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Shooting Blanks : Entertainment: Culver City claims GMT is not a traditional producing studio, and has changed its tax designation. The company disagrees, may say 'That's a wrap!' to the city.

November 27, 1994|MARY MOORE | SPECIAL TO THE TIMES

A commercial production studio is claiming that Culver City--"The Heart of Screenland"--has no heart when it comes to collecting revenue.

GMT Studios, where commercials, music videos and other footage are shot, says its reclassification on city tax rolls is costing its clients money--and may force it to leave town.

For 11 years, Culver City had classified GMT as a studio. Last year, however, that designation was changed to "commercial rental property." That means that filming at GMT is considered by the city to be an on-location shoot, similar to shooting on a public street.

As a result, producers who film at GMT are supposed to pay the city $230 a day or $1,500 a year in fees, in addition to the average $700 a day these producers pay to rent the company's studio space.

The city says it gave GMT a new tax designation after it discovered the company's activities were not those of a traditional motion-picture studio. Unlike a traditional studio, the city says, GMT makes its money mainly by renting out its facilities rather than by producing or co-producing its own projects.

GMT disagrees--and says it is already being deserted by clients concerned about the prospect of paying the city production fees. Alan Hauge, GMT president, says the loss of income could prompt his company to relocate, contributing to a trend that has seen other film business depart California.

"Our business is down 25% already this year," Hauge said. "This is our livelihood, our future here."

Independent producer Robert Marcarelli, who has rented studio space from GMT for several projects, said he will not return to GMT if there is a question about whether he should pay the city to film there.

"It's not happening in other cities," Marcarelli said. "It's a highly competitive environment, and to levy a tax will not bode well for Culver City."

The dispute has prompted threats of lawsuits from both GMT and the city, which says it will not try to collect the disputed fees until the matter is resolved in court.

GMT was founded in Culver City in 1981, after it received permission from the city to convert a warehouse on Buckingham Parkway into a studio.

Today, GMT, which according to studio executives grosses more than $1 million a year, operates five stages and pumps more than $30,000 a year in various taxes into the city budget, according to company estimates.

GMT's main business is in short-term rentals of its studio space two or three days at a time--for television commercials, television shows, music videos and feature films. Among the footage shot at the studio: Natalie Cole's "Unforgettable" video and commercials for McDonald's, Coors, Miller Light and many other consumer products.

Although GMT executives say theirs is the day-to-day business of a traditional studio, the Culver City Treasurer's office views it differently.

"Technically, GMT is a location," said Alida Ostler, revenue supervisor for the city.

The city's definition of a studio is a business that operates on property designated by the city as a studio zone and that makes its money from gross receipts on motion picture production or on production costs, according to Sue McCabe, city treasurer.

Currently, McCabe says, only two such facilities in Culver City fit that description--Culver Studios and Sony Entertainment Pictures.

When Culver Studios and Sony do business with itinerant producers, the city says, their clients are not charged rental fees--unless the shooting takes place outside the studio lot. In that case, the itinerant producers are required to pay the full location fees.

In addition, city officials point out, Culver City has a handful of other converted warehouses where television and film production take place. All, like GMT, are classified as commercial property rentals and their clients pay the city's fees, said City Atty. Norm Herring.

Hauge, however, argues that other warehouse studios generally rent space for long-term filming projects, so the city's fees--$230 a day or $1,500 a year--are a small fraction of the overall cost. Nor do the fees make much of a dent in the usually long-term projects undertaken by clients of Sony and Culver Studios, where the budgets for movies run upward of $30 million, he said.

"If (the city) said they wanted to charge us a fee that was equal in ratio to the others, that would be different," Hauge said.

GMT executives complain they have been denied their right under Culver City's municipal code to meet with city officials about the tax classification change.

In fact, GMT says it didn't become aware of the reclassification until this year--a year after it happened.

At a City Council meeting last week, city officials once again denied GMT executives a hearing to resolve the matter. Herring cited the city's preparation of a lawsuit against GMT as the reason for the refusal.

But the council did agree to meet in a closed session Monday to discuss the GMT matter. There has been no word on the outcome of that meeting.

Hauge says Culver City will lose if the tax dispute forces his company to leave.

If GMT's space is converted back to a warehouse, he says, it would generate no more than $645 a year in business taxes.

"There's no guarantee that another business that would go in there wouldn't generate $50,000 a year in tax revenue," Ostler responded.

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