Dollar's fall keeps production in L.A., but worries persist.

The falling dollar has proven a boon to the region's efforts to stem runaway production, but industry officials cautioned that the pendulum could swing at any time and that programs are still needed to keep location shooting local.

Overall, motion picture and television location filming in Los Angeles was up 19.2 percent in 2004 over the year earlier, according to the Entertainment Industry Development Corp., and Steve MacDonald, its president, estimated that the declining dollar caused production days in Canada to fall by 30 percent to 40 percent last year.

The dollar has been on a yearlong decline and hit its low point against the Canadian currency in November, reaching 1.18 Canadian dollars. The Canadian government responded by boosting its tax incentives to lure American production back over the border.

With runaway production dwindling, the provinces have gotten into their own bidding war, offering ever-higher subsidies on top of a federal subsidy to attract production.

In late December, Ontario's provincial government announced it would boost its tax credit to foreign productions shot there from 11 percent to 18 percent of on-site production costs. A week later, Quebec announced that its tax credit would go from 11 percent to 20 percent.

All of which prompted MacDonald to call for both the state and federal governments to increase their incentives.

"You can't rest an economic development program on the exchange rate," he said. "When the dollar goes back up, you'll see a natural migration of production back to Canada. We need to come up with a strategy that will work when the dollar strengthens."

In October, Congress passed legislation that offers tax breaks for American films and television shows shot in the U.S. and a depreciation schedule beneficial to producers.

"On the federal level, we were successful in getting tax relief on how producers can accelerate depreciation, which gives a benefit to their tax liability," said Bryan Unger, Western executive director of the Directors Guild of America, which lobbied for years to get the tax credit. "Coupled with state incentives.., we think that is the best way to combat runaway production."

The Jumpstart Our Business Strength, or JOBS Act, includes a tax break for films and television shows of up to $13 million if 75 percent or more of the wage costs of production go to services inside the U.S., and another $5 million if productions are shot in low-income regions.

Domestic challenges

Advocates for local production have not been able to rest on gains that come from the exchange rate.

Competition for filming has increased on the domestic front at the same time the dollar as been slipping.

Thirty-one states now either plan to introduce or have already passed some form of tax incentive in an increasingly intense competition to attract production. California, with its movie star governor, has yet to respond with its own legislation to keep filming at home.

"The standard response you get from people in Sacramento is, we're broke, we have no money," said Jack Kyser, senior vice president and chief economist at the Los Angeles County Economic Development Corp. "And the perception is that it's a wealthy industry and that everyone makes $20 million. But you have to look at which of these (state tax) incentives would generate new state and local taxes. Any program would more than pay for itself."

At the local level, Los Angeles approved a business tax reform proposal in October that made more productions shot here eligible for a tax break.

The measure benefits small productions, so it could be particularly effective in keeping the production of commercials here.

Commercial shoots, which generally operate on tighter budgets, are especially prone to the lure of low-cost alternative locations.

"We're a very cost-sensitive industry with a very fast turnaround time, so our members shoot globally, and frankly we'll continue to go where it's most cost effective to serve our clients and do our productions," said Steve Caplan, executive vice president of the Association of Independent Commercial Producers. "It's important that our cities and state have a long-term strategy, regardless of the exchange rate, because this tide could turn."

Dollar Developments

Currency fluctuations are credited in part with
keeping filming close to home.

Total L.A. Location Production, 2004: 52,707 days
Increase Over Prior Year: 19.2%

Films in Production, Jan. 25-31
U.S.: 58    Abroad: 19

Films in Production, Jan. 20-27, 2004
U.S.: 49    Abroad: 18

Sources: Entertainment Industry Development Corp., Hollywood Reporter