05/08/12

Incentives Sharpen State's Competitive Edge

Recommended Reading from The Sacramento Bee
By George Deukmejian, Pete Wilson and Gray Davis

That our California seaports and our film and television industry have something in common seems a real stretch. Terminals, cranes, ships, on one hand. High drama, comedy, superheroes, on the other. Yet these two seemingly disparate industries share two attributes in common – they are major drivers of California's economy, and both face ramped-up competition from within the United States and abroad, threatening their positions as huge job and revenue generators for our state.

As others try to capture California's market share, the importance of these two industries maintaining and sharpening their competitive edge cannot be overstated. 

California ports generate approximately 1 million cargo-related jobs in the state. Together the three California customs districts – Los Angeles, San Diego and San Francisco – led the nation by processing $456 billion in two-way trade value by vessel in 2011. It's not just the ports that light up the economy, it's the entire supply chain including the manufacturing, retail and wholesale trade, construction, transportation and warehousing sectors. 

In California, the film and television industry is responsible for more than 200,000 direct jobs. And, it's not just about the "in front of and behind" the camera jobs. Billions of dollars are spent by the industry annually on goods and services in California – ranging from accounting to automotive equipment, to florists and dry cleaners. 

These two robust industries have been taken for granted for years. Historically, California has long dominated the film and television industry. And California ports are the gateway to the economies of the Pacific Rim – handling nearly 47 percent of all the waterborne containerized cargo coming into the United States. But we can't afford to rest on our laurels. 

Enter a new decade of intensified competition that serves up a jolt to both industries. Experts project that California ports could lose up to 25 percent of incoming cargo to Gulf and East Coast ports when the widened Panama Canal is able to accommodate the mega-sized ships coming from the Pacific Rim that would typically call on California ports. That is just two years away. Not only are other U.S. ports investing billions of dollars in capital improvements to go after California's market share, they already have substantive tax incentives in place to attract shippers. Given what is at stake, we cannot sit back. 

California must provide comparable incentives in order to level the playing field. Recognizing this situation, business and labor leaders have come together to urge incentivizing legislation that would boost exports and imports through California ports and increase cargo-related jobs in order to "Beat the Canal." It is all about bolstering international trade and the role that our ports play stoking California's economic engine. It is about jobs and investment and jobs. 

Substantial incentives that some 40 states and several nations are offering to entice filming away from California have resulted in lost production. A report issued this year by the Headway Project underscores the importance of tax credits as a powerful determinant of production location, citing the success of Louisiana as an example. After an aggressive tax credit program was put into place, film and television production in that state soared from zero to 87 productions in eight years. 

As competition increased and intensified, the state Legislature responded in 2009 by adopting a modest incentive program, available only to certain qualified film and television productions, that is less generous than those offered in other states. This program has had a positive impact; however, there are limitations that restrict California's competitive strength when compared to other states and countries. According to the report, the limited size of California's tax credit program allows for only one in every five applicants to receive credits, causing many film and television producers to pursue credits from other states. 

Much more needs to be done if California is to be competitive. Not only should the incentive program be extended well beyond the 2015 expiration date, it should also be retooled to up the ante and make more film and television productions eligible for the tax credits. It is all about meeting and exceeding the power of our competitors. It is all about reclaiming California's position as the film capital of the world. It is about jobs and investment and jobs. 

The time to help these major industries sharpen their competitive edge is now. 

Former Govs. George Deukmejian, Pete Wilson and Gray Davis are members of the Southern California Leadership Council, a nonpartisan, nonprofit public policy partnership.