L.A. Mayor Offers Production Rebate; Governor's Plan Up Next

LOS ANGELES (The Hollywood Reporter) -- Los Angeles Mayor James Hahn unveiled a new motion-picture production incentive plan March 17 to complement the more wide-ranging package under consideration by California Gov. Arnold Schwarzenegger.

Schwarzenegger's anti-runaway proposal, to be announced in the coming weeks, is expected to offer a broad tax credit when at least 75% of a production is done in the state.

Hahn's proposal is a straight rebate, in which companies would get back 5% of their below-the-line costs on the first $12.5 million in production costs, provided that at least 75% of that work is done within the city of Los Angeles. If approved without revision by the City Council, the plan would disburse as much as $15 million in the first year, ideally beginning with the new fiscal year in July.

Together, incentives by Los Angeles and California would offer a one-two response to New York, which recently began offering a 10% tax credit in the state and a separate 5% credit in New York City.

Schwarzenegger's plan would set a ceiling on both the amount a particular production can apply toward the tax credit and the overall pool of money made available to pay for it. Those numbers, as well as the percentage of the tax credit's value, still are being formulated, but it is known that the credit will apply to all production costs, not just wages.

Details of Schwarzenegger's plan are still being finalized by Bonnie Reiss, a senior adviser to the governor; California Film Commission executive director Amy Lemisch; and a contingent of labor, studio and production representatives.

Organizers believe that whatever the costs are to taxpayers, the incentive will more than pay for itself by retaining both direct production and ancillary support business.

Hahn echoed that sentiment March 17, noting that entertainment represents a $30 billion slice of Southern California's economy and accounts for more than 200,000 jobs.

Hahn recently announced two production-friendly programs, including a Web-based location-management system and a marketing campaign to publicize feature film work that is being done in the city.

City lawmakers also have overhauled the business tax codes to give significant tax breaks to small- and medium-sized production companies as well as exempt locally based writers, actors and other artists from city taxes provided they earn no more than $300,000 annually.

Councilwoman Wendy Greuel, a leader in the business tax reform, welcomed Hahn's proposal but said it is too early to know whether it will get the necessary council support when budget proposals are made next month.

"A top priority for many of us is public safety, but we also realize that a strong entertainment industry in Los Angeles is critical, so it will be taken in that context," said Greuel, a former DreamWorks executive.