By Borys Kit

LOS ANGELES (Hollywood Reporter) - After simmering for the past couple of years, the issue of California's lack of production subsidies boiled over last week when ABC said that its hit series "Ugly Betty" will pack its makeup kit for the greener pastures of New York.


The move, which takes advantage of new incentives approved by New York lawmakers, is the latest in a battle pitting state against state in upping the ante to attract productions.

The Empire State's new 30% tax credit -- plus an additional 5% offered by New York City -- means substantial savings for a show like "Betty," which costs upward of $3 million per episode to produce, even factoring in that New York is more expensive to shoot in than Los Angeles.

With 150 employees left in limbo, industryites in Los Angeles howled at the news. "Betty" has become the latest poster child for runaway production, a term that originally applied to projects going to Canada but now is used for shows leaving California for the likes of New Mexico, Louisiana, Connecticut and Illinois.

No one expected such a loud reaction, including "Betty" creator Silvio Horta.

"I didn't know how deep and big the can of worms was, how much runaway production had affected L.A.," he says.

The show's pilot was shot in New York, and many planned for a run in the Big Apple. "I made a valiant plea to shoot there, and we couldn't because it was more expensive," Horta recalls. Instead, the Los Angeles-based "Betty" production relied on CGI and downtown locations as well as studio lots to fake the Big Apple.

Horta sees the move as a homecoming, a view shared by many inside New York film circles. "This is a show that was born in New York and belongs in New York," one state insider says. "There's shouldn't be a big deal about it."

Says Horta: "We've spent the two seasons with a really wonderful L.A.-based crew. They've been really essential and vital to the success of the show. But having said that, I am excited about going back to New York. . . .

"It came down to economics. It was economically viable to shoot in New York, and creatively it always made sense."

It also made sense for New York, whose recently enacted incentives were meant more to stem the production bleeding to nearby states like Connecticut than to poach shows from California.

Tell that to the people losing their jobs, or to Gov. Arnold Schwarzenegger. He was promoting fire-prevention season at an event last week but instead was pummeled with questions about why California doesn't have film incentives.

It's easy to blame Schwarzenegger for inaction.

"We had a perfect storm: an actor and producer who is our governor who could certainly put his political clout on the line (to pass incentive legislation)," Los Angeles City Council president Eric Garcetti says.

Schwarzenegger is seen as one of Hollywood's sons, and you're supposed to take care of your family, right? But those close to the governor say he would sign legislation -- except none has come across his desk.

Why? Most incentive legislation was killed by politicians outside of southern California who don't see the value of keeping of productions in the state, the jobs they create, the businesses that rely on them or the tax dollars they bring in.

(In 2006, for example, a bill called AB777 proposed a refundable tax credit of 12%-15% on qualified expenditures of qualified motion pictures in California, but it was held up in the Senate Committee on Revenue and Taxation.)

Despite "Betty's" move, Horta is a believer in the need for incentives. "We have to stay competitive," he says. "If this (situation) goes some way to creating an incentive program, then I think it's a great day."

Of course, the time for Schwarzenegger to act might already have passed. Who would pass incentives now with the current state budget crunch? How do you tell legislators, "Oh, while you're cutting funding for teachers and hospitals, can you put some money aside so we can make some movies?"

Garcetti, however, sees it differently.

"I would argue that every time we delay this, we create a bigger budget hole for ourselves because business is leaving California," he says. "And it may be penny wise, but it's pound foolish to allow these productions to leave this state."

Reuters/Hollywood Reporter

© Copyright 2007 Reuters.

Photo:
Actress America Ferrera accepts the Image Award for outstanding actress in a comedy series for her role in "Ugly Betty" at the 39th Annual NAACP Image Awards at the Shrine auditorium in Los Angeles February 14, 2008. REUTERS/Mario Anzuoni