L.A. Times Writer Mischaracterizes LAEDC Study, Ignores Well-Researched Findings

by Vans Stevenson 07/20/2011 12:37 (UTC-08:00) Pacific Time (US & Canada)

Michael Hiltzik, generally speaking, is one of the more thoughtful opinion writers on staff at the Los Angeles Times, but his latest missive, which takes issue with a recent report on California’s film production tax credit prepared by the Los Angeles Economic Development Corporation (LAEDC) and sponsored by the MPAA, needs a reality check. 

First, some context.  We asked the LAEDC, a highly respected, decades-old think tank whose policy and economic expertise has been relied upon by government agencies, educational institutions, and businesses for many years, to analyze whether the production tax credit enacted by the California legislature in 2009 and signed into law by Governor Arnold Schwarzenegger was producing a benefit to the economy, the workforce and government. 

In keeping with its reputation for rigorous, high-quality research, LAEDC employed the IMPLAN economic impact modeling system, a respected and widely-accepted methodology for local economic analysis.

Based on this analysis, LAEDC found that the production tax credit program is a pretty good deal for California: The first $200 million spent by the state (discounted to $198.8 million) generated more than $1.5 billion in production spending and more than $3.8 billion in total economic output.  Even more importantly, it generated over 20,000 jobs. 

The program is not a subsidy of motion picture and television production –  in fact, it generates a POSITIVE return on the state’s investment:  for every $1.00 the state invests in qualified motion picture and television projects, state and local government get $1.13 back.  If Mr. Hiltzik’s question is whether that’s a good use of taxpayer funds, that kind of return on investment should be a pretty convincing answer.  Indeed, the study’s conclusions are very conservative; LAEDC did NOT include tourist related follow-on economic activity, nor did it include capital expenditures by entertainment companies.  So actual economic benefits to California from supporting film production could be even greater.

Unfortunately, Mr. Hiltzik’s column didn’t provide any evidence that LAEDC’s results were incorrect.  Instead, he took shots at the integrity of the researchers.  That doesn’t feel like a productive contribution to the discussion, to us.

As with any public policy program, it’s always possible that the production tax credit could be improved.  While LAEDC’s job was not to make recommendations on how to do that – perhaps the Times could assist LAEDC with resources to undertake such a study – the researchers did analyze two types of production that are ineligible for the production tax credit: large budget feature films and network television series. LAEDC found both types of productions would return a positive investment for state and local government.

It’s also worth noting that this year, in the face of steep budget deficits, many states have sustained and in many cases, improved and enhanced their production incentives, finding them to be sound investments in jobs and economic development, including, Pennsylvania, Oregon, Wisconsin, Ohio, Georgia, South Carolina, North Carolina, Rhode Island, Connecticut, New Mexico, and Massachusetts. 

It’s disappointing that Mr. Hiltzik seems so eager to discount a solid, well-researched report by a highly reputable group of researchers.  And it’s a shame for California’s economy and the talented industry workers struggling to do their jobs closer to home that he can’t see the benefit in this modest and cost-effective program.

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