Posted 29 September, 2007 in FilmUSA
Soaring loonie causes uncertainty for Canadian film and television production
By Keith Doucette, THE CANADIAN PRESS
HALIFAX - A steadily soaring dollar coupled with increased tax incentives in the United States has people in the film industry asking if the race to attract film production will intensify as Canadian producers struggle to keep business.
In a bid to attract film production, Nova Scotia recently did what many Canadian provinces are doing to help the industry as it enhanced its tax-credit system.
Premier Rodney MacDonald used the opening night gala of the just-concluded Atlantic Film Festival to announce the province was boosting its labour-based film tax credit to 50 per cent from 35 per cent. An additional 10 per cent will be tacked on for films shot in rural areas of the province.
The province already had an additional five per cent credit in place for companies that shoot three or more films over a two-year period.
The increase was the second in just two years and was in large part dictated by the improved tax regimes that have been introduced by British Columbia, Saskatchewan, Manitoba, P.E.I., and New Brunswick.
John Barrack, executive vice-president of the Canadian Film and Television Production Association, said while tax credits are welcome, competition is fierce.
“When you take the benefit of the dollar away and you’re going head-to-head on credits, obviously an enhancement like Nova Scotia introduced is going to get noticed and it likely will generate work,” he said.
But Barrack, whose organization represents nearly 400 Canadian film and production companies, believes the industry is entering an uncertain time as increasingly competitive American states join Canadian provinces in upping the ante.
Indeed, alarm bells were sounded earlier this month in Toronto, where officials blamed the high Canadian dollar and competition from other jurisdictions for a dip in production spending.
Figures show that spending had fallen to $700 million in 2006 from $1.2 billion in 2000.
“I don’t think there is any guarantee that the Canadian production community will see the pieces of the pie, at least in order and magnitude that they’ve seen in the past,” Barrack said.
“You see states that were never in the film game now are very much in the film game. You look at what New Mexico’s doing and Louisiana and Connecticut. These are not traditionally large film centres and they are now.”
New Mexico is considered a leader in its ability to win business through its tax incentives. The state currently offers a 25 per cent tax rebate on all production expenditures, including local labour.
As well, productions costing $2 million or more can qualify for an investment loan of up to $15 million. Another program offers a 50 per cent reimbursement of wages for on-the-job training of New Mexico residents.
“If the dollar had stayed down around 67 or 70 cents those incentives in the states wouldn’t necessarily have touched where we were at with the double benefit,” said Barrack.
He said the challenges facing the industry have also been complicated by a shrinking domestic marketplace that is the result of media consolidation. Barrack singled out the acquisition of film producer Alliance Atlantis (TSX:AAC.A) by CanWest (TSX:CWM.UN) and CTV’s purchase of CHUM radio’s assets as examples.
Meanwhile, the more competitive landscape is not going unnoticed by those who are in the business of promoting their provinces or cities as a place to shoot.
“The combination of the increased value of the dollar, less U.S. work coming to Canada and the other provinces competing more aggressively for the smaller amount of work meant we were starting to feel a reduction in the industry,” said Ann MacKenzie, CEO of the Nova Scotia Film Development Corp.
MacKenzie said the 2006-07 fiscal year saw the province register $136 million in production activity, which was actually “one of its better years.”
But she said it was clear through the first six months of 2007 that the ground had shifted.
“We really didn’t have much production going on,” MacKenzie said of what is generally considered the province’s peak period.
“By the end of July we wouldn’t have had quite $20 million in production activity and ordinarily we would have been at $60 million plus at that stage.”
In the last 10 years, Nova Scotia has ranked fourth in film production behind such leading centres as Toronto, Vancouver and Montreal.
MacKenzie expressed confidence that the proposed tax credit would also help local producers who have recently had problems securing Canadian broadcast commissions. She estimated Nova Scotia’s access to the Canadian Television Fund was down 35 to 40 per cent in the last year.
“With this tax credit the local film makers will be able to entice some of those broadcasters to start commissioning work here again,” she said.
But one province’s gain may be another province’s loss, said a New Brunswick film producer.
Tim Hogan, the founding partner of Dream Street Pictures based in Moncton, wondered where the tax credits will end.
“The short-term solution is to match or better it,” said Hogan. “Will that result in more business? I don’t necessarily think so.”
New Brunswick currently offers a 40 per cent refundable labour tax credit, but Hogan would like to see more help to promote ongoing relationships with producers and to encourage the development of creative ideas.
But he concedes the stakes remain high in an industry where competition has increased for content and for a return on the dollar. He said there is a lot of pressure on producers to be able to come up with additional funds.
“An extra 10 per cent here or 15 per cent there can mean the difference between having a star that sells your program all around the world versus not,” said Hogan.
A recent economic profile by the national association put the total volume of film and television production in Canada at $4.8 billion, including $1.7 billion in foreign location shooting.
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