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Gov. Gavin Newsom traveled to Sunset Gower Studios in Hollywood on Wednesday to sign a $330 million boost to the state’s film and TV tax credit. The studio lot is more than 100 years old, and provided a backdrop for Newsom to talk about a new $150 million program to encourage more soundstage construction.
Newsom also met with industry figures and lawmakers and discussed a new goal, incorporated into the soundstage credit, to make film crews reflect California’s demographics. The diversity provision, led by Assemblywomen Autumn Burke and Wendy Carrillo, was key to persuading lawmakers to expand the tax credit.
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In an exclusive interview after the signing with Variety, Newsom said he would support incorporating the diversity hiring mandate to the entire film and TV credit once it comes up for renewal. He also indicated that the expansion he signed into law — $90 million a year for two years — will not be temporary, saying “You gotta be there for the long haul.”
He also stressed the importance of being competitive with other states, calling out Georgia specifically. In a 15-minute interview, he used the words “compete” or “competitive” 10 times.
Here is the full interview:
It’s a good next step. No one’s naive. We still have to do more, be more competitive, more accountable, more transparent with all the data. But nonetheless it’s an important demonstration of our commitment and our resolve to be more competitive. And to acknowledge that the last few decades, we stopped investing in our lead. If you don’t invest in your lead, you’ll start to lose it. And we’ve seen that around the globe, not just across the country. So I appreciate the resolve of the Legislature, and the collaboration. The most significant part of this effort, having experienced a little bit of the rancor as a former mayor, that advocated film credits, and watched what did and didn’t happen during the Schwarzenegger administration; as lieutenant governor, watching the contours of the debate. What was interesting about this debate was the collaboration between labor and legislative leaders north and south. It wasn’t concentrated exclusively to one group or another. So that made it much easier to get where we are.
The fiscal capacity to do this as a result of a $75 billion surplus — presumably that is not going to be true next year or the year after. So is this, “enjoy it while it lasts?”
You gotta be there for the long haul. We went from one (hundred million) to 330 (million) on the baseline. We had ample advocacy and excuses last year with a $54.3 billion shortfall to start to pull back. No one — we didn’t do that. We resisted that temptation. I think that gives you an indication. When you’re facing the acuity of that shortfall, and yet we still committed ourselves to this credit. I think it gives you an indication of our willingness to do more in the future. This is multi-year at least on one component, the $180 (million). Obviously the $150 it could be one year, it could be three years, it could be five years. I imagine it’s going to be a short period of time with that tax credit getting drawn down. (Laughs.)
It’s going to go fast.
When I was mayor we did our own local tax incentive, because I was frustrated with the state. So if that’s any indication. It wasn’t that substantive, but it was millions of dollars, and we had to prioritize it over other things in our city. And so it gives you an indication at least personally, as long as I’m governor, of my commitment to do more. And I’m, again, there’s monetization issues that the industry is still looking for. There’s some nuances that will expose themselves on the diversity credits, which we have to hold ourselves to a higher level of accountability on. And I think the novel nature of this $150 million is also promising, because I think if that’s successful, to me that’s a real legacy piece, that we can actually convert these one-time dollars to investments that pay dividends for generations. And that’s where I am particularly enthusiastic to see how that $150 million goes.
On the diversity piece. Obviously right now it only applies to the soundstage portion — the goal of making your productions look like California. The baseline credit expires in a couple of years, comes up for renewal. Is that something you’d want to include in the full program?
My personal opinion, my hope and expectation is we do. But we gotta prove ourselves. That’s the opportunity here, to not just assert but to prove. And I think you’ve written about it, or someone has, but the data issues have been a bit opaque. So we got work to do in that respect. This is an opportunity to acknowledge that, and to work with our labor partners, to work with the industry, and hold ourselves accountable to at least the promise of this diversity credit. And if we’re successful, absolutely I’d love to see it integrated. It’s in the interest of the industry itself. There’s no greater beneficiary than the industry itself to be truly representative. And taxpayers deserve I think nothing less with tax credits, to have a full expression of the state in terms of those credits.
The way it’s phrased is “make a good faith effort,” and “broadly reflect” and that sort of thing. So how much teeth do you see in that?
What we got done, we got done. And so now it’s an opportunity — but not just an opportunity in terms of being the beneficiary of the credit, one-off — but an opportunity to annualize this going forward, and extend the credits and broaden them and deepen them. I’d like to see the credits expanded. I want us to be more competitive. I’m very mindful of the credits coming out of places like Georgia — that, I think, what, it’s the size of New York and California combined. And how the infrastructure, not just the human capital that’s moved there, but the physical capital that’s been invested there. And if we’re going to be here for the long haul, we gotta send signals. And that means the industry itself should have all the incentive in the world to get it right. Because, look, this is a majority minority state. The legislative leadership demands that accountability. And if the industry — our partners — can prove the efficacy, I can assure you there will be a benefit of that in terms of the willingness to expand the credits going forward. So it’s in everyone’s interest.
Let’s talk about the soundstage piece of it, because that’s brand new. As you said, this is going to go pretty quick. So are they going to come back in a year or two and say the cupboard is dry, we need to re-up this thing?
It’s the nature of things. Let’s see what we get in the result. What’s the ROI? We don’t need a UCLA economic study to assert the ROI through some analysis. We can see it. We will have the physical manifestation of that to pay testimony to the efficacy of it. So look, I like it. I think it’s a very — as a taxpayer, not just a governor — I think it’s a good use of one-time money. You’re investing in your creative strength, the creativity that defines the best of California. You’re investing in something that truly will — These are legacy lots that have been around 50, 70, 80 years — 100 years. Those investments continue to pay dividends. So to me, that annuity continues for generations. I think there’s real wisdom in that. And look, infrastructure, broadly in this state — someone described visiting South Korea and coming here to L.A., like visiting the Jetsons and coming back to the Flintstones, which was very unfair, but nonetheless their point was made. And that should include an industry that we’re exporting, entertaining the world. I think $150 million is a lot of money, but then again, to your point, it’s not.
You definitely seem to have a different attitude to this concept than your predecessor, who seemed to be dragged reluctantly into supporting this.
You probably had the same conversations we all did. He was very honest, publicly, and consistent with his private thoughts about what he position was. Here’s why. Not only an appreciation of the obvious, which is a point of pride as a Californian, that we’re entertaining the world. And this is the world we created now and in many ways it’s competing against us. So A), it’s about acknowledging what separates our game from the game played elsewhere. And that’s the creativity. That’s the diversity of ideas and values that define the best of California, number one. Number two, I’m also deeply mindful of what’s happening in Silicon Valley in relationship to what’s happening here in Southern California, and the combinatorial nature, the stacking of technologies, the opportunity to see these two regions of the state merge increasingly, with the Hulus, the Disney Pluses, not just the Apples, Netflix and others. It’s a really exciting space, and California has just an incredible opportunity to dominate that space for decades. So this is also about where the puck is going. And it’s about dominating in that space for a generation. And so I don’t want to miss that opportunity. I don’t want to lose sight of that. Because if we start to see a bleed of creative, with the nature of technology and platforms, and the mobility of platforms and technology, we could really rue the day. We could regret that. So I don’t want to see that happen.
It’s also, in Los Angeles, such a doorway to the middle class for the whole region.
And that’s the other point. As you know well, chronicling this. It was the hardest part. ‘11, ‘12, ‘13, ‘14, to make the case — this is not about — forgive me — George Clooney or Will Smith. This is about the caterers. This is about the folks out there doing the sets and the designs. And this is about the middle class. And these are about careers, not jobs. And that’s the exciting part, is to see the careerism that’s taking place — to see an expectation of permanency, so union membership begins to grow, not decline. And people know that we’re here — to your point, to your original question: Is this episodic because you got an $80 billion surplus? Or are you committing yourself? And I want to reinforce: we’re not interested in being more competitive, we’re committed to being more competitive. That’s a major distinction. Anyway, I love this state. I’m very sensitive to our remarkable capacity to even be self-critical as a state, not least of which those who are out there 24/7 casing our joint and going after us. And so back to that second point I made: we’re competitive. I’m competitive. I want to step up our game.
And this is also about an economic stimulus.
Yeah, but an economic stimulus in the things that really distinguish us. No one cares how much you know because Google knows more, right? So at the end of the day, there’s certain things where we used to compete that it’s less essential to compete. What’s essential is that creativity index. It’s the creative sector. It’s so powerful and potent. It’s the differentiator. That’s why this industry is even more powerful. We just gotta keep that alive. No one else does what we do. But increasingly, some are. We want to keep them at bay. We want to keep the talent here. Talent resides at all levels. It’s not just, again, the directors, the studio heads and the actors. It’s about the remarkable infrastructure of truck drivers and caterers, and folks out there on the front lines every single day, doing props and everything else, that are also skilled and remarkably well trained. And that’s part of our creative strength as well.
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