Studio owners, unions and other stakeholders are in huddles across Canada this month looking for ways to offset damage caused by the U.S./Canada exchange rate.

The loonie has been trading at a 10-year peak of more than $0.80 against the greenback since October, fueling fears that the high rate and lack of savings will scare off penny-conscious U.S. producers. The 80-cent mark is often thought to be the tipping point at which Hollywood begins to shun Canada.

‘It’s definitely not good news,’ says Ken Ferguson, president of Toronto Film Studios. ‘And it’s started to have an impact in Toronto. We’re not getting the same frequency of calls or inquiries as we usually would this time of year.’

Some economists think the loonie could hit $0.85 by year-end and stay there into 2005, jeopardizing the spring/summer filming season and Canada’s service industry that last year rang in $2 billion last year, most of it in B.C. Shooting days in B.C. are down a reported 25% this year compared to the boom of 2003, and production revenues are expected to dip below $800 million for the first time since 2000.

To soften the blow, stakeholders across Canada are tightening their belts and again calling for improved tax credits in B.C. and Ontario. Service shoots get an 11% tax break in both provinces.

The lobby group FilmOntario met on Oct. 28 to discuss strategy and is keeping pressure on the provincial government for a broader ‘all expenses’ tax credit (the current one only covers labor), while continuing to promote the region as an attractive location with skilled crews and a sturdy infrastructure, according to cochair Patrick Whitley.

‘The feeling among stakeholders in the industry is we have to do more to stay competitive,’ he says. The Motion Picture Production Industry Association of British Columbia and a consortium of Quebec stakeholders are also scheduled to hold separate brainstorming sessions this month.

Nationally, the CFTPA is also banging the tax-credit drum. ‘The government can respond if it wants to,’ says president and CEO Guy Mayson. ‘Tax changes can be made at any time.’

For now, the Department of Canadian Heritage is taking a wait-and-see approach. ‘We’re watching the situation and everything that’s happening,’ says spokesperson Catherine Gagnaire. ‘We know there are lots of worries with producers, but for now there is no plan.’

The Department of Finance had no comment. It is barred by law from commenting on the exchange rate, according to spokesperson David Gamble.

Lobby efforts may be weakened, however, by a recent report that noted there was only a weak connection between the exchange rate and the volume of service shoots. Service spends were up 10.1% in 2002/03 despite a $0.01 jump in the exchange rate, according to a study by Neil Craig Associates. The study was co-commissioned by FilmOntario as an answer to the anti-runaway movement.

Short-term fix

But few companies seem to think Ottawa or the provinces can act in time to rein in the stampeding dollar and are looking at charging lower rates to American clients as a short-term fix.

‘We need to be more flexible on rates, with labor and equipment,’ says Peter Leitch, VP and GM of Lions Gate Studios in Vancouver and vice chair of MPPIA-BC. ‘We’ve got to find a way to stay cheap. Hopefully we can all share the pain equally.’

The unions, however, are not about to rewrite their current contracts and generally oppose any talk of lower rates. ‘We live by our collective agreements. They’re fair and equitable and they should stand,’ says ACTRA national exec director Stephen Waddell.

John Lewis, director of Canadian affairs at IATSE, also thinks better promotion of Canadian locations and crews is the smarter move, noting that luring Americans north is getting ‘harder but not impossible.’

The loonie is up because the U.S. dollar is sinking. The greenback has recently dropped in value against the British pound, the Euro, the Swiss franc, the New Zealand and Australian dollars, and the South African rand, making it less likely that Yanks will shoot anywhere other than their own backyard. This makes a bad situation worse for the service industry, which has already suffered from mounting anti-runaway sentiment in Hollywood and increased competition from many U.S. states, several of which now offer generous tax breaks.

‘Our biggest competition right now is the U.S. itself,’ says Crawford Hawkins, managing director of the Directors Guild of Canada’s B.C. office.

Hawkins is among those suggesting a more radical plan and wants B.C. unions, suppliers and other companies to strike an across-the-board agreement to charge American producers uniformly low rates, as if the dollar was still trading at $0.60 to $0.70.

He believes ‘pegging the dollar’ is a good short-term solution that, with luck, will prop up the service industry until the government is able to pass new tax credits. ‘The dollar has gone up too fast for the government to react,’ he says. ‘Our basic problem is that Canada is the third highest [priced] labor jurisdiction after New York and L.A. At 82 cents the costs here have gone up without an increase in productivity. At 62 cents it was like Christmas Eve.’

Pegging the dollar has also been discussed in Ontario but seems to have few supporters – in part because such a move is very difficult to organize. ‘The only way it works is if everyone comes on board,’ says Rick Perotto, business representative at Toronto’s IATSE Local 667. His chapter tried to organize a dollar peg at $0.80 when the loonie jumped in 1989, but failed to convince any others to join in. ‘It just didn’t work,’ he says.