Industry types are calling it a ‘good news’ budget, a phrase rarely uttered in recent years. However, while applauding the Ontario government’s nod towards increased industrial support of film and tv production, the Ontario Film Development Corporation is not yet ready to call it a day.

‘This is not the end of the road,’ says Sara Morton, director of tax credits for the ofdc. ‘Since the provincial tax credit was adopted last year we’ve been encouraging the government to increase the rate, and we’re definitely in support of raising it further.’

The 1997 Ontario budget contains what the government calls ‘enhancements’ to the Ontario Film and Television Tax Credit. The rate for qualifying labor expenditures (for costs incurred after May 6, 1997) has been increased from 15% to 20%, and the annual cap per company has been raised from $2 million to $3 million for productions with qualifying labor expenditures incurred after May 6, 1997. First-time producers are still eligible for a 30% rate on the first $240,000 of qualifying labor costs.

Morton says Atlantis Films in particular urged government to consider the cap increase. ‘The government, while trying to be responsive to the full range of companies and not just the biggest ones, did recognize that a cap increase could anchor bigger projects here.’

According to Atlantis Films vp and gm Steve Ord, the incentive means the company can look at producing more at home. ‘Until a year of production has gone by it’s difficult to say how much this will affect our bottom line, but it’s definitely an incentive for us to produce more in our own backyard.’

The other budget goodie was the ocase, a brand new tax credit for computer animation and special effects. The 15% refundable tax credit will be effective July 1, and the ofdc’s Morton says an industry consultation process is currently being developed by the corporation and the Ministry of Finance.

Eligible expenditures are those incurred in Ontario for film and tv projects with a minimum length of 30 minutes. Commercial work is ineligible and the annual cap per company is $500,000. A company will be able to utilize both the Ontario Film and Television Tax Credit and the ocase without reducing the amount of either credit.

‘There are a couple of differences between criteria for the new credit and the existing one, the most notable being that companies benefiting from the ocase don’t necessarily have to be Canadian-controlled companies,’ says Morton.

The budget document says a qualifying company is a Canadian corporation that ‘is performing eligible computer animation and special effects activities either for a film or television production that it is producing, or under contract with a producer of a film or television production’.

Ron Estey, managing director of Toronto’s C. O. R. E. Digital, applauds the government’s move to establish the credit but wonders whether it is correctly designed for an industry primarily made up of small, boutique-style companies.

‘If you look at the cap of $500,000, and leverage that to the wages you’d need to be paying to take full advantage of it, you’d need a studio of 150 animators,’ says Estey. ‘Our hope is that the incentive won’t cause a rush towards animation and effects warehouses. But as it stands, it will help us in terms of our ability to hire.’

Estey also points out that the plan is a very attractive incentive for mammoth companies like Disney and Dreamworks: ‘If the intent is to create an incentive for outside companies to move in, they’ve definitely done that.’

Meanwhile, while the 5% increase to the ofttc rate was designed to help Ontario keep a competitive edge within Canada, it still falls short of the 30% rate in Nova Scotia and the 33.3% rate in Quebec.

‘We tried to make it as clear as possible to the government that Ontario needs to keep pace,’ says Morton. ‘Quebec, with the richest credit, is our greatest competition, and now there’s Nova Scotia as well. The only reason New Brunswick is not as competitive right now is that they haven’t had a chance to develop their infrastructure.’

Morton says she d’esn’t foresee a return to direct support for production anywhere in the near future. ‘The trend – definitely in Ontario, and apparently country-wide – is a move away from direct funding and towards tax credits. It’s clear that the Ontario government is not in favor of direct funding for any business.’

At press time, the Ontario Arts Council, in light of a $5 million or 16.5% cut for 1997/98, announced it will cease issuing grants until late June at which time it hopes to have a new budget and strategy. In two years oac funding has dropped from $42.6 million to $25.3 million, a reduction of over 40%.