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Proposed entertainment tax credits face a not-so-Hollywood ending

July 21, 2007|Richard Verrier and Marc Lifsher | Times Staff Writers

Hollywood's hopes for a tax break rose and fell in the space of about 12 hours Friday as California lawmakers rushed to pass a belated state budget.

At 4 a.m., the Assembly passed a $900-million-plus package of tax cuts that included more than $145 million over three years for film, television and commercial producers in an effort to stem so-called runaway production.

The tax credit bill, however, ran into immediate trouble in the Senate, where President Pro Tem Don Perata (D-Oakland) declared it "DOA," dead on arrival.

He indicated that he would refuse to take up the tax credit bill before the Legislature left for summer recess, saying the loss of revenue "would decimate public education, public health, public safety."

That was unwelcome news to union leaders who have been lobbying for several years for incentives to keep shows from leaving California for cheaper locales.

"It's been frustrating, no doubt about it," said Steve Dayan, business agent for Local 399 of the Teamsters, which represent casting directors, location managers and truck drivers. "The reality is, if we're going to retain this industry and the union jobs that go with it, we need to be competitive with other states."

Over the last decade, the state has lost thousands of jobs as producers flocked to other countries and states that offer generous film incentives that aren't available in California. States such as New Mexico have enjoyed growing success in luring not only film shoots but also the support companies that form the bedrock of Los Angeles' entertainment economy.

Sony Pictures Imageworks Inc., for example, is moving a major chunk of its visual effects business -- and more than 100 jobs -- from Culver City to Albuquerque.

The loss of entertainment jobs in Southern California has been a hot-button issue for Hollywood's unions, which have pushed for statewide incentives, and for Gov. Arnold Schwarzenegger, a movie actor who has vowed to help keep the entertainment industry in the state.

The proposed tax breaks would have provided a 12% to 15% tax credit on qualified film, TV and commercial production expenses for projects shot in California, with a $3-million maximum for film production companies. .

But the measure faced stiff opposition from both sides of the aisle.

Perata said he would not rule out the possibility of passing future legislation to boost movie industry employment. "All these may be really good ideas, but they have to be done in some context," he said.

"The worst place to do it is in one house literally in the middle of the night."

The outcome recalls a similar scenario two years ago, when a proposal providing as much as $100 million in annual film industry tax breaks died when Republicans balked, viewing it as a giveaway to Hollywood.

Those arguments anger unions officials and industry backers who argue that runaway production hurts the entire Southern California economy.

"Every California resident should care about entertainment industry jobs," said Pamm Fair, deputy national executive director of the Screen Actors Guild.

"We are workers who pay income tax and spend wages in this state and have good jobs with benefits. If productions continue to leave California, thousands of jobs leave too."

Leery of previous political battles, studio executives didn't lobby heavily this time for the proposed tax breaks and were reticent on the subject.

Some executives were reluctant to support the proposed incentives, arguing they were too paltry to make a difference. New Mexico, for example, offers a combined 25% rebate on production and post-production expenses. "This is not our fight," one studio insider said.

richard.verrier@latimes.com

marc.lifsher@latimes.com

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Times staff writer Patrick McGreevy contributed to this report.

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