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SR-211-008 (9) / 2//-tfJocg \ 4\ -c.. Sf? 9 1186" C1ty (ounc1l Off1ce CER svc Counc1l Meet1ng of Septe~ber 9, 1986 Santa Mon1ca. Callforn1a 5~ JU I 3 \~ TO FRO~l: Counc 11 ~lembe rs Mayor Chrlst1ne E. Reed SUBJECT- F1lm Perm1ts SCAG has been lnvolved in a re~lonal effort to keeD the f1l~ industry in Southern Callforn1a. One of tre major proble~s 15 the divers1ty of regu- lation by the ~any d1fferent jur1sd1ct1ons. So far SCAG has developed a code of conduct for fllm crews, a ~odel ordlnance, and a cede of conduct for local governments. The f1lm 1ndustry and the C1ty o~ Los Angeles 1ave asked trat our c':Y. speclficaily. part1c1pate 1n a coordinated fllm per~lt e~fort (see attached). I do not want to ask our staff to de a iot Of wcr~ on thiS unless the Ccuncll 1S lnterestec in partlcipat1n0. Attachwents August 14 le!ter ~rom SCAG r'lode 1 crd ~ nGnce Code of cenduc: for +l~m crews Code of conduct for local govern~ents \ 4 -c... ~t? 9 ;~~S 5 -4 5IP t ~ 19ftil ) ~ '~ ,~ ,," ~ I :~." ~ : :'r;.'1:i~'~~1~'-~"'"' ".:. , ".",'. j,"\ ! ...: -1.A -.:..J... ..t. t -1- : "\ . .. " IOUTHERn CAliFORniA -." AI/OCIATlOn Of GOVERnmEnTl . 600 fouth Commonweolth Avenue. fUlte 1000 · lor Angeler. Collfornlo .90005 .213/385-1000 August 14, 1986 Honorable Chrlstine Reed ~1ayor Clty of Santa Monlca 839 23rd Str~et Santa Monlca, CA 90403 Dear Chn s : The Research Instltute of Southern Callfornia and the Southern Callfornia ASSGClation of Governments held a meetlng on July 28th wlth Los Angeles City and County offlclals, labor, business and movie lndustry representatives to discuss the consolidation of Los Angeles Clty and County as the regional one-stop film permit office. As a resu~t of this meeting, it was recommended that Santa Monlca and Beverly Hi11s be invlted to jOin this effort in establlshlng a reglonal one-stop permlt office. Based en economic data that SCAG presented at thlS meeting, it ~as ccpcluded tna: the time is right to act on the one-stop offlce through a JOint Powers of ~g~e~me~t. We would llke to request that your city aOpolnt a staff perSCn to wor~ with SCAG. Los Angeles City and County ln developlng a JOlnt Powers of Agreement. In a recent study of the eccrcmlC lmpacts of the mOVle lndustry on the SCAG region, we ha~e discovered that runaway productlon lS not a myth but a reality. Ot1er cities and states are definltely wooing the movIe and TV industries outSIde of Ca11fornia with tax incentives, low fees or no fees, and an easy per~lt process, etc. The loss of film productlon In Southern California ccntr~butes to lost employment, income and taxes. One-Stop Permit page 2 Although the maJor1ty of location shoot1ng is done In Los Angeles, it ~s 1mportant to work together as a reglon to keep th1S element of the ecoromy here. Each t1me a f11m 1S produced in th,s area, there are d,rect benef~ts to the region because of related expenditures for goods, services ar.a labor costs. I hope that you w1ll cons1der J01ning us In th,s effort to estab11sh :ne one-stop f11m permlt off,ce. I look forward to hearlng from you scon. If you have any further questions, please don't hesItate to call me. 51 ncere ly. ~~-t B,lI,RtON R. MEA YS Dlrector, Government & Publ1C AHa 1 rs BRM:ss 1I;J4' :oA ./ '::'<li"~1 tJtO(;'''';::'.~~II~~~:~~ .,.II ':'(l~ f"'tl,h rl"\n"t..,nnIIIA......Jrh ~"D""'4. (lilt", I(}on .1...., ~.,.f'\...~""'f'. r^li~"""..r.n. Q{"\("'\f""'!":;. ?11-.,A~_'("\0(1 FINAL Regional Film Permit Model Ordinance March 21t 1986 Purpose It is the policy of the city/county to encourage the production of motion pictures and television within their jurisdiction. This ordinance is the basis for the rules and regulations governing the issuance of permlts for filmingt video tapingt or any related actlvity on locations within the city/county, to ensure that this activlty is consistent wlth considerations of the public health and safety and the protection of property. Creation of a Centralized Permit Process There shall be located in the office of the City Manager/County Admin- istrator a centralized permit function. This office shall develop the necessary regulations to carry cut the intent of this ordlnance. These regulations and future modifications shall be approved by the City Council/ Board of Supervisors. Permit Process The permit process fOCUSeS on permit requirements, exemction from permlt requirements, and amendments. They are: 1. Requirements: An applicant shall have an aporoved per~lt from the City/county to film on public/private property far the purpose of producing, taking. or making any motlcn picture. television. commercial. videa taping, or still photography. 2. Exe~otion from Permit Reauire~ents: Permits shall not be required far the followlng: a. The filming. video taoing or production of current news which includes reporters~ photographers, and camer~~en employed by a newspaper. news serv1ce. broadcasting station or similar entity when actually engaged in news events. b. Photography, filming or video taping solely for one's own personal or family use. -1- 3. Amendments: Changes to the conditions of the original permit shall reqUlre aoproval throug~ Lhe same process as the orlginal permit and may require a permlt amendm~nt fee. Fees An applicant shall comply with the following permit fee requlrements and waivers. 1. Fees Reauired: The following nonrefundable fees may be established by the clty/county, if necessary: a. Permit application fee (cost for processing). b. Permit amendment fee (cost for processing). c. Public property fee (f~r reasonable costs). d. Personnel charges (for actual costs, if required). 2. Charges: An applicant shall pay all charges directly, or through a miscellaneous cash bond account. 3. Permit Apo1ication Fee Waiver: There shall be no fee charged for the followlng: a. Public access and local origination programs for cable television syste~s franchised within the city/county. b. Photographic evidence for use in a criminal investigation or civil proceeding. c. Filming, video taping and still photography by students, educa- tional institutions, other governmental agencies and charitable institutions shall be exempt from permit fees only. Violation If an applicant violates any provision of a film permit or the implementing reguiations, the issuing office may cancel the permlt. Definitions For the purpose of this ordinance, the following definitions shall apply: a. News shall documentary preolanned event. mean regularly scheduled news programs (but not magazine or .programs), and special news programs which are not and are broadcast wlthin twenty-four (24) hours after the b. Charitable Institutions shall mean a nonprofit organizatlon, WhlCh qua11fles under Sectlon 501(c)(3) of the Internal Revenue Code or Section 23701 of the California Revenue and Taxation Code as a charitable organization. No person, directly or indirectly, shall receive a proflt from the marketing or production or showlng of the fllms, tapes, or photos. -2- c. Student shall mean an applicant who has subm1tted a letter wr1tten on school letterhead by a school admin1strator or instructor stating that the applicant 1S currently enrolled in a recognized U.S. educat10nal institution and that the r1lm 15 not commerci~l release and who agrees, in writing, to pay the city/county all waived fees in the event the film is ever used for commercial purposes. Note: Whf1e the model ordinance provides for permit fees, the Film Industry has recommended the jurisdictions consider no fees. This policy could be utilized to encourage filming In particular juris- dictions, however as a trade-off the jurisdiction might wish to require that their jurisdiction be recognized 1n the credits. -3- .- fOUTHERn CALIfORniA AffoctATlon OF GOVERnmEnT! 600 /auth Commonwealth Avenue .fuite 1000 .taJ' AngeleJ'. CalifornIa · 90005 . 2[3/385-1000 FINAL CODE OF CONDUCT REPORT FOR THE MOTION PICTURE AND TELEVISION PRODUCERS August 13. 1986 PURPOSE The purpose of the "Code of Conduct" report is to establish behavloral guidelines for location filming. Location filming 15 a bus1ness and is controlled by time constraints, production costs, employee problems and all other factors involved in operating a business. However, the good reputation or public image of this business 1S not judged by these factors, but instead by the attitude conveyed in its business dealings w1th the community. Therefore. the permittee shall adopt and w1ll adhere to the conduct code when filming on location. PERSONAL CONDUCT CODE All personnel on location are guests of the community. They shall conduct themselves in a considerate and responsive manner In all their dealings with the community. MANAGEMENT ON LOCATION Permittees will be responsible for controlling the entire operatlon of fllming on location and shall require its personnel to comply wlth the Code of Conduct. Their respcnslbilitles are: A. Preoaration for Lecation Shootlnq: Upon establ1shment of the required location, the permlttee wlll con~act and lnform the affected communlty resIdents or businesses within the 1mmedlate area of the proposed filming, includ1ng the mentIon of any unusual Clrcumstances (e.g., irregular hours or nOlse). B. Location Sheoting: The permittee or its authorized representative wll1 be respanslble fer handling all the affected cltizen's 1nqu1ries ana comolalnts wlthin the immediate area or film1ng. ResolutIon of the problems will be prompt and will be performed 1n a courteous manner. The cltyjcountyls per~lt Coordinator should be contacted for assIstance 1n handling any unresolved ccmolalnts. C. Post-Location Shootina: The permittee shall conduct operatIons in an orderly fashlon. The area used shall be cleaned of trash and debrls within a timely manner. The city/county may require a faithful performance bond to ensure cleanup and restoratlon of the slte after lnspectlon. The bond shall be returned to the permittee within seven days of compliance. The Reglonal One-Stop Film Offlce and the California Film Office will be available for assistance in the resolution of any problems that may arise. COMPLIANCE To assure comp'iance, the following items will be adhered to: 1. Production Cor,lpanies A. The permittee or its authorized representative WI Ii be responslble for and reqJire: 1. Identification of crew members, when possible. 2. Proper identification of production-related vehicles. ~~~~ Filminq Requlation 1. Permlt Application: informatlon: An applicant must provide the following a. Full legal name of applicant (name of person filing application, if different); b. Business name of applicant (if different); c. Business address of applicant; d. Business telephone of applicant; e. Location(s) of proposed filming or taping; f. Date(s) and time(s} of proposed filming or taping; g. Lists which include the aoproximate number of cast and crew, cars, personal autos and trucks. h. Services of city employees desired or required on location during filming; i. A brief description of the type of activities to be fil~ed. j. Name of person in charge on location; k. Such other informatlcn as dee~ed reasonably necessary by the city/county. 2. Advance Notice for Aporoval: An applicant will be requlred to submit a permit request at least two working days prier to the date on which such person desires to conduct an activlty for which a per~it is re- quired. 3. Permit Request: A permit application shall be issued for the number of days requested. 4. Charqes: When a miscellaneous cash bond account (name to be determlned by city/county) is used, the city/county shall debit this account for required charges and provide an accounting of such charges to the applicant. Othe~~ise, charges ~ill be pald in advance. 5. Conditions: An applicant shall comply with all candltions or restrlctions of the per~it. 6. Liability Provisions: Far the legal protection of the c~tyjcounty, an appllcant shaHl be required to provide the fallowing: a. Liability rnsura~ce: A certif~cate of ccmorehensive aer.eral l1abl11ty lnsurance shall be required in the amount or $l,OOO,COO combined single 11mit coverage naming the City/county and C1tyj county officers and employees as a cOlnsured indemnlfying agalnst any and all clalms of third persons for personal lnJurles, wrongful deaths, and property damage. This insurance shall be prlmary to any self-insurance or insurance programs the Cltyj county may carry. The certificate shall not be sub~ect to -1- cancellatlon or modification until after thirty days written notice to the clty/county. A copy of the certiflcate wlll renrain on file. b. Hold Harmless Agreement: An applicant shall execute a hold harmless agreement as provided by the city/county prior to the issuance of a permit under this ordinance. c. Workers' Comcensation Insurance: An applicant shall conform to all applicable federal and state requirements for Workers' Compensation Insurance for all persons operating under a permit. 7. Clean uc: An applicant shall conduct operations in an orderly fashion. The area used shall be cleaned of trash and debris within a timely manner upon completion of shooting at the scene and restored to the origlnal condition before leaving the site. The city/county ~ay require a faithful performance bond to ensure cleanup and restoration of the site after inspection. The bond shall be returned to the applicant within 30 days. 8. Filminq on Private Property: An applicant shall obtain the property ownerls wrltten permlsslon, consent, and/or lease for use of property. A copy shall be kept at the location during the hours of the permit. As a courtesy, the local fire and law enforcement personnel shall be notified. 9. Flood Control: When filming in a flood control channel, an applicant shall vacate the channel when permit indicates because of water releases. Please note that when filming in or on Flood Control properties, the agency shall be named as an additional insured. 10. Public Right of Way: A filming permit shall be required for the pOstlng of temporary ~No Parking" signs, parking of equipment and/or cars on public streets, stringing cable on sidewalks or frem generator to service point, sidewalk shots~ and driving scenes. "No Parking" signs shall be oosted by the city/county and the requirements shall come from the clty/county. The fee shall be assessed by the cltjfcounty. 11. Traff1c Control: Far filming that would impair traffic flow~ an acplicant shail use local law enforcement personnel, acceptable to permitting agency, who have primary jurisdlcticn over the roadway belng used.. If the local agency c~nnot provide appropriate safety personnel, personnel of a bona fide Californla Law Enforcement Agency, as aeoroved by local ~gepcYt may be utilized. d. An apolicant shall furnish and install advance warning signs and any other trafflC control devices in conformance wlth the Manual of Traffic Controls, State of Californla, Department of TransDor- tat~on_ All aporoprlate safety precautlons shall be taken. b. All interruptions of normal pedestrian or vehicular traffic must be authorized on the permit. Police officers assigned will inter~ret the oermit, and may further restrict operatlons based on -2- safety. c. Traffic shall not be detoured across a double line without prior approval by the city/county. d. Unless drlven laws. authorized by the clty/county, the camera cars shall be 1n the direction of traffic and shall observe all trafflC e. Any emergency road work or construction by city or county crews and/or private contractors, under permit 0r contract to the city/county shall have priority over filmlng activities. 12. Special Restrictions: For the convenience of the general public, all act1vity by an appllcant between the hours of 10:00 p.~. and 6:00 a.m. shall be performed without undue noise and nuisance. 13. Water Scenes: When filming water scenes, adequate safety precautions shall be prescribed by the city/county. 14. Fires: All fires, explosives or hazardous materials are subject to Flre Department restrictions. 15. Parking Lots: When parking in a parking lot, an apolicant may be bll1ed according to the current rate schedule established by the city/county. In order to assure the safety of citizens in the surrounding community, access roads, which serve as emergency service roads, shall never be blocked. No relocation, alteration, or moving of structures shall be permitted wlthout prior app~Qval. 16. These procedures and guidelines are intended to serve as minimum regulatlons under normal filming circumstances. The film permit offlcer has the discretion to increase or decrease the requirements based upon the actual circumstances. -3- ~ IOUTHERn CRLlFORnlR AI/oelATlon OF GOVERnmEn,,;,/ 600 Jouth Commonwealth Avenue · Julte 1000 · leI Angele.r. California. 90005 . 2[3/385-1000 FINAL CODE OF CONDUCT REPORT FOR CITY NO COUNrv-GOVERNMENTS August 13, 1986 I. To assist the motion picture and television lndustry in acquirlng permlts and i~plementing the Code of Conduct Report, the clties and counties will adhere to the followlng: A. The city/county permit office will provlde pre-location shooting, locatlon shooting, and post-location shooting assistance and advice when needed. Pre-location meetings will be held to avold potent1al problems, IT necessary. The city/county will have a permlt coordinator to issue permits, conduct pre-location meetings, and to make necessary changes to a permit when needed. B. The city/county will designate one senior coordinator to handle all complaints. The senior coordinator will behave in a responSlve and considerate manner. This coordlnator wlll be aware of tre economlC and artIstic benefits of filming and convey thls to the camolainant. This coordinator will VlS,t the locatlon slte, If necessary, to resolve a complaint. This coord1nator wlll ldentlfy problem areas in location meetings. C. Compliance monitoring of location sites will be conducted by the cltyjc8unty per~lt offlce. The permlt offlce wlll aler: the per:nittee ,,,hen vlolatlons have occurred and will lssue 11~~ot'ces of Unsatlsfactory Condltions.1I D. The city/county changes in the orocedures. permlt office will notify the lndustry of any filming ordinance, fllmir.g gUldellnes, and Add }O l'f-C .... i r- ~ . . {"'. ~U 9 \1~~ A LUCRATIVE ALLIANCE: LOCAL GOVERNMENTS AND FILMMAKERS IN THE SCAG REGION ECONOMY August 1986 Prepared for the: Regional Inst1tute of Souther~ CalIfornia by the: Southern Callrornla ASsoc1atlon of Governments 600 S. Cammer.wealth Avenue, SUIte 1000 Los Ange12s, CalTfornJd 90005 ADO I 0 14 -CO 000:106 _:- ~ i3bl' . . INTRODUCTION This report will glve some perspective to the importance of the film industry in the Los Angeles Basin economy. Since the early 1900s the presence of f11m studl0S has had an 1mportant role 1n shaplng Southern Californ1a both econom1cally and soc1ally. The film 1ndustry1s early m1grat1on to the reglon was a prlme magnet and an 1ntegral part of what has become -a large entertainment-oriented industrlal complex. The filmmak1ng industry Obvlously glves a un1que soc1al culture to parts of Los Angeles such as Hollywood and Beverly Hills. The myst1que created by the mOVle industry is a major attractlon for the tourism lndustry as well. The association of the mot1on p1cture and TV lndustry with Southe~n California as the entertainment capital of the world lS still very powerful. This stud} ~5 meant to address the concern over the 1ncreasing number .of motion p1ctures being f11med 1n other states or overseas. An analytlc approach will be useful in looking at total production organizatlon as dist~nct from on-locatlon fllming. Both these fllming and post production phases of filmmaklng lmpact a wide variety of related local business activltles. The reason for doing this study is the recent concern that the Los Angeles region is 1n a new comoetitive e~vironment with many states establlshlng their cwn film cammlSSlons to lure filmmakers to thelr areas. This would boost treir ecancm1es a~d have a negative 1mpact on Los Angeles, or so 1t 'ifould see'lt. An i~put-output model 1S utllized to illustrate the llnkage between f1lmmaklng and other economic activities in the Southern California area. This report illustrates the econom1C impacts assoc1ated with a Slngle feature fllm prcduction through the use of the input-output model. The data, detal1ed by 'r.dustrial sector. shows that no other lndustry ln Los Angeles consumes as mary locally oroduced goods and serV1ces to produce its fInal product for the consumer marketplace than the mot1on p1cture industry. First. the report documents the importance of filmmaking as an 1ndustry in our local econcmy. The~, t,e econom1C stimulus 1mparted by a single fllm ~hen all productlon phases occur lnslde the region 1S examlned. Next. the focus ~ill turn to the lssue of so-called runaway product10n. The locat'on-shoot1ng phase of motlon p1cture productlon wlll be wlthdrawn for a Slngle film and the dlffere~tlal economic impacts will be presented. The locatlon f11m1ng pnase 1S net the most sign1flcant portlon of total oroduction organ1zatlon wnlch has 9lven Los Angeles its lmage as the mctlon p1cture ce~ter of tre world. In fact, Los Angeles has not been the undisouted center of en-location shooting Slnce the 19601s. However, ather states are cur~ently mount1ng advertising campaigns and film commiss1on expenditures to take away the roughly stable share of location sheoting that Lcs Angeles has mainta1ned since the mid-seventies. ThlS report classlfles some maJor factors that may be critical 1n decislonS as to where locatlon shootlng ends up. These are technological. econom1C, and . organizational factors that could be affected by public polley. 1 000107 On the other s'~c of the issue of runaway production lS the fact that some local communit1e5 charge local fees assoc1ated w1th shooting on location ~ that can run nearly ten times h1gher than in other regions of the country. Therefore, we shall examine the var10US economic impacts descr1bed above on a local community. This final section of the report exam1nes only the tYP1cal expenditures of a film company spent per month inS1de a C1ty for teleV1s10n ser1es episodes. Th1S analys1s will center on the local tradeoffs of permit and other local fees as opposed to the st1mulus to the local economy that occurs through the spending of the f1lm company wh1le shooting 1n a local community. Th1S report makes an lmportant d1stinction between locat1on fllming and other productlon phases 1n the motion picture industry Wh1Ch are centered 1n Los Angeles. We examine the 1mportance of these different aspects of production Wll.." a familiar tool of regional economics--the input output model which has been developed for economic impact studles 1n Southern Callfornia. ThlS analytical tool is ldeal for investlgatlng the relation between production organlzation still centered 1n Los Angeles and locatlon shootlng. ASlde from the impacts on output (In 1984 dollars), the lnput-output analysls gives us a basis for assesslng the effects on employment and labor income. The lnput-output model yields the output, labor 1 ncome , and employment impacts on 66 lndustrial sectors of a change in reglonal expenditures (or demand for products produced 1n the Los Angeles Bas1n). The model starts wlth estlmates for productlon spendlng in the motlon picture industry ltself. These are the effects that immediately or directly flow from the motion picture budgeted expenditures. However, for the lndustry to carry out lts fllm productlon, it must obtaln inputs (goods and services) frcm other lndustrles in the reg10n. These are the indlrect effects of the dlrect expend1tures in filmmaking. The model measures these as well as a thlrd level of economlC lmpacts that result from the spendlng of incomes 1n all the lndustries affected (food, rent, etc.). These impacts are referred to as the lnduced effects. The dlrect, indlrect, and induced lmpacts wlll be estlmated for three lmportant economlC variables--regional output, employment, and labor income. ~ . 2 OO'010fj - = ~- SIGNIFICANCE OF THE MOTION PICTURE INDUSTRY I~ 1HE REGIONAL ECONOMY ThlS sectlon w111 give same perspect1ve to the 1mportance of the f11m lndustry 1n the Los Angeles basin economy. The medla has portrayed a battle royal: the State of Cal1forn1a1s deslre for revenue vs. the unw1l11ngness of communit1es in Southern Callfornla to woo--or even ~elcome producers. This report shows that both producers and local commun1t1es can coex;st--lucrat1vely. Locat1on fllm;ng, the facet of movie production that has direct econom1C 1mpacts on local commun1tes in the SCAG reg1on, makes good economlC sense for both the film company and local communitles. A conservative estlmate of $1,050,000,000 in dlrect locat1on film1ng expendltures in Los Angeles prov1des a safe reference point for assessing the economlC 1moact of the mOV1e industry far local commun1t1es 1n che SCAG reglon. The State of Ca iforn1a Film Office reports that approximately $4 billion was spent on d1rect product10n expend1tures (as found 1n a typical ~otion picture or TV budget) in 1984. Practlcally all of this money was spe~I in the Los Angeles reg1on. These flgures, along with a survey of ~otion picture and TV budgets show us that f11mlng on locat10n is anywhere from 20-30% of total production costs when we examine the organization of irjustry product10n. In 1984 motion picture and TV production as a sectG~ in the Las Argeles County econo~y e~oloyed about 75,000 persons. This may not seem slgn1f1cant in comparison to the almost 4 ~111io~ Jobs 1n Los Argeles County. However, thlS sector 1S a vltal part of our lceal economy referred to as the bas1c lndustrles sector by regioral economists. Trad1tiGr.a11y basic lndustr1es are thought of as those produclng gocds and se~Vlces that are exported to satlsfy customers outs1de of the regiont not Just local consumpt1on. Ir a sense, they brlrg wealth lnto t11S reg'on from other parts of the country and the rest of the world. Motlon plcture production is included in the dlverslf1ed marufactur1ng industr1es that comprise almost half of the reg10r's baS1c 1ndus:~y employment or economlC base. Though the mot1cn picture and TV procuct10n industry comorlses only 7% of the diverSlfied manufac:u~lng sec:or employment, it accounted for 17% of the growth Tn tre d~ve~slfled manufactur1ng lndustr1es from 1972 to 1984. In other words, f1J~mak~~g generated one(1) out or every slx(6) new jobs added 1n d1ve~sified manufactuflng sectors of our reg10nal ecorom1C base. F1lmma~1ng e~cloyme~t grew by 66% from 1972 to 1984 (addlng about 30,000 Jobs to a base of 45.00C in 1972). Thus, th1S relatively small sector is an lmportant subcomocne~t of the basic 1rdustr1es v1tal to future econcm1C g~~wth. Furthe~ st1mulat1ng local bUSlness 1S the r1pple effect Wh1CP lS anywhere f~om three to ten times greater than the direct oroduc:1Cr. do11a~s soent 1~ f1lming (dependlr.g on WhlCh type of business 1S cons~dered). The motIon picture and TV 1ndustry has t1€ h1ghes: lcca~lo~ quct'e~t of any basic sector 1n Los Angeles County (7.65). A lacat10n quot1ent 15 :1e rat10 of the proportlon of total employment this industry acc~unts for 11 L.A. relatIve to the proport1on of thIS 1r.dustry In the total e~D7Gyment of the entlre United States. The high location quotie~t is ofte1:~cught to slgnlfy areas of comparative advantage relatlve to othe~ regions of the country (1.e., the value of the quotient would be one 1r ~e had no grea:er 3 0OO1~ advantage or proportion of total e~~'~yment 1n this sector). The next section examines the lead that the local economy has in movie and TV productlon and the compet1tlon lt 1S experlenC1ng from other regions that seek to lessen our region's comparatlve advantage 1n fi1mmak1ng. . COMPETITION FROM OTHER REGIONS AHD RUHAWAY PRODUCTION Despite Los Angeles1s substantial lead. other states are seeklng to enhance their shares of the lodustry. Filmmakers are work1ng outside Ho11ywood 1n such record numbers that Los Angeles's reputation as the movie production capital of Amer1ca 1S being challenged. In 1984 not one major Academy Award went to a movie shot .- ~ollywood. And. of the 175 feature films produced 1n thiS country (in 1984) 81 were shot outside of Callfornld, costing th1S region an est1mated $1 b111ion in lost wages and productlon related costs than if they had been filmed here. The long-run multplier effect of these direct locatlon shooting expeditures 1S estimated at $4.2 billion when total product1on-re1ated regional spending is taken 1nto account. New York has always had its own motion plcture and TV lndustry and is the pr1me beneficiary of the exodus from Californla. New York has taken 60% of the market for TV cDmmerc1al product1on. Also, money spent on feature films and TV product1ons in New York C1ty has more,than doubled Slnce 1983. The competltion from other reg10ns for location filmlng is a1so growing. Nevertheless, other segments of productlon and distribution, d1stinct from . the f11mi~g-on-lQcation phases of motion picture productlon, are stlll centered 10 Las Angeles. For every fl1m shot outside of Los Angeles, the posltive soending effects are about three tlmes larger than the lost expe~d~tures because the f11m was shot out of the reg1on. Perhaps the most serlCUS threat to the reglon1s production industry 1S the real challenge presented by the emergence of several new permanent Studl0 complexes 1n such areas as Wilmington~ N.C.. Houston~ Flor1da and New York. Tlb1e 1 gives some comparlsons of production revenues ln motlon plcture and TV lndustrles in Los Angeles and other regions furnished by state film offices. _n' 4 000110 1 <t' -'" . . . 1l~"" Table 1: leading Movie-Maklng Reglons, 1985 ($ millions) Ranking: Region: (1) Los Angeles (2) New York (3) Florlda (4) North Carol1na (5) Massachusetts ( 6 ) r 111 no i s (7) Ari zona (8) Georgl a (9) Texas Productlon Revenue: - $4,000.0 $1,700.0 $114.0 $68.3 $67.0 $34.9 $34.1 $34.0 $28.0 Source: 1985 National Confe~ence of State Leglslatures, Senator Carl Moore, Denver, Colorado. It ;s difficult to specuTat~ about the outcome of camoetition from ather regions and the posslble mlgration of motion plcture prod~ctian business from this region in the future. We can, however, be more cefinite about just what we m1ght be misslng. Thus, the next sectlon answe~s the question, IIJust how lmoortant is a major feature film to the reg10nal economy7H In the process of ans'lIering thlS quest10n '~e shall also learn aDout the ,nput-output mcdel WhlCh can trace t,e ecor.omic lmpact of film productlon on the regional ec~nomy. REGIONAL INPUT-OUTPUT SPENDING EFFECTS AND FILMMAKING: To get a good p1cture of how a fllm lmpacts t~e reglonal economy we Cdn thlnk of a pebble thrown into a pend. After the dlrect impact, rlpples are V1S1bl~ which Circle the ooint of 1mpdct. The inout-output model 1S a tool WhlCh helos us trace :he ripples of spending that take place when the public demands a motion p1cture and budgeted exoe~ditures to make a feature film hit thlS reg1on, llke a small pebble hits.the pando Waves of soendlng can be thought of as levels af expendltures whlch are generated from the original impact of a motlon Picture prcductl0n. The analysls involves three dlstlnct levels of spending as lllustrated in Flgure 1. ;) 000111 ...., U rO ~ E ~ U .... .... == E . a ~ c 0 0 U <0 L.a.J a (>'T r- C rei a ...... u 0 L.a.J I- -- It rei u c a a -l -a .... ...... <1.1 ...... U QJ > U QJ ~ >,-- QJ :::I ..... I- a t.."O "- 0'''''' > :::I a t.U ~ C U c...... I... en .... <1.1~ uo.... QJ ~ -a I... .... C .... >,0.. C 0.. E <1.10-- a u Co ~ ...., c .... QJ .... <::r" Vl U1 U a ..., u E cr: I... QJ .... .... :::I M I... QJ 1......., > -0 r- VI N <1J .:L .... a QJ c <""'J '" ::s: lA- c I... -0 ::E r- - - QJ ~ a c QJ C t.. U13:......c::1- c ...... V'I c::J 0 >,1... .... I... :::I - U ..a a 3: 0 c:l i- ~ + II t.. a 3: ~ >, U1 I'CI I'CI c::J C ~ I'CI C I... ~ 31 a QJ ~ 0 <V ~ .... ;> .... ;> O"l.... a C) .... 0 ....1 (lJ r- U ':J-u ...... -;::1 c:: <1.1 c:::: '1.1 U ,~ Cl - ...... Cl - ...... 'lJ >. -- u >. u '...... . I... e .... 'lJ I... 0 .... CJ '.L- ~I E 4-l ...... u... 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'" ...... I... ~ W ...... .... CJ U <V U 0.. a.. ...... -l U uo:: <l) QJ >< e <l) t.. ..J ..... .... 4- =1..1.I -l ..... ::J(.:J u.J '+- U1 ..... -l -< U W ..... 0.. <C ::> w ::J !.U W ::: t.. ::> \.oJ u t..LI co ::> I..L.. 0 o- W I... U'l .....l ...... C'I W ..... ..0 . -l -a QJ U -0 ::: -" t ..... ::: 1lI = QJ G "" :1.1 U "'0 a... Cl u :::J..c:: z I... ...... ':l !- :::l :::I :::::: ::J "'...... 0 .... 1:1 ::: lfl ..., -0 c::I . -0 .... W -0 - 11 2: 0':} '::;l 3 I C a '- w C ;t) ~ 'J.} CJ , i- -u .... VI - Ct::....-' tl... L:... a.. ~ u... 6 000112 k '- " l . . . OIKclT EFfECT: THE FILM EXPENDITURE The making of a film, of course, starts with the public's demand for a feature f11m. One of the reasons why 10cat1on shooting 1S done outside the reglon has been the public's des1re for realism. Its hard to imagine Out of Africa being filmed on the back lot at Burbank. None-the-less. assume all the praduct10n aspects of a f11m'S budgeted expenditures end up 1n Los Angeles. - Examination of film budgets. studies done at UCLA. and the industry's own need to keep cost w1thin a safe marg1n to make a profit after a film is d1strlbuted to consumers in the national and lnternational market, lead us to a round figure of $15 m1l1ion in production cost tL make the average feature film in 1984. To cons1der the complete economic impact of the d1rect expenditure or ~Irect effects. we need to do more than merely translate the money spent 1n Beverly H111s to shoot a scene for Beverly Hills Cop into quantltativ~ estimates. The benef1ts to the reglon and the commun1ty go much deeper. - The input-output model demonstrates that $15 million spent on a feature f11m w111 lead to an additional $45 mill10n for a total of $60 mill10n of related reg10nal spending when we see how the f11m expend1tures ripple t~rough the local economy in the three waves or levels of spending. After exolalnlng these waves of spending. lt will be shown that the impacts, or multipller effects. can be measured in terms of employment and labor 1ncome created. as well as the value of output produced. INDIRECT EFFECT: THE BUSINESS RIPPLE EFfECT F1gure 1 ShOWS the immediate impact when consumer demand calls forth a S15 ~1111on ex~enditure in the mot1on p1cture lndustry to cover the product1on cas: of a film produced ent1rely 1n the SCAG reg1on. ThlS is the f1rst wave or level of spending to impact the local economy. The second level of lmoacts or wave-like economic ripples lnvolve other industries llnked to the mak1ng of the mOV1e. Lumber 15 bought to bU1ld props. extras n1red from the local commun1ty; halrdressers and food-serv1ce workers demanded, local hotels and restaurants cater to the filmmak1ng personnel, ard Qtne~ eS:lblishments WhlCh provide 1nputs to the production are exper1erclng an 'ncreased demand for their goods and serVlces. For the motion plcture to be made. the f1lm 1ndustry must obta1n 1nputs (goods and serv1ces) from ot1e~ 1ndustries. and these bus1nesses. 1n turn. are economlcallj st1mulated. Thus. the direct effect is compr1sed of only money spent out of a st~dio budget to produce a film. The lndirect effects result from such things as mare local hairdressing serV1ces requ1rlng more ha1rspray to be purchased. When more shootlng 1S done more pollce are put on duty. Added demand for foad to feed the film crews means more buns and hamburger pattles w1ll be orjered from wholesalers in the area. These interindustry business effects are the 1ndirect effects. For the $15 m11l1on motlon plcture the bus1ness r10ple effect 1S $22 m1l1ion ln inter1ndustry purchases. As shown in Flgure 1. when these ind1rect effects are added to the direct flow of spendlng for the f11m project. the second level buslness ripple effect totals $37 million. These numbers are calculated from the SCAG 1nput-output model Wh1Ch simulates the detailed flow af goods and services betHeen the var10US producing and consuming sectors of the reglondl 7 000113 economy. In addition to the spending for good and serV1ces used 1n making a film, the input-output model also records employee comoensat1on and number of person-years (labor time) expended in producing a unit of output 1n each 1ndustry in the SCAG region. The second level of economic impacts can be summar1zed by the rat10 of the d1rect and indirect spend1ng effects to the imrned1ate $15 mill10n expenditure Wh1Ch lnltiate the second level local bus1ness r1pple effects. This rat10 is called the Type I multipller effect. This OJt~ut multipller provides an ind1cator of the degree of lnterdependence of any industry with other industries in the region. The motion picture industry has the highest level of structural interdependence with the other 65 sectors of the regional eCJnomy. The output multipller (Type I) for the mot1on picture sector 1n Table 2 15 2.46. In other words, $1 mil110n spent in filmmaking calls forth $2.5 mill10n of total reg10nal spend1ng from all local sectors which are related to f11m production in the reg1on. No other industry in the region has a higher second round output-generating effects when the local business ripple effects are considered. Even the aircraft and construction industries have lower multipliers (1.81 and 1.75 respectively). INDUCED EFFECT: THE LOCAL CONSUMPTION RIPPLE EFFECT To calculate the total economic impact, we need to ccnslder one further level of spend1ng effects. This third level or economlC Impacts shown in Figure 1 is termed the induced effect. Induced impacts represent the labor 1ncowe spent 1n the tradit10nal consumer marketplace by workers who owe the ex'stence of their Jobs either directly or indirectly to the mot1on picture 1ndustry. When a 10catlon manage~ gets oa1d to scout locations. or a haird~esser gets his/her mont~ly salary. trey take t115 1ncome home and spend 1t on things :hat the tyolca' household buys--cars. houses, furn1ture, clotMes. stereos and other consumption 1tems. These final purchases by consumers make U~ the largest share of the Gross Reg10nal Output. What 1nput-cutput analysis revea1s lS t~at these so-called flnal purchases are only the tip af the 1ceberg beneat, which lle the larger volume of transactions that occur bet~ee~ bUSInesses. For examole, the sale of a VIdea taoed movie to a consumer 15 the end product of a series of regional transact1ons. To make the oroduct that IS finally sold also 1nvolves the sale of petroleum to t1e taoe manufac:urer, the film1rg which lS recorded on the tape, 1ts reproductlon. ard the sale of the recorded tape to the whoiesale a~d reta1l distributors. So, 1nout-outout analysis 1S analogous to a microscope that uncovers the many 1nter-related busi~ess sales, 1n addltion :0 t,e flna! sales WhlCh are typ1cal1y portrayed as a barometer of econom1C health. . . The induced impact revealed In Figure 1 is S23.4 mill10n resulting from the origlnal f1l~ project exoendlt~re. The long run or complete multiplier . effect 1S derived from the direct, the lr.airect and the induced effects 8 000114 . . . ....,_:... -.~~., :: added together. ThlS reflects the direct lmpact, together wlth the buslness and consumer ripple effects of the orlginal $15 mllllon expendltur~ to make a fl1m. The rat10 of the total economic fmpact to the cr1g1nal flow of film project spending that 1nitlates the second and th1rd level spend1ng effects lS called the complete (Type II) mu1tlp1ier. Slnce $60.4 mllllon is the total economlC lmpact, the long run impactor multip11er effect is four t1mes greater than the lmmediate spend1ng of $15 mil110n to make the film. EMPlOYr.ENT AND INCOME Also of great lnterest along with the output multiplier effects are the employment and labor income mult1pllers. Employment and lncome multipliers are directly analogous to the output multlpli~, _ given in our example above. We often are mare interested 1n local income and job creation or reduction than in the value of products produced and consumed (output). Products such as mOVles are often exported to beneflt other regions, whl1e labor income and jobS certa1n1y measure benefits to local res1dents. The complete or Type Ii employment multiplier for the film industry slmply measures the sum of the dlrect, 1nd1rect, and induced employment change in the SCAG reglon resulting from the requlrements needed from all sectors when one add,t1ona1 job 1S generated in f11mma~lng as a consequence of the direct lncr~ase 1n exoendlture 1n thlS industry. L1Kewlse the complete or Type II 1ncome multlpl1er measures the sum of the direct, 1nd1rect and 1nduced change in lnccme in the SCAG region per dOllar of income added 1n the filmmaking industry. The bUSIness riDole effects are summar~zed for output, employment and 1ncame by the iype I mult1pl1er which has the same 1nterpretat1on as the Type II multipl1er except that it leaves out the induced 1mpacts. It summarizes only interrelated buslness transactions. Provlding est1mates of total direct and indfrect chan~e in outout, e~ployment and lnccme 1n the SCAG region per unlt of dlrect change 1n the same varlable for any 1ndustry. the busi~ess ripple effect is of speclal lnterest 1n analys1s where we do net excect consumer spending effects to be relevant. For examp:e, t~e s~e~dlng of labor lncome on consumer goods is nat useful 1n assess11g the eccnom1C 1mpacts on a c'ty t~at result when location shootlng takes place lnslde that commun1ty since the cons~mer expend1tures may occur cutside the city. We w1l1 expand on thlS pOlnt later. Table 3 reflects the Type I (dlrect and indirect effects) and Tyee II (direct, lndlrec: and induced effects) mult'pllers far employment and 1nccme 1n the motiOn p1cture industry. From this point we shall use these mult1011ers to shaw the slgnlricance of the f11m industry 1n the Los Argeles basi~ econcmy. Then we shall use tbese multipliers in an analysis of two d1stlnct phases of product1on organization -- the on-locatlon shooting phase and the pest locatlcn shcot~r.g phases of production. When cons1derlng only film1ng-on-location production, the d1rect spendlng effect lS the act~al dollars spe~t for locatlon filmlng. Going on locat1on simply means leavlng the studio to shoat scer-es. We are concerned with local ecorcmlC lmpdc~s when d locat1on is chosen in Los Angeles. Here we 9 0001.15 shall apply the multiplier analysls for O~l~ film company expendltures that . are made in the Clty itself. Whlle the multlpliers given in the table are lnteresting in and of themselves, they must be approprlately lnterpreted in each appllcation. We wlll discuss the output. employment and 1ncome impacts of a motion plcture 1n all aspects of productlon, the loss of locatlon filming only. and finally. the lmpact on a local communlty in WhlCh filming takes place. Table 3: Type r and Type II Employment and Income Multipliers for Motion Picture and TV Productlon. Employr.~' : Income .ndirect Effects Multlplier: (Business R1pple Effect --Type I Effect) 2.926 2.686 Induced Effects Multiplier: (Total Multiplier Effect --Type II Effect) 6.379 3.999 . EMPLOYMENT EFFECTS: For every Job directly tled to production of feature fl1ms, made-fer-TV movies, documentaries and TV series there are three jobs that depend 7ndirectly on this segment of the entertalnment bus7ness. When the lnduced lmoacts of motion picture maklng 1n Los Angeles are also considered there are six Jobs t1ed to every Job created or lost In the motlon picture lndustry. In other words, we can trace 450,000 jobs wh1ch depend In some way on the eXistence of an attract1ve environment for moviemakers. Thls e~ployment figure comprlses roughly 8% of the jobs in the reg10nal economy In 1984. local Business Ripple Effect: The f71m industry in the Los Angeles baSln directly employs roughly 75.000 persons directly. Indirectly there are nearly three times that amount of ~orkers employed in other industrles which work with the film industry (l.e., the type I multlpller ;s 2.93 1n the I/O table). Total Rlpple Effect (Consumer Rlpple Spending Effects Added): The total employment linked to this segment of the entertainment bus1ness (through local business and consumer ripple effects) is more than six tlmes as large as the direct employment 1n the industry (i.e.. the d,rect, . indirect. and induced effect, or type II employment multip1ier is 6.4). 10 000116 . . .- ~ REGIONAL LABOR INCOME: Direct Spending: Close to $2 billlon 1n wages and salaries are generated annually in the 1ndustry-through direct employment 1n the industry. Local Business Ripple Effect: The indirect wages pa1u to workers in industr1es linked to the film 1ndustry are 2.7 t1mes the dlrect disbursements 1n payrolls 1n filmmak1ng. Thus. the generation of at least $5 billion 1n payrolls dependS upon the health of fllmmaking. Total Ripple Effect (Consumer 3pending Multiplier Effects Added): When the total effect of film-related business and consumption spending 1S added to the direct and lndirect impact of filmmaking expend1tures in the reglon another $4 of labor income 1S generated for every $1 spent 10 direct production of a f1lm. This means that as much as $8 bill10n 1n wages are tied to motlon picture and TV productlon In the SCAG reg1on. Now that regioral 1moortance of the filmmaking lndustry to emoloyment and labor income generation has been established. we need to further exam1ne the 1ssue of lost production when some of this bUSlness migrates to other regions. Before gettlng into the lmpacts of lost product1on. consIderatiOn w,ll be gIven to factors 1nfluencing the declsion as to ~here locat,on f,lming w1ll take place. FACTORS IN CHOICE FOR LOCATION Of MOTION PICTURE AND TV FILMING As with most complex ,ssues it 15 difficult to give a slngle major cause for the chOIce of location shoct1ng. The migratlon of :1e on-locat,on shoot,ng aspects of f,lmmaking to other reg'ons involve anyt11ng from legal decis'ons and the rise of lndeoender.t f,lm ccmOdn1es to tre advent of colar televls10n and the public's demand fer more realism 1n t,e portrayal of storyllnes. The factors highllg~ted he~e are chosen 1n areas where ~ubllC policymakers could have some lnf;uence, or fac:ors which are :lr~ly based 1n the composition of the regional economy. These facters are: teChnological. economIc, and organ,zational. Technological factors 1nvolve the use of fewer lnputs to produce the same quant,ty. or better qual1ty products because of lnnovations. Econcm1C factors would involve lower labor costs, material casts. or other product,on costs for the same quant1ty and qua1lty of 1nputs. Organlzat10nal factors are those which lower the cost of production when the same technology and tr.e same inout costs confront a producer. Far example. two reg,ons wlth the same labcr casts. local shaotlng fees. apd the same advanced film,ng equ1pment cauld d,ffer ~lth respect to the physical centrality of the 1ndustrial faClllt~es for sma;! subcontractors and independent product1on compan1es; or. tne t~o regIons could differ w1th 11 ooo~~ respect to the t1m~ it takes to get letters of permission fQ~ ;;lming on . locat1on; or, the organizat1on of the process for getting a permit. Such organizat1onal aspects of tlme and spatial locatlon are hard to translate into direct dollar costs. However, these factors may be cruc1al for determin1ng where a producer dec1des to shoot scenes for mOVle and TV productions. Examples of technological factors are plentiful. More f1rms 1n competlng regions offer mobile locatlon shooting w1th more Soph1stlcated technology. New innovations in advanced sound stage equ1pment have led to new construct10n an. l~creased competltion from new permanent stUd10 complexes in other reglons that adopt and advertise more advanced technolog1cal stUd10 equipment. A prlme example of a determining economic factor is ~~~or costs in right-to-work states hat can be 25% lower than labor costs in Los Angeles. Also, shooting on location has become cheaper than buildlng sets and filming on a back lot. A popular economic factor cited 1nvolves fees for shooting that can be ten times h1gher in Los Angeles than in other reg1ons. (The last section of the report expl1citly addresses thlS 1ssue.) An organ1zationa1 factor often clted by producers is the need for the permlt process to be coordinated in a way WhlCh saves tlme. ~ometimes two location managers are hired for fllmlng in Los Angeles -- one for flnding locations and one for gettlng permlts, paying fees, gettitlg letters of permission. . Public Policy The perm1t process, local fees and letters of permission have been ra1sed as issues that fall 1nto one or more of the categorized factors Wh1Ch affect cnOlee for loeat10n shooting. Perhaps lt would be ~elDful to concentrate on a large range of lssues rather than 5ingl1ng out one slngle lssue such as local fees. Local fees charged by local governments for shooting on locatlon compr1se such a small part of the total oroductlon cost that 10catlon choices may not be as sensltive to lowerlng fees a'one. Nonetheless, we shall examine the lmpacts of lost location fees as d source of revenue to cover local government spending lncurred by location f-'~l~g 1n thelr communlty. A more comprehensive strategy to meet the compet1tlon from al~ost 100 otner state and city film councl1s 1S for local governments to coooerate wlth the f11m 1ndustry to ensure that Los Angeles remalns the ~high tech" fl'm leader, and retalns lts skllled labor force edge~ Other states offer rebates and other economic induce~ents (such as moratorlums en fees, advantageous labor pOl iciest and extraordlnary local gove~nment cooperatlon). Other reg10ns have been known to give dlscounts (5% prlce reductions) on any goods and serVlces purchased by a f11m company In connection with shooting on location. A useful aporoach would be to come up wlth a strategy that successfully addresses all three areas--techno10gy and skills retention. reductlons in . the direct costs of product1on, and cooperatlve local and state go~ernment 12 OOO~8 . . . arrangement~ that reduce the hard-to-measure organizational lssues such as spatlal orga~izat1on, more accessible lnformatlon on ava11able locatlons (establishlng a regional location llbrary), and streaml;nlng the permit process. Although such factors 1nvolv;ng t1me costs, spatlal location, and information are d1fficult to quant1fy, they are very 1mportant. REGIONAL IMPACTS OF LOST PRODUCTION: Hav1ng outlined briefly some factors 1n the migrat10n of the location f11m1ng port1Gn of motion p1cture product1on to d1fferent regions. it is useful at th1S t1rne to cons1der the economic impacts of lost production. This analysis w11l underscore the pos1tive gains and extent of potential econom1C lu~5es wh1ch public policymakers may want take 1nto account. I. A MAJOR MOTION PICTURE: Business Ripple Effects: A typical major motion picture runs close to $15 mill10n 1n product1on cost. The loss of one p1cture would translate into a loss of $37 m11lion ln total regional output. $7 million in employee compensat10n, and roughly 300 Jobs 1n the reglonal economy. If only tne locat1on shootlng for the film 15 lost to other regions (assum1ng these costs average about 20% of the total product10n costs) then the loss translates into $7.4 million of lost regional output per f1lm. 51.4 million 1n lost laber 1ncome per film and about 60 jobs per f11m shot elsewhere. Total Ripple Effect (Consumer Spending Multiplier Effects Added): The total long run multlDlier effect of a lost featu~e f11m means a pcte~t1al loss of 560.4 million in reglonal output, $10.5 m1llion 1n lost ~ages, and close to 500 Jobs. F'lming on location outside the Los Angeles bas1n, while retaining other prases of production of a major motion picture could result 1n total losses af about $12.1 mill10n 1n lost reg10nal output, and a loss of $2.1 m1ll10n 1n Nages as well as approximately 100 jobs. II. SENSITIVITY ANALYSIS OF RESULTS: The SlZ~ of the regional imoacts of lost product1on and associated trade-offs are sens1tive to the assumptions made as to the total cost of the praduct10n and the share of the total prOduction budget devoted to locat~on srooting. Every dollar of lost location f1lm1ng stlll br1ngs 1n three dollars of spend1ng 11nked to other phases of f11m production when a new f11m 1S shot outside the region. This 1S based on careful research and an informed analysis of how the estimated impacts change with small changes ln our 1nitial assumptions. 13 000119 ? L~~s look at two extremes. Hold the total cost at $15 mi1110n for a major ~ feature film and vary the portion of budget spent for locatlon f11m1ng from 20% to 30% of the film's budget. Analys1s of budgets (and other res~arch studies confirm) that shootlng on locat1on costs can be as h1gh as 30% of the total budgeted productlon costs in a feature f11m. Therefore, the extremes are spending a large port1on for locat10n shoot1ng ($4.5 mlllion) outslde and l1ttle post productlon expenditure ($10.5 million) lnside the region vs. a smaller proportlon (S3 m1111on) spe~t for filmlng outslde and a larger amount ($12 ml111on) spent on other phases of making the feature f11m lnside the reg1on. If the f11m 1ndustry 1n Los .Angeles handles those phases other than the actual fi1m1ng-on-lccation productlon phase, then the 20% loss in direct expend1tures for shaot1ng 1" other regions are stlll offset by a $12 million 1nfuSlon of expendltures llnked to the other phases of ~he f1lmmak1ng. The total economic lmpacting Southern Callforn1a is $4B.3 million from a film shot outside the region, while another $12.1 m1l1ion is lost to other regions. The expendltures inslde the region even whe~ a f11m 15 shot outside result in a positive lmpact four tlmes as great as the loss in reglona~ output assoclated with shooting outside L.A.. Now, lf the proportion of the budget going to shootlng an locatlon outslde the region's changed to 30% of the 515 milll0n budget, the shootlng costs run $4.5 mill1on. If this amount is spent outside the reglon lt means a loss (or reglonal oODortunity cost) of $18.1 mllllon in total economlC imoacts. If the ather phases of productlon such as film edit1ng. hlring ~ actors, scor1ng mUS1C, are only 70% (instead of 80% as in the previous ~ case) th1S leaves 510.5 mil110n ln productlon expendltures in thlS reglon WhlCh trig~er Sd2.2 m111ion increase 1n total gross regional spend1ng through the related business and consumer spend1ng effects. Under this scenar10. the lass of $18.1 mllllon from runaway production 1$ offset by only 542.2 ml1lion increase In output 1n Los Angeles 11nked to the rE~ai~~r.g expe~dltures 1n the industry. In th1s case, the positlve lmpacts assaclated wit~ the ~rcduct1on of a film outside the reg10n are only 2.3 tlmes greater than the loss because the f11m was not shot 1n the region. III. FILMING ON lOCATION fOR TELEVISION: fILMING IN CITIES AND LOCAL COMMUNITY ECONOMIC IMPACTS It is difficult to exactly Slmulate the econom1C lmpacts of locatlon Shoot1r.g in 1ndlv1dual clties. Each city has a d1fferent m1X of businesses and serV1ces ava11able for use by the fllming companies. As a result, the amount o~ se~.;ces demanded by the f1lm1ng companies w111 vary greatly oetween clt1es. Furthermore, the buslness and consumer r1pple effects wlll vary dependlng upon t~e the economic mixture of the city. The followlng analys~s lS intended to illustrate the types of economlC tradeoffs that might be fnvalved ~hen location film1ng occurs 1n a city. Having established the reglonal lmportance of the film industry, and the lmpact of lccatlon-shootlng elsewhere, we now will further narrow our focus . 14 000120 i~~~~~ -- ~~:- ~ ~-t~I;_ ~ . on that port1on of 10cati0r. shooting budgets that are spent in a local communlty. We consider on-locatlon f1lmlng for televislon ep1sodes, as opposed to feature f11rn shoot1ng. F,1mlng for TV episodes 1$ a relatively frequent occurrence in the local comrnunltles of Southern Cal1fornia. Fllmlng on locat1on often involves slgnlflcant lnJectlons of revenues for local merchants and film-related local businesses. Expenditures for locatlon shootlng can run as hlgh as $100,000 during episod1C telev1sion filming (Callfornla F1lm Off1ce figures are based an actual budget lnformation and converted to averages for a sample of budgets for television episodic fllming compan1es). The $100,000 per month is a f1gure for monies scent in cit1es by location filming companies durlng eplsodlC televlsion production. Up to $15,000 of this amount can be devoted to municipal permits and fees. In an attempt to simulate the impacts on local econom1es, the analys1s used these worklng figures with the input-output coeff1cients for the reg10n to assess the multipl1er effects. The input-output analysis shows that a S100,000 expenditure by the filmlng industry would result 1n a total econom1C impact of $402,000 in increased spending in the reglon. Public Policy Impacts . ~S local gove~nme~ts 1ncur costs due to filmlng act1vities, they face the choice of coverlng those CG5tS through fees on tr.e film1ng companies or by , us'ng mon~es from other reve~ue sources. The issue centers around the risk of losing the economic stiau'us generated by f11m1ng company expenditures if the local fees serve to deter f11ming 1n ~hat city. If a local governmer.t wa1ves 1tS permttt1ng fees and covers those additio~al film1ng related costs from at~er reve~ue sources, then there lS an opoortunlty cost reoresent1rg the economic effects of the government's reduced soendlng for other serVlces. If local government fees are the equ1valent of $15,000 of the SlOO.GGO soe~t by filming companles. then the effect on the economy of the cholce to waive fees is $47,000 when the full ~uit1ol1er effects are considered. This ~eans that the total net econom1C lmcac: of the fflmlng actlvlty;s reduced to $355,000 from the orlglnal $402.000. This stll1 shows a substantial net economlC benef1t from the ~ilming act-vity to the economy of the regl0n. . ~cwever, It must be reaJlzed that rot all the economlC beneflts are llkely to occur 1n the c~ty where the f1l~1~g takes place. Although film~ng compan1es may use local businesses, they are also likely to use services of Qthe~ Southern California businesses WhlCh are not in the C1ty where the filmi~g 15 occurrlng. Therefore, some af the direct lmpact of the spending may be last to ether cltles. Also, even if local bUSlnesses are used, lt must be reme~bered that these bus1nesses and thelr employees may be making OUrC1dS€S af goods and services 1n ot~er cit1es. This could reduce the JUSlneSS and consumer spe~ding r1Dple effects on the local economy. The ~e5sage 15 clear that there 1S a substantial benefit to the people and bus1nesses 1n the reglon's economy from retaln1ng the fllmlng actlv1ty even if local governments must fund part of the services to support the activ1ty. Eve~ 1f only a portlon of the filming expenses are spent 15 0001.21. dlrectly in the C;ty where fllmlng ocurrs there ;s the potential for the . Clty'S economy to com~ out a net winner also. However, thlS addltlonal economic activity may not be sufficlent to generate enough revenue to offset the costs Wh1Ch the local government treasurles would have to carry lf the fees were walved. The issue faclng local elected offlcials is whether to stlmulate economlC actlvlty by walvlng all or part of thelr fllmlng fees or to rlsk losing that economic st1mulus Whlle covering all locally 1ncurred costs through the use of fees. CONCLUSION: We have reviewed the importance of the motion picture industry to the Los Angeles basin ~~v,lomy. The input-output model has ut111zed detailed industry information from the State of Californla and U.S. Bureau of Economic Analysls. The analysis presented shows that no other 1ndustrlal sector in the SCAG reglon purchases as much in locally produced goods and serVlces for each dollar of output produced. Out of the 66 sectors in the model, roughly one thlrd are signiflcantly impacted wlth respect to employment growth when a movie is produced in the region. These industries lnclude professional serVlces, personal services, local government, hotels, eatlng establishments, retall and wholesale trade, health services, advertising, printing, amusements, business services, finance, lnsurance, electrlcal machinery, motor veh1cles. air transportatlon, travel services, carnmunicatlons, apparel, food products, construction and local publlC utllities. . There are few industries in the reglon which are related to such a wide variety of other local businesses. The inout-output aralysis bas proven itself fruitful in separating the fllming-on-locatlon phase from other production phases. Through thlS analytical perspect1ve ~e have seen that the migratlon of location filming should not be equated to a total dis~ersal of the motlon plcture industry from Los Angeles. Films snat outslde of Los Angeles have been linked to other phases or movie production WhlCh provlde economlC stlmulus approximately three t1mes larger than the losses assoc1ated wlth fllmlng performed outs1de the reg1on. Nevertheless, fllming outslde the reglon represents a subs:ant~al opportunity cost for the region and ltS local communit~es. The ove~al1 economic galns to the reg10n from locatlon shooting exoendi:.res In a C1ty have been estlmated to be greater than the loss in publiC benef1ts 1r local governments walve location shoot1ng fees. However. the amount of lnc~eased economic activity may not be suffic1ent to generate enough local government revenues to cover the reductlcn 1n fees. The analysis suggests several 1mportant pOlnts for pub11c Dolley. Aoproprlate publlC POllCY needs to be based on a more cGmp~ex analjS1S of the economlC structure of the fl1m Industry than is conveyed by slogans and papular notlons about runaway product1on from los Angeles. Along With this understanding comes an appreclatlon for more broadly based regional pollcles that include technologlcal, economlC and orgar1z~tional conslderations. ~ 16 OOO~22 ~~ Wh1le the organlzational aspects are hard to measure quantitatively. the1r importance should nat be overlooked. Such aspects include provid1ng location informat1on (a regional f1lm locat1on library). spat1al organization (reestablishment of a motion picture 1ndustr1al district). and other measures that save t1rne in processlng local requirements prior to local film1ng on location (standardization of fee and permit requlrements). The number of small bus1nesses 1n the industry has grown rapidly. In light of thlS fact, such organizational measures could provide a better environment for the reorgan1zed 1ndustry. Without such measures small businesses and subcontractors might shy away from locat1ng in Hollywood. 8urbank and other areas which have traditionally found a portion of their identity and tourism l1nked to filmmaking. Above all~ local communlties in the SCAG reg10n need to cooperate to develoD strateglc policles which recognize the slgnif1cance of the motion plcture industry to Southern Callfornia The lucratlve alliance between local communltles and filmmakers would restore a sense of ident1ty to the industry that is currently being coaxed to migrate from the SCAG region by other state and city film comrnlSS10ns. Such regionally coordinated local public policy would prov1de a signal to the ent1re motlon picture lndustry that lt is wanted and welcomed by local communities in the SCAG region. The industry has been a source of Southern Californld hlstorical and conte~porary c~lture. Mcreover~ 1t 1S and can contlnue to be a vltal provider of future Jobs and a long run source of economic growth in the most baslc sectors of the regioral economy. 17 OOO~~3 STAFF CREDITS SCAG MANAGEMENT: Mark Plsano~ Executive Dlrector Arnold Sherwood, Oir~ctur, Community a~d Economic Oevelopment Department PROJECT STAFF: Program Manager: Gordon Palmer~ Economic Analysls and Development Program Author: Jim Oulgeroff, Regional Planner. Economic Analysis and Development Program 0001.24 . . .