she lives in and that’s so important to me as an artist.”
Curtis and Murphy were part of an enthusiastic throng of state film commissioners, government officials, production vendors, producers, actors, press and others at the Conference, which in past years has been an effort to flog enthusiasm for production in California despite richer incentives offered by other cities, states and countries - that for decades drained productions out of Hollywood.
Celebrating California Film, this actress rang chimes to announce panels
This year’s Conference felt like a pep rally for a college team head to a bowl game. Curtis, who took the role of lead cheerleader, was on hand to present the first Golden Slate Award to Murphy for being a “champion of filming in the Golden State.”
Curtis was introduced by Los Angeles Mayor Eric Garcetti, who along with Kevin James, who heads the city’s film office, and others, worked closely and effectively with elected officials in Sacramento to reinvent California’s seven-year-old tax incentive program.
“We have a lot to celebrate this year,” said the Mayor. “It’s such a different year than in the past when we were kind of complaining about other states and other places stealing production away from where it all started, because this year we really feel that Hollywood is coming home.”
Official numbers won’t be available for a few more weeks, but all indications are California’s tripling of tax incentives last year to attract and retain movie and TV productions is a spectacular success. The Mayor dished out one tasty statistic: “This year 45 network pilots are shooting in Los Angeles, more than any other city in the U.S. or Canada.”
That is important because the vast majority of pilots picked up to series will be produced in the same place the pilot was made, and TV series are the most desirable because when they employ crews, fill stages and require services year after year.
Based on unreleased results from the just completed state fiscal year Amy Lemisch, Executive Director of the California Film Commission, is feeling quite positive about the impact of the expanded incentives.
Amy Lemisch, Executive Director of the California Film Commission, oversees and administers the state's annual $330 million movie/TV tax incentive program
“Yes it is working,” said Lemisch, in an interview with Block & Tackle.biz. “Through the grapevine I hear all of our facilities are very busy right now…If you talk to Teamsters and various Los Angles (union) locals they will tell you it is busy and their members are back at work, so this is exactly the intent of our program.”
PRODUCTION SINKING IN THE BAYOU STATE
At the same time Louisiana, which over the past 20 years has become a booming production center, resulting in the creation of a significant amount of infrastructure and development of skilled crews, has seen its once soaring level of movie and TV work load go into freefall.
In mid-May Louisiana’s Economic Development Secretary Don Pierson told a state Senate committee activity is down 80 percent in less than a year. The owner of a studio in New Orleans told the Senate committee that his business had dropped by 90 percent.
That doesn’t mean there aren’t productions and big movies like Tom Cruise in Jack Reacher still shooting in Louisiana but the flow into the pipeline that fuel in 2015 fueled 12,600 jobs with an annual payroll exceeding $188 million is slowing noticeably.
The Louisiana Economic Development state agency this year received 61 applications representing $225 million in productions, compared to the prior year when they received 138 applications for $1.2 billion. That is an astounding 81 percent drop.
That isn’t because of what California did, although as in the case of Scream Queens, Hollywood was a beneficiary.
Under a Republican governor (failed presidential candidate and now former governor Bobby Jindal) and a Conservative minded legislature, Louisiana made cuts to its long-running hit, the movie tax incentive program. For the first time they put a cap on the amount the state will spend annually of $180 million, compared to $246 in 2013 and $222 in 2014.
They also enacted other new restrictions and sent shock waves through the finance world with a freeze on the ability of producers to cash in tax credits already earned, for at least a year (July 1, 2015-June 30, 2016).
Jindal was recently replaced as Governor by a Democrat, John Bel Edwards, but based on statements during his campaign he approves of the budget cap where it is. “I know this is a subject of great debate,” Bel Edwards said in July 2015, “but we know recently the state has paid more in tax credits for one movie production, than it paid for the University of New Orleans to operate for an entire year.”
No wonder producer’s get nervous when looking toward Louisiana.
“When the cap suddenly comes in a lot of companies become very skeptical and aren’t sure how it is going to play out,” says Kevin Klowden, Executive Director of the California Center at the Milken Institute. “One of the things entertainment companies need is predictability. When you have a volatile situation in Louisiana, that has an immediate impact on decisions being made about productions.”
California by comparison now is assured of a stable incentive program that will spend $330 million a year to lure productions, compared to $100 million a year from 2009 through last year.
It hasn’t been announced yet but for the recently completed fiscal year, Lemisch expects that the $230 million the state has allocated will result in $1.7 billion being spent in California, of which about $660 million is for wages to crews. Those tax incentives rise to the full $330 million annually later this year.
“It’s definitely having an impact,” says Eric Klosterman, Treasurer of the Locations Managers Guild International (they scout places to shoot and are on the front lines of productions). “Filming days are up in California and our members are working. This has been quite beneficial.”
“We’ve seen an uptick in the amount of production since the incentives went into place,” said Pete Brosnan, Managing Partner of L.A. Center Studios, where Mad Men was produced for seven seasons. “We’ve dealt with quite a few of the shows that have chosen to relocate and come back home. It’s been very good to see that happen.”
On a panel discussing the upcoming CHIPs movie, hosted by KPCC/Take 2's Alex Cohen, from l to r: producer Andrew Panay, multi-hyphenate Dax Shepard, Warner Bros. VP Ravi Mehta and the movie's location manager, Rick Schuler
Photo: California Film Commission/FLICS
During a panel on the making of the upcoming Warner Bros. movie CHIPs, a Dark Knight-style remake of the 1970s TV series, star/director/producer/writer Dax Shepard, who plays Officer Jon Baker (with Michael Pena as Officer “Ponch” Poncherello), said the tax incentives kept his production where it belonged, on the California freeways.
“Yes, we could have made this movie in Louisiana or Atlanta and we would have,” said Shepard. “It took me three years to get this made. I would have gone to Alaska but it would have completely changed the movie, because California is one of the stars of our movie.”
Shepard shot all over California and got extraordinary cooperation from the city of Long Beach to shoot high speed car chase scenes along the ocean which had not been done there before.
The community welcomed the work. “The incentives have been great for us,” said Tasha Day, Long Beach’s Film Commissioner. “We’ve always had TV but not this much TV and now we’re getting the features back which we haven’t had for a while.”
Having shows like Scream Queens, and Murphy’s American Horror Story relocate is not only a boon to Los Angeles but also a blow to other states, in this case Louisiana, which has also lost productions to neighboring state Georgia, where rich incentive programs continue to draw productions.
More than three quarters of production in California takes place in and around Los Angeles. The activity that takes place outside of studio lots owned by Fox, Paramount, Disney and others is tracked by the non-profit organization Film L.A.
In April, Film L.A. reported that for the period between January and March, the first under the new incentives, was “the busiest on record.” On-location feature production was up 23.7 percent for the quarter, and TV production rose by 19.1 percent, fueled by projects receiving tax credits including Rosewood, Twin Peaks and Westworld.
THE TRICKY BUSINESS OF OFFERING TAX MONEY TO LURE MOVIE/TV JOBS
Over 40 states have provided incentives over the years but it can be hard to justify when it is an expensive one off, as anti-tax critics have been quick to point out. However, it can be a good business if an infrastructure is created and thousands of citizens get good paying middle class jobs that can be sustained over the years.
New York has moved aggressively to capitalize on its own history in show business and the richest incentives in the U.S, about $460 million annually. Many productions also head to London, especially blockbusters like Star Wars; and to Canada, especially Toronto and Vancouver, not only for incentives but also due to the strength of the dollar.
New Mexico, Georgia and Louisiana are places the industry has taken root and now the pressure is to keep the brand new stages busy, crew employed and create a way to train locals for the future.
What has made Georgia and Louisiana stand out in the race for movie and TV production jobs is the sheer magnitude of what they offer. Even after it placed the cap on productions, Louisiana still offers a full 30 percent of everything spent during production (40 percent for in-state companies), including “above the line.”
“It inflates the qualified expenditures that are actually occurring,” said an industry expert, who asked to remain anonymous. “So it’s a big tax credit on actor’s salaries, director’s salaries, a producer’s salary, out of state vendors moving equipment. That later makes it much harder for those places to demonstrate a positive return on their investment.
That’s what happened in Louisiana. The Economic Development department in 2015 produced a study showing the program generated 23 cents in tax revenue for every dollar paid by taxpayers. At a time, there was a budget shortfall causing severe cuts in services, education and infrastructure, the prevailing political mood was to at least stop it from being so open ended.
Backers evidence, and lobbying by the MPAA, which showed that there are other benefits to the community in terms of a ripple of spending and even tourism were brushed aside by Louisiana's legislators.
California and New York do not subsidize the above the line – only direct production costs - and both have much tougher union rules statewide. That compares to Georgia, which is a right to work state, where there are no union crews required. That can mean large cost savings.
The crowd attending a panel discussion at the 2016 Film In California Conference
Mayor Garcetti pointed out why California can actually get away with being a little more costly, beyond the desire of cast and crews to sleep in their own homes at night. “We do have competing tax credits out there,” said the Mayor, “but we know we don’t have to be the cheapest. We just need to be cheaper, because of what we do have. We’ve got the best state, the best talent and gorgeous locations that can double as anywhere else in the world. “
PLAYING POLITICS WITH MOVIE TAX INCENTIVES
In recent years cutting money for movie tax subsidies has been a hot issue. It has been part of a ultra Conservative political agenda backed by a few dozen billionaires who hate paying any taxes or giving handouts to Hollywood. A number of Conservative think tank have targeted the issue.
“I completely see their point,” said Mike Gatto, a Democratic California Assemblyman from Burbank who was one of the fathers of last year’s expansion of the tax incentives, along with former Assemblyman Raul Bocanegra and California Senate President Kevin de Leon.
“I’ve read their materials,” continued Gatto, “and I sympathize with their theories and in certain economic studies their theories make very good sense. I also understand their philosophical distain for these things, but that being said, in the real world there are communities being destroyed because of their states offering these teasers for productions.”
Gatto grew up in Burbank when most of his neighbors worked at the local Boeing Aircraft factory, and he saw the economic and societal devastation when those aerospace jobs left for Seattle. He compares that kind of devastation to what California was facing in the entertainment industry before passage of the expanded movie tax credits.
“The loss of entertainment would mean the same thing for our region,” said Gatto. “So this is a real world decision we had to make and I think we did what was best for our people.”
One side benefit of the new incentives is that it has made government at all levels more open to helping productions so that the companies keep coming back, according to Arturo Pina, who does community outreach for Film L.A. “This is an initiative coming from the top down, from our Governor to local levels,” said Pina. “Council members are doing their homework and educating themselves on the benefits of having filming in their communities. So they will train their staff to work with productions on issues that could become serious if not addressed.”
L.A. MAYOR ERIC GARCTTTI: HE TOLD YOU SO
Photo: California Film Commision/FLICS
“A lot of people said we couldn’t get it done,” said Mayor Garcetti. “There were years of cynicism. There were people who said this is not an industry we should be putting money in, but when we did the hard calculations of how little money put into a credit created X number of jobs, X amount of economic activity, X amount of tax revenue to come back and pay for those credits, I think it was clear to our legislators.”
Garcetti shared a story about his efforts to convince Gov. Jerry Brown, who did not agree to the expanded movie/TV credit package until near the very end of the process. Gov. Brown asked Garcetti why he should sign this bill?
“I said, 'I’ve been a big supporter of your high speed rail,'” recalled Garcetti. “'Everybody said you’re crazy but I think you are right. Well, this is my high speed rail. People think I’m crazy but I know I am right."