When the producers of Ugly Betty announced they’d be moving the TV show from Los Angeles to New York, the city finally woke up to the fact of runaway production.

At Secret Headquarters, a post/design facility in Culver City, chief Greg Huson had convened a panel to discuss “Keeping it SecretHdqtrsLocal.” The panel, moderated by Secret Headquarters operations manager Dave Bogosian, included Jim Horwitz, constituent advocate for L.A. Councilmember Bill Rosendahl; Amy Lemisch, director of the California Film Commission; Paul Audley, president of FilmLA, a private non-profit organization established for public benefit to process permits in the LA region; motion picture producer Eric M. Klein; and location manager Richard McMillan.

“This is an evening of tips and tricks on how to do it better,” announced Huson, who said that Secret Headquarters’ “creative salons” would focus on creative issues in filmmaking. Huson also noted that the next Secret Headquarters’ creative salon would take place in September, and be an opportunity for DPs to screen creative reels. Anyone interested in being on the list can email the company at ProducerEvents@SecretHQ.com

First, it was made clear how bad the problem of run-away production is. Audley noted that in his early days at FilmLA, he visited every major studio and found that none of them were budgeting California for all their major films.  “One was budgeted for $110 million,” he recounted. “It was more expensive to shoot in NY, but they’d save $23 million by going to Connecticut and $10 million by going to NY. That major studio only budgeted to show their execs WHY they were leaving California–and the others didn’t even bother any more.”

Has the city of Los Angeles’ sense of entitlement created the problem? “The film industry is our L.A. cookie jar and other people are reaching in our cookie jar,” McMillan said. “But the film business is international, not just ours. I haven’t seen Los Angeles market to its own industry.  The whole region has to figure out how to market to its own industry.” Audley agreed, noting that the fact that the studios all have buildings in Los Angeles have prevented many people from realizing just how mobile the business is. “Last year was the worst year on record with feature films shooting here, and this year so far has dropped an additional 50 percent,” he said. “We’re now at the point where we’re losing people, not just films. We’re in direct competition with [all the other] other states.”

At the California Film Commission, Lemisch deals with the issue of runaway production every day. She notes that, historically, films have gone outside of California to shoot, driven by creative concerns. “That’s what’s changed,” she said. “It started out as a creative decision and nowadays it’s no longer that way. Instead of producers and production execs making decisions about what works for the script, it’s the finance people making the decisions based on what regions are offering the biggest breaks.”

When the Ugly Betty story broke, reported Lemisch, she was in Sacramento, going door to door with legislators, and at last had a very vivid and timely description of what she’d been warning about.  The news of that TV show moving also woke up the Los Angeles City Council, noted Horwitz, who said Councilman Rosendahl geared up to help make Los Angeles more friendly to film productions. That includes a recent brouhaha over whether retired policemen can wear their uniforms while working on film locations; Police Chief Bratton is opposed to that idea, but Rosendahl and others are working to keep the retired cops on the film jobs.

But the biggest news came in February when the California legislature finally launched a tax incentive program. Yesterday, Governor Arnold Schwarznegger’s office announced the the first 25 film and television productions to qualify for the film and television production incentive signed into law on February 20.

Producer Klein decried productions that leave the state for other than creative reasons. “As a lower budget indie filmmaker I don’t think there’s an easier place to make a film than here,” he said. “Any time I do assessment and budgets for other producers, they’re chasing incentives before they even have the money. You have to tell them that the incentive could be gone by the time they’re ready. We’ve all spun our wheels comparing state to state. It comes to smart producing. I think you have to spend a lot to go somewhere else to save a lot.”

But even the biggest budget films can make decisions to leave California based on relatively small amounts of money saved. Lemisch noted that she’s seen productions with a $45 million budget that go to Louisiana to get back $5 million. “They had to spend $2.5 additional to go there,” she said. “But they were still up $2.5 million and so they went.”

She described the incentive program that passed in February. Applications are available online. “It’s a very competitive tax credit program for California,” she said. “It’s limited because we have $100 million per year but it’s a good start.” Films that are eligible must have a minimum budget of $1 million for feature films, and a maximum budget of $75 million. Eligibility for TV is only for new TV series produced for basic cable. TV series that shoot elsewhere and want to relocate are eligible regardless of distribution.  To qualify, 75 percent of the film has to be shot in California.

“If you are an independent–and you have to show that you’re truly not owned by the studios –you can “sell” the credits but you can’t apply with a $500,000 budget,”  she said. “The tax credit is 25 percent for indies and 20 percent for everyone else.  It’s your total spend minus what you pay writers, direrctors, producers, actors. On lower budget, 80 percent of their budget is a qualified spend.”

Even with this tax incentive, noted Lemisch, “everyone is desperate for this business.” But she said that the offers by some states aren’t good deals and may be scaled back in time. “In Massachusetts, they’ll give you a 25 percent credit on your salaries, uncapped, knowing it’ll go back to California and be put in someone’s mansion in Bel Air. They’re starting to talk about capping salaries. A lot of what they’re offering doesn’t make sense. They’re giving away more than they’re getting in return.” Bogosian stated that it’s estimated that only 15 percent of the dollars given to film productions in Massachusetts actually stay in the state.

Films that apply for the California tax incentive are required to send in an application and get a queue number. If the production can’t get its financing together in six months, it’s bumped out of the queue. She also reported that different cities also supply additional incentives. San Francisco provides two free policemen a day, for example

The panel also discussed the problem of neighborhoods that complain about film shoots. “They don’t realize that four people in the industry live on their block,” said Horwitz. “We’re trying to do PR to push the idea of not getting in the way of filming, It’s our life blood.”  McMillan encouraged producers to spend the money to hire a location manager to be on location for commercials and music videos, to smooth over any potential problems with people in the neighborhood.

FilmLA is focused on getting filming permits, and Audley said he could tell stories all day long about issues in the neighborhoods. “If you create something out of control, you’ll end up with restrictions on your permit,” he said. He told the story of a production that decided to shut down a street, blocking a City Councilman from going home. “The next production that came through had a lot more restrictions on that spot,” he said. “It’s a few very, very loud people who come out and try to make it difficult. We have a production planning group that will tell you what neighborhoods will be difficult. We work closely with productions and tell them they need a film monitor if they’re not playing within the rules.”

“The problem we find when we don’t get cooperation is that when people come in and scorch the earth, the story stays for years and years in that neighborhood,” he concluded. “Someone told me a horror story of something that happened in 1982. And they still don’t want a production in the neighborhood.”

Audley pointed out that there is no single voice of filming in the greater Los Angeles area. FilmLA is coordinating with the Guilds to launch a campaign showing that filming in Los Angeles streets and neighborhoods is about jobs and the economy.

Lemisch also reported an effort to stop gouging by local businesses that charge exorbitant fees to film productions. One production in downtown Los Angeles was charged $100,000 per episode by a business seen in the frame. “There is an effort by unions and trade associations to address those issues and try to stamp out gouging,” she said. “On a state level, we don’t charge for permits for filming on state property. We also don’t charge rent.” With regard to the episode of gouging above, Lemisch reported that the LAPD has assigned officers to work in the film industry and let businesses know that there is no charge for shooting in a city street.

One attendee suggested that locations could certify themselves as production-friendly, an idea that Audley liked. “I can’t tell that flower shop what a just compensation is when they block the street in front of them,” said Audley. “But we have the power to say we’re not withholding the permit if this guy wants money. As the word is getting out that the old game is over. When it was a  city street or alley being charged for, the LAPD stepped in and said they’d arrest that person.”