Mixed Reviews for TV, Film Tax Break

Gov. Gray Davis told Hollywood labor leaders Friday he believes legislators will pass his proposed tax credit aimed at stemming runaway film and TV production, although Hollywood union officials and state legislators acknowledged several obstacles remain.

Chief among them will be convincing legislators outside Southern California that the tax credits will benefit the entire state, not just a Los Angeles industry, and that the economic boost will outweigh lost tax revenues at a time when the state faces a severe financial crunch.

Although several Los Angeles lawmakers embraced the proposal Friday, state Senate President Pro Tem John Burton (D-San Francisco), was taken aback by it and said he will oppose it.

“Things like this will be on the back burner until we see where we are,” Burton said. “At a time when the governor proposes to cut [state aid] to poor people, it sort of leaves me speechless.”

Senate Budget Committee Chairman Steve Peace (D-El Cajon), who owns a production company, also is skeptical. Advocating an overhaul of the tax system rather than granting specific industries tax breaks, Peace said: “Don’t pick an industry; do it across the board.”

But union officials, who have pushed for years for some kind of state incentives to blunt the advantages of low-cost locations such as Canada, said they believe the current statewide economic slump and the entertainment industry slowdown will help overcome those concerns.

“When times are good, it’s a harder sell. But now you have people who are unemployed,” said Thomas Short, president of the International Alliance of Theatrical Stage Employees, which represents about 50,000 Los Angeles entertainment workers such as grips, lighting technicians, cinematographers and costume designers.

Hollywood’s unions have pushed for years for state and federal incentives to fight runaway production. Canada’s weak dollar, combined with government incentives, make shooting there about 25% cheaper.

Roughly one in four U.S.-developed productions shoot in foreign countries, mostly Canada.

Davis unveiled his proposal for a 15% wage-based tax credit for the first $25,000 earned by workers on lower budget projects during a meeting of entertainment union officers in Burbank.

Davis said he has not had specific discussions about the proposal with legislative leaders, but said this is the first time he has joined the push for tax credits.

“I am weighing in this time, fully in support of it this time. And I believe that will make the difference,” Davis said.

Davis’ support of the tax credit comes as he faces reelection, and is working to shore up support in the entertainment industry and among unions that represent film workers, particularly given that one of his Republican challengers, former Los Angeles Mayor Richard Riordan, has significant support within the industry.

Though Hollywood unions believe the proposal is their best chance yet of enacting an incentive, they said it may be hard given the state budget problems.

One union source at the meeting put the odds of enacting anything this year at “50-50.” Short predicted the proposal would win statewide labor support, adding that Miguel Contreras, the powerful head of the Los Angeles County Federation of Labor, AFL-CIO, attended Friday’s meeting.

One proposal two years ago cleared the Assembly, but stalled in the Senate and never got a push from Davis. That plan was broader, prompting criticisms it could end up as a major giveaway for big studios.

The plan announced Friday would be narrower, and likely include projects with budgets under $10 million such as TV movies, cable shows and low-budget films. Those productions are the ones that flee to cheaper locales most often.

As a result, it is likely to have little, if any, effect on the bottom line of today’s giant entertainment companies.

The likely cap on productions is less than 20% of the average studio film budget.

Indeed, the total amount of money producers are expected to save statewide in the first year--$50 million--is less than the average budget of a single Hollywood film, now at about $55 million.

Still, labor leaders consider Davis’ support a major symbolic victory because, they believe, it recognizes the severity of the issue.

“Everyone hoped that you might see a leveling off. In fact, you’ve seen an acceleration. This problem is not getting better, it’s getting worse,” said Jay Roth, executive director of the Directors Guild of America.

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Times staff writer Dan Morain in Sacramento contributed to this report.