While there are rumblings that California may be about to propose significant anti-runaway incentives for feature, TV and commercial production (see Street Talk, p. 22), clearly the health of filming in Los Angeles has improved dramatically this past year.
According to the Entertainment Industry Development Corp. (EIDC), which oversees the Los Angeles City/County Film Office, film permits were issued to cover 6,703 spot location shooting days in Los Angeles during 2004. That’s a whopping 17.5 percent more than the 5,701 days tallied in ’03.
The ’04 performance represents the largest percentage increase since ’01 exceeded ’00 by 12 percent. Since then, spot lensing activity has been relatively flat with ’02 being one percent higher than ’01, and ’03 showing a 1.5 percent increase over ’02. Even the 12 percent jump in ’01 wasn’t all that impressive in light of the fact that ’00 was the year of the six-month actors’ strike against the advertising industry, which accelerated runaway production to foreign countries and caused spot filming in Los Angeles to tumble precipitously. Thus ’01 outperforming ’00 could hardly be deemed a major accomplishment.
But the surge in spot location lensing in Los Angeles this past year signals a substantive turnaround, spurred in part by such ad-boosting dynamics in ’04 as the Summer Olympics and the presidential election. Additionally a weaker dollar helped to offset financial incentives of shooting in foreign countries.
Los Angeles also experienced growth in other production categories, with shooting of feature films and TV shows on the rise. The latter went up nearly 27 percent. Across the board, location shoot days in Los Angeles totaled 52,707 in ’04, a 19-plus percent increase over filming activity in ’03.
However, EIDC president Steve MacDonald warned against the complacency that such robust numbers could foster. He noted that Los Angeles is facing competitive threats from cities and states throughout the U.S., as well as from foreign countries that are offering aggressive financial incentive programs to lure production away from Southern California. MacDonald stressed that Los Angeles must be vigilant when it comes to retaining and attracting filming-generated jobs and revenue.
ANTI-RUNAWAY PUSH
So while on the surface it might seem incongruous for California to feel the need to enact an incentives program in light of the growth reported in Los Angeles this past year, there’s strong belief within Gov. Schwarzenegger’s administration that such a measure is essential. The justification, according to anti-runaway legislation proponents, is that filming constitutes a major component of the state’s economic engine.
Yet whatever the outcome of lobbying efforts for a California anti-runaway package, Los Angeles has a filming incentive of its own in the offing with business tax reform slated to take effect in July ’05 (SHOOT, 11/26/04, p. 1). The restructuring of how the city business tax applies to the production community will benefit small and medium-sized production houses that lens in Los Angeles. Many of these shops are primarily involved in spotmaking.
The city’s business tax code is currently tied to a yearly per company cap of $4.2 million on gross production costs incurred when lensing in Los Angeles. A production house that meets or exceeds that cap has to pay an annual city business tax of $12,700. Thus, boutique houses often find themselves paying the same amount in business taxes as major motion picture and TV studios.
Starting in July, the reform initiative will attach that maximum tax to a higher cap: $12 million in annual gross production costs on Los Angeles shoots per individual company. This means that many commercial production houses will end up paying a considerably lower amount in business tax. The measure also should prove particularly beneficial for those entities that maintain more than one commercial production company. The collective business tax savings for two or more sister/satellite spot shops would translate to a fairly significant sum.
Furthermore, the reform will also raise the $50,000 gross production cost floor–under which production companies currently pay a minimum tax ($147)–to a much higher level, $2.5 million. This would again result in savings for smaller shops that shoot a limited number of jobs in Los Angeles.
Cities generally impose business taxes on companies–local or from other towns and states–that conduct business within city limits. This applies to different business sectors, not just entertainment and media production. Production houses based in other cities and states are all subject to the business tax if they annually lens a certain minimum dollar amount of production in Los Angeles. Thus the business tax reform will favorably impact most spot production companies that shoot in Los Angeles.
At the time that this measure passed in November ’04, Steve Caplan, executive VP of the Association of Independent Producers (AICP), assessed, “This reform benefits anyone who shoots in Los Angeles–not just Los Angeles-based companies. It provides and restores some equity to the city business tax.”
Caplan noted that the AICP board was committed to the reform measure from the very beginning because it “targeted our industry, providing tangible relief to the small and medium-sized production companies.” Collectively these small and medium-sized shops represent a major business sector. The AICP released a study earlier this year showing that its members account for nearly $5.5 billion in production-related expenditures annually. The study also found that 46 percent of all domestic commercial production took place in Southern California (SHOOT, 2/13/04, p. 1). Caplan said that amounts to about $2 billion in direct yearly impact on the Los Angeles economy.
EIDC Statistics
The location shoot day figures are compiled by the EIDC based on the number of filming permits it issues. EIDC statistics reflect on-location filming within the City of Los Angeles, the unincorporated areas of Los Angeles County, and the cities of West Hollywood, Diamond Bar and Southgate. These numbers do not include production that occurs in any of the 95 other Southland jurisdictions, nor do they take into account filming that happens only on soundstages.
(Editor’s note: See accompanying EIDC chart of Los Angeles spot location shoot days in ’04 as compared to ’03.)
