BILL ANALYSIS
SB 1131
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Date of Hearing: June 22, 2010
ASSEMBLY COMMITTEE ON ARTS, ENTERTAINMENT, SPORTS, TOURISM, AND
INTERNET MEDIA
Mike Davis, Chair
SB 1131 (Calderon) - As Amended: April 27, 2010
SENATE VOTE : 24-7
SUBJECT : Commercials: state funding prohibition
SUMMARY : This bill prohibits the state from expending any
state funds for the purpose of filming or producing commercials
or other filmed materials for commercial use outside of
California. Specifically, this bill : Provides that,
notwithstanding any other law, the state shall not expend any
state funds for the purpose of filming or producing commercials
or other filmed materials, for commercial use, outside of the
state.
EXISTING LAW :
1)Establishes a motion picture production tax credit and
requires the California Film Commission (CFC) to administer a
motion picture production tax credit allocation and
certification program. Described in more detail in Comment 2
below. (Revenue and Taxation Code, Sections 17053.85, et seq)
2)Contains the California Tourism Marketing Act (CTMA) and
creates the California Division of Tourism in the Business,
Transportation and Housing Agency (BTHA) to promote travel and
tourism to and within California. (Government Code Sections
13995, et seq.)
The CTMA further establishes the California Travel and Tourism
Commission (CTTC), a separate, independent, non-profit
corporation, and authorizes the CTTC to levy assessments on
specified businesses which benefit from travel and tourism
spending, according to referendum of the assessed businesses
for the purpose of producing a variety of marketing
activities, including: advertising; visitor publications; and
cooperative programs. (Government Code Section 13995.40.)
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3)Contains The California Marketing Act, the purpose of which
is, in part, to enable producers of this state, with the aid
of the state, to correlate more effectively the marketing of
their commodities with market demands for those commodities.
These marketing efforts are funded by the levying and
collection of assessments. (Food & Agriculture Code Sections
58601, et seq.)
4)Contains a public and private collaboration known as the "Buy
California Program." The purposes of the program are to
encourage consumer nutritional and food awareness and to
foster purchases of high-quality California agricultural
products. (Food & Agriculture Code Section 13995)
FISCAL EFFECT : None
COMMENTS :
1)Authors Stated Need for Legislation : According to information
provided by the author's office, California's motion picture
industry is an essential source of economic activity, tax
revenue, jobs and tourism for the state. Specifically, film,
television and commercial production activities contribute
more than $40 billion to California's economy and directly
employ almost 250,000 workers.
Other states and countries are working to build up their
long-term infrastructure with stage construction and post
production facilities. For example, New Mexico, Louisiana,
Massachusetts, and Toronto are building large multi-studio
facilities. The author's office points out that between 2001
and 2006 the City of San Francisco witnessed a loss of
production spending totaling $123,403,000 and a loss of
$8,417,000 in state and local tax revenues. During this time
frame, San Francisco film production employment dropped 43%.
On the other hand, production dollars spent in Louisiana grew
from $3.5 million in 2002 to $400 million in 2007.
The recently enacted California Production Tax Incentive
Program, SB 15XXX (Calderon) Chapter 17, Statutes of 2009,
specifically targets productions that are most likely to leave
the state due to incentives being offered by other states and
countries. The author's office asserts that SB 1131 is an
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important next step - "California has invested millions of
dollars to ensure that we make every effort to retain
production activity in California." The author's office
emphasizes that "to allow California tax dollars to be spent
supporting production companies that have moved a project
out-of-state is simply unacceptable - SB 1131 is intended to
ensure that California does not make this mistake."
2)Production of Commercial Advertising in California is a
Shrinking Industry : According to the Association of
Independent Commercial Producers (AICP), an industry
organization which represents the interests of United States
companies that specialize in producing commercials in various
media - film, video, digital - for advertisers and agencies,
"commercial work is increasingly flowing outside of
California, reflecting a similar trend in feature films and
television."
In a recent survey of its members, AICP found that while,
"Southern California remains by far the most frequent location
for member shoots. In 2008, the proportion of all shoot days
based in California decreased from a 2007 recorded high." The
survey found some good news, for instance, about half (48%) of
all domestic shoot days take place in Southern California,
with about 15% in New York and 20% elsewhere in the U.S,
however a troubling trend is seen in firms fleeing the state.
Companies located in New York or California are more likely
than other companies located elsewhere to shoot overseas: 66%
of California members and 63% of New York members shoot
overseas, compared to 29% of members located elsewhere.
Nationwide, AICP members spent about $2.5 billion on
production during the study period of January 1, 2008 through
December 31, 2008. California-based companies reported
production expenditures totaling $1.46 billion in 2008.
3)State Programs Which Appear to be Covered under SB 1131 : The
language of this bill would provide that, "notwithstanding any
other law, the state shall not expend any state funds for the
purpose of filming or producing commercials or other filmed
materials, for commercial use, outside of the state." While
this language may at first glance seem quite broad, this
analyst could only find three programs operating in the state
which clearly fall under its terms. They are described below.
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a) California Film Tax Credit . The California Film
Commission is charged with implementation of the film
production tax credit program created by SB 15XXX
(Calderon). According to information on its website, the
program operates as follows:
i) How the Tax Credit Works.
Qualified taxpayers are allowed a credit against income
and/or sales and use taxes, based on qualified
expenditures, for taxable years beginning on or after
January 1, 2011. Credits applied to income tax liability
are not refundable. Only tax credits issued to an
"independent film" may be transferred or sold to an
unrelated party. Other qualified taxpayers may carryover
tax credits for 5 years and transfer tax credits to an
affiliate.
ii) What Types of Productions Qualify for the Program?
To apply for the California Film and Television Incentive
Program, a "qualified motion picture" must be one of the
following:
(1) (Eligible for 20% Tax Credit):
Feature Films ($1 million minimum - $75 million maximum
production budget)
Movies of the Week or Miniseries ($500,000 minimum
production budget)
New television series licensed for original
distribution on basic cable ($1 million minimum
budget; one-half hour shows and other exclusions
apply)
(2) (Eligible for 25% Tax Credit):
A television series, without regard to episode length,
that filmed all of its prior seasons outside of
California.
An "independent film" ($1 million - $10 million
qualified expenditure budget that is produced by a
company that is not publicly traded and that publicly
traded companies do not own more that 25% of the
producing company.)
A "qualified motion picture" must also meet the
following conditions:
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75% test (production days or total production budget)
in California
Application must be submitted at least 30 days prior
to commencement of principal photography. Once an
application is approved, principal photography must
begin within 180 days
iii) How much was allocated to the program?
$100 million annually beginning fiscal year 2009-10
through fiscal year 2013-14. A minimum of $10 million of
the annual funding is available for independent films
each year.
b) California Tourism Marketing Act : From its website
comes the following information: CTTC is responsible for
promoting California's image worldwide in order to increase
travel to the state. Since 1998, CTTC has had a direct
impact on increasing tourism to California through:
Advertising, Visitor publications, Cooperative programs,
California Welcome Centers (Statewide), International
travel and trade programs, Media outreach, New media/web
site tools (www.visitcalifornia.com).
Since its inception in 1998, CTTC's funding levels were
tied to the state budget and therefore vulnerable to cuts
on the state level. In 2006, Governor Arnold
Schwarzenegger signed AB 2592 (Leno) Chapter 790, Statutes
of 2006, a tourism assessment program for the passenger car
rental industry, into law. In addition to assessment
collections, this landmark legislation allocated $50
million for tourism marketing beginning Fiscal Year
2007-08. In 2007, the CTMA referendum was passed with 91%
approval, cementing the $50 million in funding for
California tourism through 2013.
The budget for the next year includes: BTHA's Office of
Tourism for 2010-11, $934,000 from the General Fund,
$842,000 from reimbursements. California Welcome Centers
(total of 12 statewide) for 2010-11, $103,000 from the
General Fund (also receive assistance from the CTTC). CTTC
operates as a separate non-profit mutual benefit
corporation.
c) Department of Food and Agriculture Buy California
Campaign : On July 28, 2001, the Buy California campaign
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began with a $5 million state contribution to the program.
This program created a partnership between government and
industry to promote consumption of California-grown
agricultural products to California consumers, benefiting
both public health and the state's economy.
Also in 2001, Congress approved a farm assistance package
which included a block grant to states for assistance to
specialty crop producers. Specialty crops are defined as,
"any agricultural crop, except wheat, feed grains,
oilseeds, cotton, rice, peanuts, and tobacco." CDFA
received these funds in the form of a Specialty Crop Block
Grant from the United States Department of Agriculture
through the Commodity Credit Corporation in September of
2001.
Today, according to CDFA, the state contribution for the
Buy California campaign has dropped to essentially zero.
However, the federal farm bill continues to provide states
with grant support for marketing of specialty products.
The Buy California campaign operates to distribute these
federal grant dollars, and the costs of administration are
borne by industry recipients through industry assessment
fees.
In Fiscal Year 2009-10, the program anticipates
expenditures of $739,570 for domestic marketing and another
$824,325 for international marketing of California grown
products.
4)Conflicts with AB 1778 (Lieu) Need to be Addressed : AB 1778
(Lieu), provides that "any department, commission, office,
agency, or other administrative entity of the state that
produces, or contracts for the production of, a promotional
commercial for the state or a product of the state, and
finances that commercial in whole or in part with public
funds, shall require that commercial be filmed in this state."
An exception would be made for any agreement between a state
entity and a private entity to promote a California product.
Filming of promotional commercials, as covered by AB 1778,
would be considered a subset of the general prohibition of
filming any commercials (or other filmed materials) outside of
California contained in SB 1131. As such, the bills are in
conflict. If the committee chooses to approve SB 1131, the
author may wish to work with Assemblymember Lieu to address
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potential conflict and/or chaptering out issues.
AB 1778 was heard by and passed out of this committee without
dissent on April 6, 2010. It is currently pending in the
Senate Governmental Organization Committee, set for hearing
April 22, 2010.
5)Prior related legislation .
SB 15XXX (Calderon) Chapter 17, Statutes of 2009, Third
Extraordinary Session, among other things, established a
motion picture production tax credit, as specified, to be
administered by the California Film Commission.
SB 1356 (Murray) Chapter 715, Statutes of 2002, expanded
eligible costs for which film production can receive
reimbursements under the Film California First Program
administered by the California Film Commission.
SJR 28 (Murray) Resolution Chapter 80 of 2002, urged Congress
to enact the Independent Film and Television Production
Incentive Act of 2001 which would grant tax credits of 25% for
certain wages in the production of films and television
programs in the U.S., and 35% of wages that are paid in low
income areas.
REGISTERED SUPPORT / OPPOSITION :
Support
California Conference Board of the Amalgamated Transit Union
California Conference of Machinists
California Teamsters Public Affairs Council
Engineers and Scientists of California, IFPTE Local 20
International Longshore and Warehouse Union
Jockeys' Guild
Professional and Technical Engineers, IFPTE Local 21
UNITE-HERE
United Food & Commercial Workers Western States Council
Opposition
None on File
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Analysis Prepared by : Dana Mitchell / A.,E.,S.,T. & I.M. /
(916) 319-3450