PURPOSE:

The purpose of this staff report is to bring back the Film and Television Action Committee�s[1] request for the City Council to consider adopting a Resolution in support of a 301 (a) petition.[2]  

BACKGROUND:

On December 7, 2004, Tim McHugh, Executive Director of the Film and Television Action Committee sent a letter to Councilmember Stacey Murphy asking the City Council to support a Film and Television Action Committee Resolution.  On February 8, 2005, approximately 60 Film and Television Action Committee members gathered outside City Hall for a special community rally before the City Council meeting.  At this City Council meeting, the Film and Television Action Committee requested the Burbank City Council to consider its Resolution to support the filing of a 301 (a) petition to help curb runaway production.   On March 15^th, the Burbank City Council voted on whether or not to support the Film and Television Action Committee petition.  Council Member Vander Borght was absent and the decision to support this proposed Resolution failed on a 2-2 vote.  However, the City Council approved a reconsideration of the Film and Television Action Committee Resolution for April 26, 2005.  Staff was also given direction to conduct additional research about the runaway production situation and current legislative efforts.

ADDITIONAL ENTERTAINMENT INDUSTRY RESEARCH:

The March 15, 2005 runaway production staff report (Exhibit A) contained detailed statistics about local entertainment industry activity, information about the Film and Television Action Committee�s request, and points in favor and against this proposed 301 (a) petition.  In preparation for this second City Council discussion and after receiving input from various organizations including the Film and Television Action Committee, Motion Picture Association of America, Los Angeles Economic Development Corporation and various local labor unions and entertainment industry organizations, staff researched the following information:

The Entertainment Industry Development Corporation[3] 2004 report reflected strong 2004 numbers in terms of production activity, location shooting and television shows (Exhibit C).  Most of the production growth occurred during the summer, with a 32% hike over 2003 and a 74% increase over the 10-year seasonal average.[4]  The Entertainment Industry Development Corporation report shows a total of 52,707 location production days during 2004, up by 19.2% over 2003 to a new record level.  The previous high (the Entertainment Industry Development Corporation began issuing permits in 1994) was in 1997 with 47,669 location production days.  The biggest increase during 2004 was in television production, which increased by 26.8% to 18,257 days, topping the 10-year average (due to cable programming, new venues, additional shows, and increased production).  Commercial activity increased 17.57% in 2004 to 6,703 (when compared to 2003 figures) and feature film activity was up by 18.8% in 2004 to 8,707 days (when compared to 2003 figures), reversing an eight year decline. 

According to the Entertainment Industry Development Corporation,[5] when comparing data from the previous ten years, although feature film activity was up by 18.8% when comparing 2003 and 2004 figures, the weaker area seems to be in feature film production, where 2004 numbers were off by 13% when compared to the ten year average (1995-2004).  Music videos and miscellaneous productions (industrial films, corporate training videos, adult filming, etc.) were also down in 2004 when compared to the ten year average; however, they are not considered to be a part of the Entertainment Industry Development Corporation�s top three categories.  The top three categories are television, feature films and commercials, responsible for 80% of the total permit applications.  Television filming is very strong for various reasons, one being the major increase in local production stemming from cable network (there are now hundreds of cable channels in need of original programming).  Additionally, commercials are up partly due to the increase in television programming. 

When looking at the first two months of 2005, the latest Entertainment Industry Development Corporation statistics (Exhibit D) reflect the following figures:  January 2005 total production numbers edged up 33% when compared to January 2004 (4,392 vs. 3,281) and February 2005 total production numbers are slightly down 3.9% when compared to last year�s figures (4,691 vs. 4,878).  These numbers reflect features, commercial, student films, photography, miscellaneous, television, music and documentary production.  Feature film days grew from 718 (January 2004) to 1094 (January 2005) and 487 (February 2004) to 599 (February 2005).  Both months reflect yearly increases in feature film activity of 52.36% and 22.99% respectively.

When asked about their view point on runaway production, the Entertainment Industry Development Corporation stated that domestic incentive programs have been very effective in luring production to their jurisdictions.  Louisiana, New York, Illinois, Pennsylvania and New Mexico all have seen considerable growth of production after initiating film incentive programs.  The United States currency is at a 10-12 year low compared to the Canadian dollar, so production in Canada has decreased.  Based on the above figures, they indicated that incentives should be considered not only to retain the weaker areas such as feature film production but also any type of production that might otherwise leave the state.

Local Burbank Film Activity Update � The following is the latest information on film activity from the Burbank Police Department Film Statistics.  Production in Burbank has increased over the past two years.  In 2004, a total of 267 permits were issued, including 27 feature films, compared to a total of 245 City of Burbank film permits issued in 2003, including 18 feature films.  The 2004 numbers reflect an increase of 9% in total permit activity and a significant jump of 50% in feature film activity.  For a snapshot at film production in Burbank through 2004, please see chart below:

Additionally, January-March 2005 figures in Burbank also reflect positive increases, especially in the feature film production area.  There were a total of 69 film permits (including ten feature films) issued during these three months.  Comparatively, January-March 2004 figures include a total of 75 film permits (with only four feature films).  Although these statistics only include Burbank film permit activity, they reflect a positive shift in local film production.

Motion Picture Industry Pension Health and Plans Organization � Staff researched additional possible ways to track the runaway production issue and current local production.  Staff contacted the Motion Picture Industry Pension Health and Plans organization for information on the local number of hours and payroll data during the past few years to further assess whether there has been an improvement in the situation or not. 

The Motion Picture Industry Pension and Health Plans merged in 1990.[6]  Based on trust funds established by collective bargaining agreements between local unions and employers in the motion picture production industry, this organization is primarily supported by contributions from employers engaged in the production of motion pictures or primarily in the business of furnishing materials or services for motion picture productions.   This organization provides a useful tool in tracking California entertainment industry activity, as the hours reported are due pursuant to the various collective bargaining agreements that cover employment on motion pictures and commercials.  The primary participating unions are the International Alliance of Theatrical Stage Employees (IATSE) and five other unions referred to as the Basic Crafts, the largest of which is the Teamsters. 

These statistics provide some insight as to the status of the entertainment industry, with a total of 90-95% of the data tracking California payroll hours.  It should be noted that due to plan mergers over the last five years, this organization covers some limited East Coast employment by camerapersons, editors, studio mechanics, and script supervisors, but the percentage is very small.  Other employment in areas outside of Los Angeles may be covered only under certain circumstances.

Below is a chart tracking the Motion Picture Industry Pension and Health Plans Analysis of Pension and Health Hours.  Overall, the hours have increased from 67,181,876 to 71,218,529 from 2000 to 2004, reflecting an increase of 4,036,653 payroll hours, or six percent.  The Motion Picture Industry Pension & Health Plans Association underwent a major system migration to meet Y2K standards.  Hours prior to 2000 are archived and not available. 

Los Angeles Economic Development Corporation � According to Jack Kyser, [7] Senior Vice-President and Chief Economist of the Los Angeles Economic Development Corporation, there has been a shift in runaway production from international to domestic runaways.  Mr. Kyser stated that although some of the major studios still sometimes go overseas, independent producers that do produce outside of the state are now almost always going to other states (rather than outside of the country) due to the incentives provided by such states.  Mr. Kyser believes this pattern will continue to shift as more states� incentive practices are growing.  For example, he is now noticing a shift of post production infrastructure being created in New Mexico, as this state is working to retain a bigger portion of the film production there.  Mr. Kyser stated that the Los Angeles Economic Development Corporation is currently working on a very detailed entertainment industry production study for the California Film Commission,[8] which will track current production statistics and conduct an analysis of how the proposed California incentives would retain production in California. 

California Film Commission - The California Film Commission works to enhance the economic climate in California by keeping film industry jobs and projects in the state. The Commission has an advisory board of 21 members appointed by the Governor, Senate Pro Tem and Speaker of the Assembly.  Staff interviewed Amy Lemish,[9] Director of the California Film Commission.  Ms. Lemish indicated it would be a good idea for the City of Burbank to support the proposed California legislation to retain film production in California.  She also stated that the runaway production issue has shifted from an international issue to a domestic issue.  She mentioned that there are ten states offering current incentives and another 17 states with pending legislation, all working to lure production to their states. 

The California Film Commission is working very closely with the various entertainment industry labor unions in California, entertainment industry organizations and the Governor�s office on the proposed legislation to make sure that the proposed language is geared towards areas of film production that are most susceptible to leaving the State.  She believes that the best way for California to curb the runaway production issue is to create state incentives and level the playing field.  She mentioned that when production teams plan a feature film or another project, they prepare comparative budgets taking into account other states� and countries� incentives.  When they prepare these comparative budgets, it is difficult for California to compete in this process because there are no competitive incentives available. 

Ms. Lemish is very optimistic that these incentives will move forward because the California Film Commission has been working very closely with the Governor�s office and local union groups (International Alliance of Theatrical Stage Employees, Teamsters, Director�s Guild of America, Screen Actor�s Guild, etc.) to make sure this legislation is successful.  Staff asked Ms. Lemish about the proposed entertainment industry study which is being commissioned by Jack Kyser and the Los Angeles Economic Development Corporation.  She stated that this study will be completed during the next couple of months and delivered to the Governor�s office first.  The decision has not been made as to whether this study will be public or not.  The main purpose of the study is to analyze the tax revenue generated by different types of productions to see how the new legislation would generate additional revenue to the State of California.  Ms. Lemish stated that Burbank can help by sending letters to legislators and working closely with the California Film Commission sometime in May 2005 when the new legislative language will be developed in conjunction with the local entertainment industry labor groups, entertainment industry organizations and the Governor�s office.   

LEGISLATION:

Staff is in regular contact with the various legislative offices sponsoring entertainment industry bills and the California Film Commission to support the proposed legislation.  As of April 7, 2005, when this staff report was finalized, no new information or language was available on the following bills:

Senate Bill 58  � In California, on January 12, 2005, Senate Bill 58 was introduced by Senator Kevin Murray.  This bill would express the intent of the California Legislature to enact legislation to encourage production in California.  Senate Bill 58 is currently a �spot� bill[10] while the legislative office is working with the Governor�s Administration to amend this bill�s language and include specific information about how this legislative effort would encourage production in California.  

Assembly Bill 261 � In California, Assembly Member Paul Koretz introduced Assembly Bill 261 on February 2, 2005.  Existing law established the Film California First Program within the Business, Transportation and Housing Agency which is supposed to be funded by the Film California First Fund and appropriated by the Legislature.  This bill would express the intent of the Legislature to restore State funding to the program. 

Assembly Bill 777 � Assembly Member Nunez introduced Assembly Bill 777 on February 18, 2005 to encourage economic development and film production in California.  This is also a �spot� bill while the actual language and incentive information is being developed by Assembly Member Nunez and the Governor�s Office. 

BURBANK�S PARTICIPATION IN LEGISLATIVE EFFORTS:

At the previous Council meeting, staff was also asked to consider how Burbank could assist with the various State legislative efforts.  Staff proposes to work regularly with the California Film Commission and the three legislative offices where bills have been sponsored to promote such bills.  Staff also proposes to send letters to the three legislative offices and the three Committees where the bills will be heard on behalf of the Burbank City Council.  In addition, if the City Council wishes to aggressively pursue support of these bills, it is also recommended that the City of Burbank express public support of these bills at the Committee Hearings in Sacramento through the representation of the Burbank City Council.

Finally, staff can also proactively support the proposed legislative efforts by contacting neighboring cities such as Los Angeles, Beverly Hills, Culver City, Glendale and others to find out if they are interested in pursuing this issue as a group and work together through the League of California Cities.

SUMMARY OF SUPPORTING AND OPPOSING POINTS:

Attached is a summary of the supporting and opposing points from the previous staff report.

Arguments for Adoption of Proposed Resolution - Based on information submitted by the Film and Television Action Committee, their membership feels that the most effective way to stop runaway production would be to file a 301 (a) petition.  The Film and Television Action Committee offered the following arguments in favor of filing a 301 (a) petition:   

• There are 19 countries that have successfully copied the Canadian production incentives and are now luring film production away from United States. According to the Film and Television Action Committee�s research, the 301(a) petition is the best way to remedy the runaway production issue.[11]

• The Film and Television Action Committee does not feel this 301 (a) petition would create a further trade threat than they believe already exists because a country would not retaliate for violating a trade agreement they already signed.

• The Film and Television Action Committee stated that �the Motion Picture Association of America has already filed a few 301 petitions to end piracy and that there is already a subsidy war out there (which is a form of a trade war)�.

• They do not feel that another petition would jeopardize this ongoing subsidy war.  The Film and Television Action Committee feels that this petition would actually help end the subsidy war.   

Arguments Against Adoption of Proposed Resolution for a 301 (a) petition - According to the Motion Picture Association of America, the Directors Guild of America, International Alliance of Theatrical Stage Employees (IATSE) and the Independent Film and Television Alliance, a 301 (a) investigation would hurt filmed entertainment exports.  The Motion Picture Association of America offers the following arguments against adoption of the proposed Resolution:

• Film production is up in California and the nation. 

• There is no need for a 301 (a) petition because there is a significant increase in out-of-state incentives which match other countries� incentives. 

• The Film and Television Action Committee petition would hurt the United States filmed entertainment exports, since over 40% of the revenues earned by the filmed entertainment industry are earned in markets outside the United States.

• Film production incentives do not violate trade agreements, so it would be difficult to come up with a substantive basis for a 301 (a) petition.

• The Motion Picture Association of America feels it would be difficult to accuse other countries of violating trade agreements since the United States employs similar incentive practices (such as House Resolution 4520 which authorizes federal film production incentives).

• The Motion Picture Association of America indicates that there is a major difference between the Film and Television Action Committee 301 (a) petition and a �Special 301� petition which the Motion Picture Association of America filed to address intellectual property issues abroad (copyright protection).  This �Special 301� petition has a high level of international consensus as it benefits the United States and foreign cultural industries.

• A �Special 301� petition does not contain the same possible perception of a direct threat of unilateral or multilateral sanctions as does a 301 (a) case.    Opening a Section 301 (a) investigation against foreign film production subsidies would ignite cultural sensitivities and affect ongoing negotiations.

Additionally, the Film and Television Action Committee submitted a rebuttal to the Motion Picture Association of America�s Arguments Against Adoption of the proposed Resolution (Exhibit E).

LOCAL LABOR UNIONS:

In the previous staff report, it was indicated that the International Alliance of Theatrical Stage Employees opposed the proposed petition, as reflected in written correspondence to the Burbank City Council (Exhibit F).  However, during the City Council meeting, there were concerns raised about whether individual Locals under the International Alliance of Theatrical Stage Employees support or oppose the petition.  This organization wrote a letter to the City Council members on behalf of approximately 29,000 members to oppose the Film and Television Action Committee Resolution.  According to Joseph Aredas, International Representative-in-Charge with the International Alliance of Theatrical Stage Employees, this decision to write this letter was based on a 2001 Convention Action where representatives from each individual Local voted by overwhelming numbers against these types of petitions.  This type of convention voting is based on delegates representing each Local (each Local has one vote per 100 members plus one additional vote for the charter).  The decision not to support the Film and Television Action Committee�s Resolution was based on this convention action where the entire membership was represented. 

Staff has contacted the local unions including the Locals under the International Alliance of Theatrical Stage Employees and the Locals under Basic Crafts.  A mixed response was received from the various representatives (Business Agents) of these organizations.  Some of them were responsive and agreed to submit a letter in �support of�, �against this issue� or �no position� (Exhibit G, H and I), and a few chose not to participate or share their input on the issue with staff.  The following charts provide a summary of the results of this research:

This chart summarizes the various labor unions� efforts in regards to this issue.  Based on the responses received, the Basic Crafts Unions tend to shift towards supporting the Film and Television Action Committee.  Most of the International Alliance of Theatrical Stage Employees (IATSE-affiliated) Locals do not support the proposed Resolution and ally themselves with the International Alliance of Theatrical Stage Employees (IATSE). 

Additionally, the Motion Picture Association of America, the Directors Guild of America, the Independent Film and Television Alliance and the International Alliance of Theatrical Stage Employees (IATSE) do not support the Film and Television Action Committee petition.

SUMMARY:

Although the Film and Television Action Committee claims that the runaway production issue will not improve unless a 301 (a) petition is filed (and other countries will continue to lure runaway production), the information in this report reflects improvements in the local and national situation.  As evident by this information and entertainment industry statistics, film production has increased in California and other states.  However, it is important to note that domestic runaway production to other states appears to be growing.  With the recent federal and pending State legislation to keep production in the country and the state, it is hoped that this situation will continue to improve so our local entertainment industry can flourish and provide additional jobs to our local workforce.

RECOMMENDATION:

It is recommended that the City Council direct staff to move forward with the following (or a combination of) the following options:

1. Send letters of support to the three legislative offices and the three Committees where the bills are heard.

2. Have Burbank City Council representation at the Committee Hearings in Sacramento for each bill.

3. Determine which other cities are interested in pursuing this effort as a group and work together through the League of California Cities to promote production retention in the State.

EXHIBITS:

A         Runaway Production Staff Report � March 15, 2005

B         Film and Television Action Committee�s comments on Unfair Trade Practices Task

            Force - June 28, 2004

C         Entertainment Industry Development Corporation 2004 Report

D         Entertainment Industry Development Corporation statistics (January � February 2005)

E         Film and Television Action Committee Rebuttal to the Motion Picture Association of

           America�s Arguments

F         International Alliance of Theatrical Stage Employees Letter � March 3, 2005

G        Letters in Support of Film and Television Action Committee Resolution

H        Letters Against the Film and Television Action Committee Resolution

I          No Position Letters

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