State Must Boost Show Biz’s Role

0

When the state’s employment rates were released last month, much of the attention locally focused on the good news that L.A.’s unemployment rate for May had declined one tick to 8.2 percent. But what might have been overlooked was that job creation in Los Angeles County has slowed. And just as concerning: One of the area’s most-watched industries, the motion picture and sound recording sector, lost 2,400 jobs after several consecutive months of improvement.

Thankfully, forces are in play that could change the entertainment industry’s job-growth dynamic and, subsequently, California’s overall jobs picture.

The state’s Senate Governance & Finance Committee on June 25 unanimously approved the California Film and Television Job Retention and Promotion Act (AB 1839), which renews and increases the state’s tax credit. In its current form, the tax credit extends $100 million in state awards to a narrow number of production companies. However, in its final form, this bill could have much greater impact, bringing four times as much in tax benefits to a much broader industry base.

To maintain the still-fragile entertainment industry job growth, it is critical that Gov. Jerry Brown back this measure in its fullest form.

Entertainment industry growth includes a large number of jobs that are rarely seen but vitally important. The expanded legislation will affect electricians, carpenters and a number of behind-the-scenes positions in entertainment.

In addition, a number of high-wage professional services will receive a boost. Speaking as a professor at a graduate business school, I believe accounting and finance experts who possess a broad understanding of how to raise money and structure finance agreements will benefit from this legislation.

Most entertainment accountants and finance professionals have at least a bachelor’s degree in accounting, financial management, business administration or economics, and often are certified public accountants. However, mastery of basic skills is not enough. A number of accountants and finance experts will be needed to manage successful financing deals. Three areas of accounting and finance that could see job growth:

Equity financing. Selling ownership shares in an entertainment enterprise is a highly sophisticated and highly technical trade. Those who structure entertainment deals must understand any number of equity types and multifaceted equity unit arrangements. In addition, those who understand the inner workings of equity partnerships and have relationships in private equity are likewise needed in the entertainment industry. 

Debt financing. Every enterprise runs on working capital. Debt financing enables entertainment enterprises to borrow money to make capital expenditures. Notes, certificates, leases, mortgages and other instruments must be moved quickly and efficiently. Principle and interest must be paid to the creditor with reasonable terms for the borrower. However, there is a scarcity of those who know how to structure agreements with institutions and individuals using these tools and balancing these principles.

Risk management. No financial market is the perfect market. Therefore, every accounting practice and finance agreement also involves identifying, gauging and preparing for risk. There are a large number of financial instruments that skilled accounting and financial experts use to hedge transaction, accounting and economic exposure. In addition, experts in risk management including incentives offered by local and national authorities (for example, local tax credits) are also a highly coveted skill.

The fact that we have a solid base of professionals schooled in complex accounting and financial skills required to serve the entertainment industry is a major asset to the area. Los Angeles is an ideal place for well-paid and stable careers in entertainment accounting and finance. According to the most recent data from the Bureau of Labor Statistics, the average mean wage in Los Angeles County for accountants is $78,090, which is $5,000 more than the national average. The California Economic Development Department projects that the number of accounting and auditing jobs will increase steadily through 2020 by roughly 10 percent to 15 percent.

At the same time, there is more policy work to be done. The California Film Commission reported June 3 that it received 497 applications for the state’s film and TV tax credit program, 117 more than last year. However, constraints on funding allowed only 23 projects to be selected for a tax credit. There is a significant need for such policies as well as broadening the incentives in the bill.

The end goal is in sight: retrench L.A.’s position as the film and television production capital.

David M. Smith, Ph.D., is a labor economist and senior associate dean and associate professor of economics at Pepperdine University’s Graziadio School of Business and Management.

No posts to display