Hollywood wary of production exodus
Advertiser Staff and News Services
Toronto Mayor Mel Lastman stood near the spot where Canada's largest film and TV production lot will be built and fired a financial shot across the border.
Associated Press
"We're Hollywood North. There's no two ways about it," he told reporters.
Toronto Mayor Mel Lastman, in a film director's chair, and Michael Grade, chairman of Pinewood Shepperton Studios, home to the Superman and James Bond series of films, announce plans for Canada's largest film and television production facility on Toronto's waterfront.
That's exactly what labor unions, actors and small business in the United States fear. Advocacy groups and some elected officials have said the same globalization trend that has sent steel, lumber and textile jobs overseas will hurt the motion picture industry unless swift action is taken.
The exodus of film and TV production to countries outside the United States is referred to as "runaway production," a phrase first used in the 1980s to describe the flight of film and TV jobs from California to North Carolina, Florida and other states that offered tax incentives and cheaper labor. In the 1990s, countries such as Australia, Britain and, most notably, Canada, offered tax breaks and encouraged the training of local crews and the construction of sound stages and backlots.
The trend has sent billions of dollars worth of production and thousands of jobs outside the United States, and stirred passions on both sides of the border.
Labor and industry groups have backed an effort by California Gov. Gray Davis to enact wage-based tax credits to keep production in the state. Congress is considering similar national tax credits.
Hawai'i's film industry also is seeking to combat Canada's incentives by pushing for state legislation that would establish a 22 percent tax credit against film production labor costs. The bill was voted on and passed out of the state House Economic Development & Commerce Committee on Thursday. It will head to the House Finance Committee for a hearing.
A spokeswoman for the Finance Committee said a hearing date had not yet been scheduled.
Film and TV production in Hawai'i contributed at least $136 million to the economy in 2000 — an industry record that could grow with more tax credits helping offset some of the higher costs for filming here.
The Hawai'i bill, based on the Canadian model, would expand an existing state rebate of up to 4 percent on total production expenditures and up to 7.25 percent on hotel accommodations.
Chris Lee of Waialua, a film producer and former TriStar Pictures and Columbia Pictures president, said in written testimony supporting the bill that Hawai'i lost out on a Warner Brothers film he is shooting starring Antonio Banderas and Lucy Liu. The project had to be moved from Thailand after the Sept. 11 attack, and the studio considered Hawai'i, Toronto and Vancouver, Lee said.
"Hawai'i was the first choice creatively. ... But, financially, the Islands simply couldn't compete with Canada's favorable exchange rate and the various tax credits and incentives available in Vancouver," Lee wrote. "I can't say we'll rival the billions that Canada has siphoned off of Hollywood, but I do believe we should be able to score hundreds of millions of dollars on a consistent and annual basis."
Canada has offered tax credits since 1997. Combined with credits offered by some provinces, the weaker Canadian dollar and lower wages, that can shave 25 percent or more off the cost of production.
Nearly 26 percent of theatrical films released in 2000 and filmed in North America were shot in Canada, up from 13 percent in 1999, according to a report prepared last year by the Center for Entertainment Industry Data and Research.
A report for the Screen Actors Guild and the Directors Guild of America in 1999 found that filming in other countries cost the U.S. economy $2.8 billion. The report said the ripple effect, including money that would've been spent at restaurants, hotels and other businesses, plus the tax revenue that would've generated, brought the cost of lost production to $10.3 billion.
To complicate matters, a six-month strike in 2000 by U.S. commercial actors brought filming of TV commercials to a halt. Much of that production went to Canada, Romania, Czechoslovakia and other countries and has not returned.
In 2001, the threat of strikes by actors and writers forced major studios to accelerate production of feature films. The strikes didn't occur, but the subsequent lull put a lot of people temporarily out of work.
"We had to give up our studio," said Jennifer McManus, co-owner of Sticks and Stones Studio, a special effects makeup and costume design shop in North Hollywood.
Actually, Los Angeles and other major production areas have not suffered as much as other states that developed thriving production businesses just as the Canadian tax credits took hold. "It's a grim problem," said Jan Lockwood of the Michigan Film Office. "Several stages have closed down. Businesses have left the state."
Lockwood said producers of the upcoming Warner Bros. film "Dreamcatcher" scouted locations in Michigan several times last summer before deciding to shoot in British Columbia. "Our budgets were $8 million apart based on the Canadian dollar and Canadian incentives," she said, and estimated the production would've spent $25 million or more to hire American crews and actors.
In Los Angeles, runaway production's impact is harder to quantify partly because most crew members are independent contractors rather than studio employees.
In some respects, it appears to be having little effect. Motion picture and TV employment in Los Angeles has risen from 76,300 in 1992 to about 134,900 in 2001, according to the Los Angeles County Economic Development Corp. That number is expected to rise to 143,000 this year.
"The numbers show that one of the fastest-growing industries in America, in fact the world, is the entertainment business," said Canadian Consul General Colin Robertson at the Creative Coalition forum. "There is more employment than there ever has been — not only in Canada, but here in Los Angeles."
U.S. film industry advocates said the government must at least match the tax incentives offered by other countries. "The pie is getting bigger, but Canada's piece of the pie is getting bigger disproportionally," said Kathy Garmezy, director of government affairs for the Directors Guild of America.
