Quarter of All Film, TV Now Shot Overseas By JACQUELINE FOX Staff Reporter The impact of runaway film production on the Valley economy and the region as a whole hit a high mark in 2001, primarily because production houses stockpiled projects in anticipation of Writers and Screen Actors guild strikes that never materialized. According to a recent UCLA Anderson Quarterly Forecast on Entertainment and the Los Angeles Economy, roughly 18,000 entertainment-related jobs were slashed last year, compared to 2,000 in each of the preceding three years. But the ongoing exodus of film and TV projects to, among other countries, Canada, where tax subsidies can save filmmakers as much as 25 percent of their production costs, is not just a jobs issue. It’s now estimated that roughly one in four U.S.-developed projects are shot out of the country each year. Valley business owners representing sectors of the economy even remotely linked to TV and film production are suffering and many are aligning themselves with local business groups to push for federal subsidies they believe will help level the playing field. “The trickledown effect of runaway production is having a devastating impact, not just on our business, but all businesses in the Valley and the region,” said Scott Murphy, president and CEO of Northridge-based Ameritel Inc., which provides telecommunications sales and service to businesses in Southern California, including several small production companies. Murphy estimates he’s lost 20 percent of his business since last spring, has laid off 10 members of his staff some who’ve worked for him for 15 years or more and sales slid from $6 million in 2000 to just under $5 million in 2001. Murphy said, “Every time a studio sets up someplace like Canada or Australia, that impacts all of us, from restaurants to dry cleaners. It’s a problem for every business, regardless of size and product.” Murphy’s story, along with testimonials from industry professionals, actors, Valley business leaders and even Mayor James Hahn, is featured in a new 10-minute video on runaway production co-produced by the Valley Industry and Commerce Association and two unemployed Valley filmmakers who happen to be Murphy’s sons, David and Jeff. “The purpose of the film,” said Greg Lippe, chairman of VICA’s subcommittee on runaway production, “is to put a human face on the issue. It’s not the big studios that are suffering. A large percentage of the businesses affected by cuts in production are small companies, and many of those companies are in the Valley.” Lippe and 15 other representatives of the Valley business community recently took copies of the video, “Runaway Films, Keep Them In America,” to Washington, D.C. where they lobbied for passage of a bill calling for a federal wage-based tax credit for U.S. film projects. Senate Bill 1278, first introduced by U.S. Sen. Blanch Lincoln, D-Ark., calls for a 25-percent tax credit on all qualified wages for TV and feature film productions with budgets of between $200,000 and $10 million that are shot in the U.S. The credit would increase to 35 percent if the project is filmed in a low-income community. Lippe said chances of the bill passing this year are about “50-50.” “Supporters are short of the votes they need to get the bill through,” Lippe said. “So our job now is to go there to push for the support we need.” Christopher Thornberg, senior economist at UCLA who prepared the industry forecast, however, said the high number of entertainment-related job cuts in 2001 was a fluke and employment figures would likely level off this year. However, he also said that, while the film industry remains strong, it is shifting. Thornberg said high-end management and design jobs are slowly replacing the countless low- to medium-budget film and TV productions that had been the mainstay of many Valley-based companies until it became cheaper to do that portion of the work out of the country. “Some movies are being made here, but it’s never going to be what it was five years ago,” said Thornberg. “Paying (production workers) lower wages is the only way to keep the bulk of the filming here, but that’s not going to happen. Whenever a production house can break up the production costs into parcels and complete that part of the project where it’s cheaper to do so, they are going to go for it.” Thornberg also suggested tax credits were a bad idea because they tend to work against natural market shifts. “I always have a problem with any kind of legislation that sets out to do something that the market wouldn’t do on its own,” said Thornberg. “This goes for anything from steel to textiles to the motion picture industry. If a production is leaving, it’s doing so for a very good reason. This is the basis of trade.” Thornberg said the local economy actually stands to benefit from the changes in the industry because, as labor-intensive jobs move to cheaper locations, they are replaced by higher-end design and management jobs here at home that are more profitable in the long run. “The movie industry is not in a slump,” said Thornberg. “Production lots are running at capacity and the reason is production here in Los Angeles is shifting toward the part of the cycle that has to be close to the design process.” And, officials with a state program introduced last year to stem runaway production say they are starting to make inroads. Gov. Gray Davis’ three-year $45 million Film California First program (FCF) offers production companies rebates for filming on public property or using public employees, and reimburses for location, film permit and public equipment fees. Karen Constine, director of the California Film Commission, which administers the FCF program, said more than $7 million was requested by producers of about 1,000 small projects since last January. Constine said the commission has also seen a 12-percent increase in days of production on state property and that the number of actual features filmed on state properties has gone up 25 percent since the program was introduced. She said Los Angeles-based Rising Star Entertainment, for example, tapped the program to shoot its $1 million project, “The Long Ride Home,” in Santa Clarita instead of Canada, saving about 150 jobs locally. “They were ready to leave until they learned about the FCF program,” said Constine. The program does not include wage reimbursement for police officers hired as set security, however. Constine said a proposal for including those costs is part of Gov. Gray Davis’ 2003 budget package. State lawmakers will soon weigh in on a proposal for the state’s own production subsidies. Also included in the governor’s proposed budget is a 15-percent wage-based tax credit for production companies that opt to film their projects within California’s borders.