‘Ugly Betty’ drawn to New York tax breaks

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Colourful, light-hearted and funny, the series Ugly Betty has become a big success on US television and has been exported around the world.

But there was anger and frustration on the show’s Hollywood set this week when ABC, the TV network that makes the programme, decided to transfer production from California to New York. The move leaves 150 Ugly Betty employees facing an uncertain future.

It also highlights California’s increasingly uphill struggle to remain the capital of the entertainment industry, with New York, Louisiana, Michigan and New Mexico among the states offering generous tax incentives to lure film and TV producers away from the west coast.

Although it is set in New York, Ugly Betty has up to now been produced and filmed in Los Angeles for cost reasons. Like countless other shows set outside of Los Angeles, such as House (New Jersey), Seinfeld (New York) and ER (Chicago), ­studio trickery allowed the illusion that Ugly Betty was filmed on location.

A recent tax reform in New York changed the economics for ABC, which spends an estimated $3m (€1.92m, £1.53m) an episode on Ugly Betty. The state has introduced a 30 per cent tax credit on production costs incurred in the state, with an extra 5 per cent saving offered by New York City.

The reasons for the tax change are clear: New York City estimates that the film, television, commercial and music video industry employs 100,000 New Yorkers and contributes $5bn a year to the city’s economy.

The departure of Ugly Betty will not mean California loses its crown as the lead location for TV productions. However, the state’s grip on film production is slipping. “Nobody shoots in California any more,” says Carsten Lorenz, who recently made two films in Louisiana: Harold & Kumar Escape from Guantánamo Bay and Tekken.

“Rates in California are too high . . . there’s no state subsidy,” he says, adding that a tax break can often “be the difference between a movie being made or not”. Harold and Kumar cost $15m to produce but thanks to Louisiana’s tax breaks Mr Lorenz expects to recoup about $3m.

Louisiana was the first US state to use tax incentives to boost film production. It launched a range of subsidies in 2004, taking its lead from Canada, which became a mini-Hollywood in the 1990s by such means.

Chris Stelly, director of film and television for Louisiana Economic Development, says the tax incentives programme has played an important role in boosting the state’s economy, which was devastated by hurricane Katrina. “Having movies made here means money is spent in hotels, restaurants and hardware stores,” he says. “Most importantly, it’s putting people in work. Film jobs are high-paying and the more people get paid, the more they spend.”

Most Hollywood studios have made films in Louisiana, including the recent The Curious Case of Benjamin Button, starring Brad Pitt.

Michigan became the latest state to turn to film production when it launched a refundable credit equivalent to 40 per cent of production costs incurred within the state. It faces a struggle to knock Louisiana off its perch, though. “Louisiana is the most established and is one of the most generous places to make a movie,” says Mr Lorenz.

Arnold Schwarzenegger, California’s governor, has faced calls to introduce a tax incentives package to stop the exodus of producers and filmmakers to other states. But with California’s budget deficit exceeding $20bn, his focus has been elsewhere.

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