A lonely voice in the rain forest, British Columbia producer Harold Tichenor says the future of film financing here remains promising, despite the current flux of government tax credit and incentive programs.

While other western producers are wringing their hands in frustration, Tichenor, president and ceo of Vancouver-based Crescent Entertainment, acknowledges the coming challenges and says he is ready to take on the added risks and paperwork.

Reviews are decidedly mixed about the outlook for film financing in b.c.

Like their colleagues across the country, b.c. producers are struggling with the muddled attempt to swap tax shelters for tax credits. They watch as Telefilm Canada, the National Film Board and other traditional funding sources grow increasingly anemic. And they are beholden to the whims of the improving Canadian dollar.

What is specific to b.c. filmmakers, however, is a relative lack of size and capitalization that sparks much fretting about bridge financing and wooing of international white knights.

Of primary concern, of course, is the coming refundable tax credit, due Jan. 1.

Objective-based system

Tichenor likes the proposed tax credit, currently in draft form, calling it a more objective-based system that will be more discerning in the kind of Canadian-content projects it funds.

The cash flow problems that come with the tax credit are not insurmountable, Tichenor maintains.

This year, for example, he was able to finance a Canadian-content qualifying mow drama through a cable presale, Canadian and foreign distribution advances and proceeds from a Canadian tax shelter paid at the front end of the project.

That same us$2.5 million mow – produced after Jan. 1 when the federal tax credit is supposed to kick in – would require some creative financing because of the six- to 18-month delay in collecting the refund. Since banks don’t consider the promise of a refund worthy collateral, Tichenor will have to dip into his cash flow or work out borrowing from other unspecified funds, all the while incurring the associated interest and costs.

The tax credit promises 12% of his budget. Factoring in the cost of bridge financing, the bonus works out to the same as the tax shelter, he estimates.

Many of Tichenor’s colleagues, meanwhile, are less generous with their outlooks.

Moving cautiously

Entertainment lawyer Arthur Evrensel, a partner with the Vancouver office of Heenan Blaikie, says producers are moving cautiously on fundraising and could be restricted in what qualifies as Canadian content under the new tax rebate. He cites one of the criteria proposed by the Canadian Audio-Visual Certification Office that states a Canadian-content production cannot have more than 75% of its budget from one source. That limits, for example, fundraising through foreign broadcast licences at a time when producers can’t afford to be inward looking.

Wayne Sterloff, president and ceo of the provincial funding agency British Columbia Film, says local producers are frustrated with the radical changes facing their financing initiatives.

Besides the tax credit, the continued pullback of Telefilm, the nfb and the cbc – which have never spent a lot of money in b.c. anyway – will be felt, says Sterloff.

As a result, he suggests that b.c. producers will have to embrace the new Cable Production Fund as an additional financing element (a problematic notion since contributions to the $47 million, crtc-driven fund by cable companies is voluntary and its value fluctuates quarterly).

Meanwhile, the curtailment of the Ontario Film Development Corporation – temporary or otherwise – means a sharply reduced number of b.c./Ontario coproductions, he adds.

Look outside

Producers in Quebec, Nova Scotia and Manitoba, for example, still remain as potential partners, Sterloff says, ‘but b.c. producers are going to have to look outside Canada for presales and coventure partners.’ b.c. companies are currently negotiating with the u.k., Israel, Australia, New Zealand and Ireland.

Interest in international partnerships is so high that a record 10 b.c. producers are attending mipcom in Cannes next month – with many others available through the cd-rom and interactive kiosk – as part of the marketing initiative spearheaded by the B.C. Motion Picture Association.

In the new financing age, Sterloff adds, they will have to invest in business affairs specialists dedicated to sorting out the myriad financing options and pitfalls open to them so that they have time to develop quality ideas.

And it’s because film financing has become so complicated that British Columbia Film has restructured its programs, moving toward a non-equity, non-ownership system of helping established filmmakers. On Sept. 1, British Columbia Film introduced the Market Incentive Program and the Applied Support Program as a commercially oriented system designed to help capitalize the companies of veteran filmmakers and invest in promising newcomers.

The new programs streamline the process of government funding and reward those filmmakers who have secured markets for their projects.

One of the newer players is TSC Film, a seven-month-old distribution company in Vancouver.

‘Producers are frustrated in their hopes and dreams of presales,’ says Melanie Kilgour, tsc’s manager of foreign sales. ‘Foreign buyers are becoming very choosy. There is a lot of competition and a lot of finished projects. The packages they are offered have to be very attractive.’

The challenges of the financing market, she admits, are forcing producers to ‘look at the foundations’ of their projects, and source international coventures.

Two projects that tsc is involved in are The Suspect, a partnership between Soapbox Producers and u.k.-based Portman Productions, and Ziggy Gonna Get It, a Quebec/b.c./Britain deal with Granite Films in the u.k.

Already tsc has invested in 16 features and committed its $1 million budget by contributing to script development, minimum guarantees and marketing.

The changes at British Columbia Film are a positive addition to the b.c. financing scene, agrees accountant Neal Clarance, the partner in charge of the entertainment practice at Ellis Foster. But with only a $5 million annual budget, Sterloff and his staff are limited in their overall impact, he says.

The promise of the provincial government’s small-business initiative, the Venture Capital Corporation, has also had limited success, Clarance reports. The fund is capped at $40 million per year, and has to service an array of businesses including ginseng producers, salmon farms and high-technology manufacturers.

Operationally, the vcc hasn’t been amended to fit better with the unique qualities of the film industry and there is no guarantee that, after incurring the accounting and legal expenses, there will be any money available because of the annual cap. Still, says Clarance, companies such as WIC Western International Communications, Excalibur and Movie Vista Productions have made use of vcc financing.

Meanwhile, the b.c. Film Investment Program continues to be a priority for the b.c. branch of the Canadian Film and Television Production Association, says Clarance. The summer lobby campaign was continued in spite of the freeze of the Ontario Film Investment Program, the model program used by local producers to educate the provincial legislators holding the purse strings.

bcfip is still expected to be presented at Treasury Board this fall and has local producers excited that they may finally have more attractive incentives than Ontario. With ofip in jeopardy, however, the bcfip proposal loses some urgency, admits Clarance.

Which leaves b.c. film concerns in the hands of the federal government – an untenable fate according to one film financier.

The Beacon Group of Companies – which invests in print-and-ad campaigns and production services for u.s. projects – canceled its Beacon Eight production services tax shelter, part of the flurry of business being transacted before year end, when it couldn’t secure an advanced ruling from Revenue Canada concerning Beacon’s investors.

Says Bob Dubberley, Beacon’s vp of development: ‘We don’t want to walk away (from b.c.’s film industry), but we may not be given any option in terms of the tax shelter-type programs.’

His competitor is more optimistic. Martin Johnston, vp at the Vancouver office of Toronto-based Alliance Equicap, says, ‘We are pleased that the federal government continues to invest in Canada’s cultural industries and there continues to be incentive to promote Canadian talent. We’re moving toward a more level playing field (with Ontario), and based on the other non-financial reasons for shooting in b.c., we can expect more business in the future.’