'Ugly Betty' relocated to New York a year ago to take advantage of the state's tax incentives.
After years of watching production lured away by government incentives, California's gotten into the game by approving a five-year $500 million tax credit program.
In a move that surprised many, the California Legislature included the new film incentives Thursday as part of a massive package of $12 billion in tax hikes that broke a three-month budget impasse.
The state's tax credit program covers 20% of below-the-line expenses for production of up to $75 million. It can be sweetened to 25% of expenses for indie feature productions of up to $10 million -- and for all TV series relocating to California, as a sort of housewarming gift.
California's move comes a year after ABC skein "Ugly Betty" abandoned Hollywood for New York due to the latter's incentives -- and two weeks after the office of New York Gov. David Paterson announced that funds for its popular incentive program had been exhausted after going through $500 million in less than a year.
California's program, which goes into effect July 1 with a cap of $100 million annually, will likely strike at the heart of the New York production industry. Even though California's tax credit rates are far below those in some other states -- Michigan offers a whopping 42% credit -- the presence of Hollywood's existing infrastructure and the desire to stay close to home has the potential to reverse more than a decade of runaway production.
The program is the first significant system of incentives to be put in place in California. Under former Gov. Gray Davis, the Film California First program allocated a meager $21 million to the industry before ending in 2003, and several other subsequent efforts failed, even with strong support from Gov. Arnold Schwarzenegger, after coming under attack by legislators outside Los Angeles as subsidizing already wealthy producers.
But with most other states having enacted incentive programs and the state's economy in a dive, the argument turned on the benefits of providing an economic stimulus to below-the-liners. Schwarzenegger has contended that money spent on showbiz production in California created nearly three times that amount in economic activity.
The legislation, authored by Assemblyman Paul Krekorian (D-Glendale), doesn't cap how much of a credit can be distributed to each production. A spokesman for Krekorian said the California Film Commission will have to develop regulations to administer the credit program and may choose to specify a maximum per-production credit allotment to spread the funds around to as many productions as possible.
"The Production Incentive Program is geared towards feature films with budgets between $1 million and $75 million, TV series that relocate to California and TV series produced for basic cable," said Amy Lemisch, head of the state's film commission. "Eligible film and television productions must shoot at least 75% of the total days in California; the credits will be applicable for tax years beginning in January 2011."
The approval of the incentives prompted SAG, AFTRA, the DGA and Motion Picture Assn. of America to issue a joint statement praising the move.
"For the past 10 years, a united entertainment community has been telling state officials that our industry is threatened by runaway film and television production," the orgs said. "Film and television productions have been leaving California for tax incentives in other states and countries for years now, and like everybody else, entertainment industry workers are suffering in this economic climate. We applaud the passage of this incentive, which will help make California competitive and not only save the jobs that are being lost but generate much-needed revenue for the state."
As for New York, California's move will likely have its most serious impact on TV series. The presence of NBC's "30 Rock," Showtime's "Nurse Jackie" (which is holding on to its sets after the first season finishes shooting, indicating confidence in a potential second season) and "Ugly Betty" in New York City allows professionals in areas ranging from catering to lighting design to make a living in Gotham.
"Last year we had 19 pilots. They spent $4 million-$10 million each, and when those shows get picked up, they become the lifeline for a lot of working people in New York," said Stuart Suna of Silvercup Studios, where "Ugly Betty" shoots. "We had two pilots in New York this year, and that was with the tax credit."
"Ugly Betty" managed to snag one of the last remaining tax credits, so it may be safe in New York for another season. But shows like Fox's freshman J.J. Abrams sci-fi series "Fringe" and HBO's "In Treatment" -- both of which relocated to New York specifically to take advantage of the tax credit -- are looking to leave the state for greener pastures.
"Fringe" moved from Toronto when the U.S. and Canadian dollars were almost equal. That show is now said to be considering Chicago as well.
Another New York-based show that didn't make it to the well before it ran dry was "30 Rock," which struggled with ratings even as it racked up kudos.
"Given the downturn in New York's FIRE economy (finance, industry, real estate), I think the credit's absolutely necessary," said Steiner Studios prexy Douglas C. Steiner. "In the last year, the industry has brought in $1.7 billion in incremental business."
Suna said he's frustrated because the money "spent" in the incentive program comes from taxes on the film productions themselves, and of the $2.69 billion the state has collected, it's refunded only $690 million after collection -- representing a huge net gain. Suna proposed that the program simply be reclassified alongside such other tax incentives as the Industrial Commercial Incentive Program, which doesn't have a cap of any kind and is funded solely by taxes from new or expanding industry.
Suna, his brother and Silvercup CEO Alan Suna and New York Production Alliance principal John Johnston are spearheading a letter-writing campaign.
"Since the tax credit program was established, New York film and television production has been booming, with local businesses from sandwich shops to dry cleaners and car service companies reaping the benefits," said the letter, sent out to union leaders and studio heads Thursday. "Not replenishing these film and TV tax credits in the current budget might cause me to lose my job, even possibly my home."
Suna's hoping the campaign will be a grassroots effort, noting that New York credit benefits local crews and technicians.
Contact Sam Thielman at
sam.thielman@variety.com