California tries to lasso 'runaway' productions

In the tumultuous days of California's 2003 gubernatorial recall election, Arnold Schwarzenegger cashed in on his Hollywood past by morphing his famous film lines into campaign slogans. From "I'll be back," to "I'm going to terminate Gray Davis," Mr. Schwarzenegger carried his film persona from the silver screen and on to the political stump. It worked.

Now, one year into his term as governor, Schwarzenegger is harnessing his Hollywood past to try and stanch one of the state's biggest economic losses: billions of disappearing entertainment dollars as California production companies take their business elsewhere.

Capitalizing on his industry insider knowledge, the governor has signed laws to ease red tape in filming, fought Internet video piracy, appointed proven Hollywood veterans to the state film commission, and mandated film industry liaisons in all state agencies and departments.

"Schwarzenegger has taken a whole bunch of giant steps in tackling this problem," says Steve McDonald, head of the Entertainment Industry Development Corporation, which handles film permitting for Los Angeles. "He's bringing in top people who really understand what the problems have been."

He has also championed key federal legislation, including a provision in the American Jobs Creation Act proposing that producers could immediately deduct up to $15 million of costs incurred for domestic film and television production.

The stakes are higher for California than any other state. The $34 billion state film industry directly employs about 250,000 in southern California alone. It has lost an estimated $10 billion per year as major film studios and independent producers have taken their films far afield as New York, Louisiana, Canada, and Australia to reduce costs and avoid California's stifling regulations.

"What we have experienced over the past few years is a huge exodus of production, which is going outside the state and the country," said Schwarzenegger. "And because of that we have been losing jobs."

To reverse that slide, Schwarzenegger is taking several tacks. In April, he appointed five high-profile industry veterans - including Danny DeVito, Clint Eastwood, and producer Lily Zanuck - to the California Film Commission. The body markets the state's scenic locales and facilitates film permits. The well-known faces are helping to bring key moviemakers back.

"Arnold has put some very high-profile people in key roles who understand the business as creative decisionmakers," says Michael Kelly of the California Film Commission. "For us to have access to them - and for them to be able to call us and say, 'Are you aware of this problem?' - has been very helpful."

For instance, Mr. DeVito was able to assist his friend and producer, Irwin Winkler, avoid excess local fees by finding state property made available by a two-year-old California law granting filmmakers access to unused surplus state property.

"Because so much money is involved in motion pictures, when directors become aware of a huge savings like this it can make all the difference," says Mr. Kelly.

In September, Schwarzenegger signed an executive order requesting all state commissions, agencies, and boards to create 24-hour liaisons accessible to filmmakers to help clear the way for films to be shot within the state.

He was also instrumental in getting federal legislation - approved by the House Friday, now in the Senate - to allow tax deductions up to $15 million for producers keeping their productions in the US, a huge benefit to California filmmakers.

Schwarzenegger has also tried to attack Internet piracy as an illegal drain on movie, music, and video games. He signed legislation last month to require anyone who sends more than 10 copies of a film, record, or game over the Internet to include their name and e-mail address or face misdemeanor charges.

The governor has also backed a pilot program within the state university system to block students from illegal downloads.

He has also signed several bills reducing the number of permits required for the use of special effects and explosive pyrotechnics, and easing background checks for the use of dummy guns in production.

"All the things Governor Schwarzenegger is doing are helping," says Mr. McDonald, of L.A.'s Entertainment Industry Development Corporation. "The idea is to keep dollars and jobs in California."

Although Schwarzenegger has put his name and rhetoric behind such moves, some critics say he has not done enough to put real substance into his proposals, such as tax breaks.

"For this to have any lasting effect, he's going to have to offer monetary incentives to these filmmakers that really affect their bottom line," says Jack Kyser, director of the Los Angeles Economic Development Corporation. He says Louisiana, New Mexico, New York, Illinois, and Pennsylvania are offering major tax breaks and aggressively pursuing film companies to shoot in their states.

The fate of such ideas may rest with California's current budget situation as lawmakers continue to look to trim every state function to make up revenue gaps.

A previous idea called Film California First - which reimbursed companies for costs of safety personnel required on shoots - lasted three years under former Governor Davis, but has not yet been refunded. The newly appointed California Film Commission is currently examining a host of ways to do the same thing.

"We are studying carefully every possible way to help to increase film production in California, says director Amy Lemisch, a longtime producer picked by Schwarzenegger to head the commission. "We have to find ways to be effective while at the same time be responsible as we can to the state with fiscal issues."