Governor Arnold Schwarzenegger has just called for a special session of the California legislature to figure out how to “stop the bleeding” because of the state’s miserable economic condition. And he reached out to keep Hollywood at home by ”providing tax incentives to new film and television production locating in California and production that has left the state, to return to the state.” How will this be received by the legislature? My bet is badly and perhaps unfairly. Especially since Schwarzenegger also proposed $4.4 billion in tax increases, including a temporary 1.5% sales tax increase, and a slew of budget cuts that slashes assistance to the needy while raising taxes on those least able to afford it. So legislators may see providing services for the poor as more important than providing tax incentives to moguls. But what else is there to do?

True, Hollywood players like Iron Man director Jon Favreau have been lobbying Schwarzenegger for incentives to stop runaway production. I first reported back on July 22nd that Marvel Studios intended to keep $600 million in productions in the Los Angeles area, especially if the state of California made it worth their while. Then Marvel announced that its next 4 movies as well as its corporate office space are moving to Raleigh Studios Manhattan Beach. Schwarzenegger pledged to Favreau and Marvel to reach across the aisle and push for tax break legislation in Sacramento.

But the heat really was on the Guvernator before that in the wake of Ugly Betty leaving Los Angeles for New York to take advantage of an Albany-passed package of fat rebates. That impacted hundreds of local crew members who lost their jobs plus thousands working for L.A.-based vendors that depended on Ugly Betty. That production bought lumber, paint, wallpaper, cabinets, other building materials, office products, fabric, art supplies, computer equipment, food, beverages, flowers, film, makeup & hair products, wigs, insurance, jewelry, clothing. It rented lighting equipment, sound equipment, video playback equipment, heavy machinery, office equipment, backdrops, costumes, furniture, scenery, props, soundstages, offices, parking facilities, cars, trucks, storage facilities, computers, camera equipment, grip equipment, editing equipment, drafting equipment, cell phones, computers, toilets, dumpsters, live plants, production trailers, tools, hardware, artwork, walkie talkies. It used the services of dry cleaners, printers, location companies, special effects companies, utilities, caterers, payroll services, restaurants, security, post production services, clearance houses, etc. When it shot on locations around Los Angeles, it paid for permits and use of property, police and fire department personnel, facility engineers, etc.

New York recently boosted the showbiz tax credits on below the line expenses for qualified productions to 30% (up from 10%), and Mayor Michael Bloomberg added an extra 5% if a project is made within New York City limits. But, unlike about 40 other states, California does not offer a tax credit program to keep Hollywood at home. So the number of film production days shot on location in Los Angeles has plummetted nearly 40% since 1997, according to FilmL.A. Inc, a non-profit group that handles film permits. What’s at stake? Well, a major production can pump tens of thousands of dollars a day into local economy what with hotel room stays, catering, services and permits. One figure cited is that 3 weeks of filming of Memoirs Of A Geisha generated more than $4 million for Sacramento and El Dorado counties.

Though his showbiz proposal contained no details, Schwarzenegger is known to favor tax credits of $100+ million to keep film and TV productions in California as part of an overall stimulus package. But Schwarzenegger’s plan also carried a possible bummer for Hollywood labor. To “reduce barriers to job creation and rendition”,  it called for ”providing flexiblity to employers regarding flex time schedules, meal and rest periods and overtime rules, to reduce the amount of costly litigation and encourage employers to keep jobs in-state.”

  1. ‘Iron Man’ Director Lobbies Guvernator To Try Yet Again For Hollywood Tax Breaks
  2. Unemployed ‘Ugly Betty’ Crew Blame Schwarzenegger For Show’s NY Move

Editor-in-Chief Nikki Finke - tip her here.