Despite Tax Breaks, Hollywood Film Production Dips

Is the film tax credit blowing up in our faces?
Is the film tax credit blowing up in our faces?

In 2014 Gov. Jerry Brown signed off on a $1.6 billion, five-year tax credit that benefits the studio titans of Hollywood. The idea was that the extra cash would keep film and television production in the Golden State.

The nonpartisan Legislative Analyst's Office took a look at such tax credits, however, and found that they simply entered California into a game in which media moguls play states against one another in a perpetual hunt for the best tax breaks. The California tax credit was billed as self-sustaining because the extra film and television production would generate economic activity and jobs. But according to the LAO: "The state government receives far less revenue back than it spends on the tax credit."

A new report from FilmLA, the nonprofit charged with issuing film permits in L.A. County, found that on-location feature film production declined more than 36 percent in the first quarter of 2017, "to levels not seen since 2012." On-location TV production was more or less flat — down 0.6 percent compared with the previous quarter — and commercial ad production dipped 2.6 percent.

But Hollywood production is cyclical, and according to FilmLA, the recent dip might have been affected by "the local unavailability of soundstages." In fact, production had reached a seven-year high in 2016.

"I don't think this is something to cause us alarm," says FilmLA president Paul Audley. "We're still benefiting greatly from the current tax-credit program."

FilmLA also found that about one in five "shoot days" in L.A. in the first quarter of 2017 was a beneficiary of the tax credit; about 30 percent of TV shoot days were tax-credit productions.

Still, the data calls into question the wisdom of offering a tax credit to an industry that doesn't come close to reflecting the demographics of a county that's about three-fourths minority. "If there are tax incentives, they should be tied to diversity in front of camera and behind the camera," says UCLA sociologist Darnell Hunt, author of the university's annual Hollywood Diversity Report.

Hunt also says he's in favor of well-executed tax breaks: "Los Angeles is a tough place to beat for filming if tax incentives are done strategically."

Valley Assemblyman Raul Bocanegra, who co-authored the tax-incentive legislation (AB 1839), points out that the FilmLA figures don't reflect "successes ... in other parts of the state."

"Last month, the California Film Commission (CFC) announced that almost half of the recipients of the TV productions receiving a credit will be shot at least partially outside the Los Angeles 30-mile zone," he said via email. "And, according to the CFC, 4,800 below-the-line, steady middle-class jobs will be created from the projects selected this year. AB 1839 is doing just what it intended: increasing employment and filming statewide, not only in Los Angeles."


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