Entertainment

How Subsidies For Hollywood Became Sexy

After years of failed attempts to pass legislation offering tax incentives to the film and television industry, more California lawmakers have joined efforts to help Hollywood. “This is a changed landscape because we made this an issue,” Los Angeles Mayor Eric Garcetti said.

Then-Councilman Eric Garcetti at a 2012 event for the Academy of Motion Picture Arts and Sciences. Valerie Macon / Getty

LOS ANGELES — A bill expanding California’s tax incentives for film and television production passed unanimously in the state Assembly on Wednesday, a sign of how Hollywood subsidies have come into vogue after years of being viewed with skepticism.

Lawmakers spoke loftily about the state and one of its most visible exports during discussion of the bill. “There has been no greater ambassador for California than its artistic output,” said co-sponsor Mike Gatto, a Burbank Democrat. “This is probably the most important measure we will hear this year,” said Ian Calderon, a Democrat from Whittier. “Let me just remind members that the most effective and efficient way to demonstrate support or not support for a piece of legislation is by pressing the button. At this rate, we’ll be leaving at 7 p.m.,” said Manuel Perez, a Coachella Democrat.

The bill, AB1839, passed 69-0 and will head next to the California Senate. It increases the kind of projects eligible to receive tax credits, but still to be seen is whether it will increase the state’s annual $100 million incentive cap. Several states currently offer more, including New York, which offers $420 million a year.

“I’m confident we will really expand the $100 million tax credits to at least double or triple or quadruple,” Los Angeles Mayor Eric Garcetti told BuzzFeed last week in his downtown office. “I think we need to be competitive with New York.”

Supporters of incentives have reason to be optimistic. Not only did the bill receive bipartisan support from at least one chamber of California’s legislature, but the mayors of the state’s 10 biggest cities are on board. In a letter to the bill’s sponsors, Garcetti and mayors from San Jose to San Diego cited the “widespread and geographic support” as evidence of a “realization that California is losing tens of thousands of middle class jobs and significant tax revenue.”

“You know, people were wondering whether we could hang on to $100 million a year ago,” Garcetti said. “This is a changed landscape because we made this an issue.”

The mayors of the 10 largest cities in California sent a letter in support of AB1839 to the bill’s co-sponsors.

It’s a long way from the opposition tax credits have faced in years past. Once polarizing, they were seen as something that only benefitted Southern California and wealthy Hollywood executives and movie stars.

Since the 2001-2002 legislative session, at least eight failed attempts were made to institute them, according to the California Assembly Committees on Revenue and Taxation. Former Gov. Arnold Schwarzenegger told the Associated Press in 2008 he’d been trying for four years to convince lawmakers to pass incentives. Schwarzenegger signed the state’s first program in 2009.

Actor and director Jon Favreau, who’s been an advocate for incentives since Schwarzenegger’s administration, said California wouldn’t need to match other states or countries dollar-for-dollar to remain competitive.

“You just have to make it financially responsible for a company that’s financing a film to keep it here,” he said. “We would love to work here and often sacrifice a great deal to do so.”

Favreau said he’s filming the upcoming The Jungle Book in California and made efforts to keep filming of The Avengers and the Iron Man films in the state as well, although those films were shot in multiple locations, including California.

“When you direct a film, you rely on your crew,” he said. “You get a better end product” when the crew doesn’t have to travel and spend extended periods of time away from their family. “I see the toll it takes to have people traveling.”

Actor and executive producer Jon Favreau arrives at the premiere of Iron Man 3 at the El Capitan Theatre in Hollywood in 2013. Kevin Winter / Getty Images

Assemblyman Gatto, one of AB1839’s co-sponsors, said lawmakers outside Southern California have come around to supporting incentives because of how dependent the state is on income tax. Taxes from jobs in the entertainment industry in Los Angeles help pay for schools in Eureka, he said. The bill also includes a 5% increase in incentives for filming that occurs outside the Los Angeles area. “I think it shows that the film industry isn’t just a regional thing,” he said.

Opponents of subsidies characterize them as “a race to the bottom,” arguing spending more to keep filming in California isn’t a long-term solution and studios will use increased incentives in one state as leverage to squeeze more out of other states.

“I’m not a fan of tax credits in general,” state Sen. Lois Wolk said in a statement. “In fact, I’m a real skeptic of all of them and have done everything possible to limit their size and duration and to build in as much accountability as possible.” Wolk, a Northern California Democrat, spoke out against the incentives last year.

Daniel Lay, who writes about the visual effects industry and has organized protests against incentives, said he thinks the swell of support is a combination of it being an election year and lobbying efforts. His group is pushing for tariffs to be imposed on films that receive foreign subsidies.

State and local leaders are limited in what they can do about tariffs and international trade, lawmakers said, but the bill could be enough to make studios think twice before filming in places like Georgia or Louisiana or British Columbia.

“Money flows to where things are cheapest,” Garcetti said. “The nice thing about California is we don’t have to be the cheapest because we still have the best crews and we can contain costs. We have the infrastructure. We have the people.”

The bill will receive a dollar amount following the release of the state’s budget on June 15, Gatto said. If approved by the Senate, any changes, including a new annual cap, must be voted on again by the Assembly before heading to Gov. Jerry Brown’s desk. Brown has expressed hesitation over spending more on incentives. “I will take anything more than what we already have,” Gatto said.

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