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Artist Ghislain Bruneau recreates the World Trade Center for a film at California special-effects company Atomic Fiction’s new office in Montreal, QuebecChristinne Muschi/The Globe and Mail

California visual-effects specialist Atomic Fiction is opening a facility in Montreal, as provinces compete to lure job-creating digital-media studios from south of the border.

Oakland, Ca.-based Atomic Fiction says a subsidiary opening in Montreal will be a significant operation, rivalling its home-based facility.

Co-founder Kevin Baillie says Montreal was chosen over Toronto and Vancouver – two other major visual-effects, video-game and animation centres – despite the Quebec government's decision to pare the tax credit to 36 per cent from 45 per cent.

"The 20 per cent reduction in credits was admittedly disappointing but, given our unique infrastructure and talent-forward focus, we continue to provide clients with an extremely compelling value and top-notch visuals," Mr. Baillie said.

"The credits in Montreal still remain among the best available anywhere."

Atomic Fiction uses cloud computing to create special effects, removing the need for costly on-site databases. About 100 jobs will initially be created at the Montreal studio and that number is expected to grow as it drums up more business, said Mr. Baillie, 35, who got his start in special effects working on George Lucas' Start Wars Episode 1 at the age of 18.

The Montreal studio's first project is The Walk, a new feature film by Back to the Future's Robert Zemeckis.

Atomic Fiction's decision follows that of Technicolor's Moving Picture Co. in July to expand its Montreal studio despite the downsizing of the provincial film, television and multimedia tax credits last June as part of a broader deficit-cutting effort by Philippe Couillard's Liberal government.

Quebec's main rivals, Ontario and British Columbia, offer tax credits of 45 per cent and 50.5 per cent, respectively.

Mr. Baillie, who founded Atomic Fiction four years ago with partner Ryan Judhope, says Montreal's vibrant cultural scene and deep pool of visual-effects talent were other factors in the decision to locate there.

"The vibe is just really just good and positive and open. The culture is incredibly intense and a very unique mix of French and English," Mr. Baillie said in an interview from Oakland on Thursday.

Meanwhile, Toronto and Vancouver are also scoring wins in the sector.

Last May, Sony Pictures Imageworks said it will relocate its headquarters to Vancouver.

John Allan, interim director of Queen's University's Institute of Intergovernmental Relations, said the interprovincial competition via subsidies and tax incentives has its problems.

Such policies result in a distortion of the allocation of resources and a loss of economic efficiencies, he said.

Industry critics of the policies – notably Daniel Lay, the Los Angeles activist behind VFX Soldier blog – say the tax credits amount to a "race to the bottom" as provinces and states try to outdo each other with subsidies.

"We're against having taxpayers pay for movies for U.S. producers who are down in L.A. and are very, very rich," Mr. Lay said in an interview in May.

"In one sense, you can say it is a race to the bottom," Mr. Baillie agrees.

But he believes the pattern is offset by the creation of a sector where artists "can do things they wouldn't be able to do otherwise. Subsidies do enable us to do work for filmmakers who wouldn't be able to afford it otherwise," he said.

And he adds it would be foolish for him to set up a studio in Montreal based primarily on tax credits because they can disappear quickly as new governments take over or policy changes are implemented.