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Fight or Flight?

As Calif. struggles with production flight, SCV film community fights to grow industry

Posted: August 27, 2013 12:00 p.m.
Updated: August 27, 2013 12:00 p.m.

Nearly 100,000 jobs have been lost in California’s filming industry since 2000, according to state statistics.

There are now 96,800 fewer jobs in five of the motion picture, video and broadcasting industries tracked by California’s Employment Development Department.

In January 2000, the state reported 514,100 jobs in five industry areas: motion picture and sound recording, motion picture and video industries, motion picture and video production, broadcasting (except Internet), and radio and television broadcasting.

By the same period in January 2013, the state recorded only 417,300 jobs — and nearly half of those jobs reside in Los Angeles County.

L.A. County’s film industry employed 162,000 in 2011, or the equivalent of 5 percent of the private sector’s workforce in the county, according to the Los Angeles Economic Development Corporation.

It also kept 85,000 independent contractors working. More than one-quarter million people – or 247,000 – are employed, making this one of the largest industries in the county.

Some 108,000 businesses make up the industry, and 85 percent are small businesses employing fewer than 10 people, reports the Motion Picture Association of America.

Spending by these businesses and their workers yields nearly $6 billion annually in state and local taxes. In L.A. County, more than 13,000 organizations created 161,862 jobs and generated over $18.9 billion in payroll in 2011.

But, the industry is much bigger than just motion pictures or TV productions, said Christine Cooper, vice president of the economic and policy analysis group for the LAEDC.

There is a whole gamut of industries that support filming directly; and indirectly, high-tech content producing companies engage consumers. They’re all merging and morphing into each other and driving business across the state, she said.

It also creates jobs across the board, across other sectors.

When both direct and indirect jobs are counted, the entertainment industry as a whole accounts for some 586,000 jobs in L.A. County, or more than $43 billion in labor income, according to the LAEDC. Overall, the local industry generates over $120 billion annually in economic output.

In 2011, the average annual wage in the entertainment industry was more than double the average wage across all private sectors, reported the LAEDC. So the state’s loss of nearly 100,000 workers in the past 12-plus years means lower tax and sales revenues for the state.

“The problem is that all the expertise here — technicians and a skilled work force — have been wooed, along with the production companies, by other states to film elsewhere using their tax credits and benefits,” said Calvin Hedman, co-chair with the SCV Economic Development Corporation. “Individuals from here have gone elsewhere and trained people, so now other states have their own trained workforce. That means skilled people here aren’t getting the jobs, so they move; they have to go where the work is. It’s a drain on skilled workforce in California.”

The state’s filming industry peaked in 1997, according to a report by research firm Milken Institute. But, between 1997 and 2008, the state’s share of U.S. filming dropped 40 percent — much of it lured away to other states offering more attractive incentives.

The city of Santa Clarita, however, has continued to see increases in filming each year since it first adopted its Film Incentive Program in 2009.

Fiscal year 2012-2013 was a record-breaking year for the city.

Permits for features filmed locally jumped from 110 to 188 in 2012, and permits for TV filming jumped from 311 to 346. Permits for other types of lower-budget filming collectively dropped around 25 percent, but the number of film days — which generally result in more revenue — reached an all-time high.

California offered its first-ever film incentive program in 2009, but the 20 percent tax credit is aimed at helping new lower-budget productions, offering only a single-year tax credit.

Further, the state holds a lottery each year to select eligible film projects because demand far exceeds the $100 million in incentives that the state sets aside each year. In June, of the 380 film projects that had applied to a piece of the $100 million program, only 31 could be selected in the lottery process.

Forty other states offer some kind of movie and television production incentives — with some offering more lucrative programs, luring much of California’s production away.

“California’s tax incentives for filming are still miniscule compared to what states like New York and Louisiana offer,” said Stuart Waldman, president of the Valley Industry and Commerce Association.

“Workers want to film in Los Angeles, the San Fernando Valley and the Santa Clarita Valley. It’s where their families are,” Waldman said. “Our public officials need to keep jobs and production from leaving the area.”

In late February, VICA successfully lobbied Los Angeles city and county to waive permitting fees for television pilots to boost filming in the region.

“It sends a message that the region isn’t relying on a past reputation of being the film capital of the world. The city wants to work with the television producers to bring production back,” Waldman said.

Whereas the Los Angeles region once saw the majority of all television pilots, it only captured half of them in 2012-2013, according to FilmL.A. Of the 186 pilots during that period, only 96 were filmed in the Los Angeles region.

Drama television pilots have suffered even more. Just 22 percent of them were film regionally during the same period — down from 63 percent in 2006-2007.

The average pilot directly employs about 150 people, according to industry sources. Production costs for pilots average about $2 million for comedies and $5.5 million for dramas.

If a pilot is picked up as a series, the loss of just one television drama from the region can amount to thousands of lost jobs and millions of dollars in lost production spending over several viewing seasons, according to a report by FilmL.A.

Locally, 22 percent of all productions filmed in the city of Santa Clarita have qualified for the state’s tax credit, said a spokesman for the city. And 26 percent of the TV shows that qualified are actually based in Santa Clarita – many of them for multiple seasons.

A 2009 study by Ernst & Young found that for every film incentive dollar granted, the state gained a return of $1.13, reported the LAEDC.

California gets more per dollar back because it has such a large industry. Production teams can find their suppliers here, buy equipment here and more, Cooper said. Companies and their employees are located here, as well — and here is where they spend their money when filming in-state.

“Another state doesn’t have all the support there; it needs to be imported. Incentives elsewhere have much less of a tax impact (return) than it does here,” Cooper said.

Locally, the city refunded just under $230,000 to productions filming locally since the film incentive program began in 2009.

The city, however, estimates that the incentive has generated $32.5 million in spending at local businesses from the productions that participated in the incentive program.

The city has focused on attracting TV productions because they bring better long-term benefits for the economy, said Jason Crawford, marketing and economic development manager for the city. They bring more film days, employ local people and spend more money in the community over the life of a series.

“The film industry is vitally important to Santa Clarita,” he said. “Filming remains one of the city’s target industries as it generates millions of dollars in spending each year at local businesses and employs thousands of Santa Clarita residents.”

It’s surprising the number of local companies that are involved in entertainment and media in the area, and the number of residents who live here that are tied to the industry, Hedman said.

Sacramento has a problem identifying that it’s a major industry and source of revenue. The attitude about most industries in the state is that “it’s California — businesses will stay here because they want to be here,” Hedman said.

As for the film business, specifically, the problem is that state leaders think the industry has always been here, and therefore, it will always remain here, Cooper said. “But, it’s wrong to look at just production. It’s not a self-contained thing; it’s a whole ecosystem.”



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