Last week, with a deal pending that would turn the mostly empty Ryerson steel plant on the west side into a film production studio, I talked to Cornell University professor Susan Christopherson. The potential buyers for the property want financial help from the city and the state, and Christopherson has been studying film-industry subsidies for a couple decades. Her major paper on the subject, “The Creative Economy as Big Business,” will be published in the Winter 2010 Journal of Planning Education and Research. In it, she and coauthor Ned Rightor conclude that government investment in studios is almost always unwise, locking the public into production subsidies that mostly benefit huge—and distant—global corporations.
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Especially now, when so many traditional jobs have been lost, “everybody wants to be Hollywood east,” Christopherson says. It’s “sexy meets desperation.” More than 40 states are actively vying for movie production business, upping the ante on subsidies in what she calls a “race to the bottom.” For places without the necessary infrastructure and professional workforce it’ll never be more than a costly fling—the subsidies will drain more tax revenue than they generate.
Illinois’ current subsidy—which also applies to television commercials with local spending of $50,000 or more—reimburses producers for 30 percent of in-state expenses and 30 percent of wages paid to state residents. Hire from a disadvantaged neighborhood and the payback on wages bumps up to 45 percent. The rebate comes in the form of a transferable tax credit, which means the producer can sell it to another business or individual. As a simplified example, say a production company with $10 million in qualifying expenses gets an income tax credit of $3 million. That’s much more than any tax liability it’s likely to incur, since it’s unlikely to be earning income in Illinois while making the movie. If it sells that credit at a 10 percent discount—a transaction that can be facilitated by the state film office or a broker—it nets $2.7 million, the buyer gets a $300,000 discount on taxes owed, and the state is out the whole $3 million.
And this is where we might have an opportunity. “Chicago has historically had a media industry, particularly strong in industrials, and an advertising industry,” Christopherson says. That means it has an experienced workforce for film and television production and businesses capable of attracting the money producers spend on things like casting agents, location scouts, specialized lawyers and accountants, and equipment rentals. “Sometimes, when you’re going to capture those expenditures, an incentive makes sense,” she says. “It’s going to work better in Chicago than it works in Des Moines.” Says Illinois Film Office managing director Betsy Steinberg, “The tax credit is an absolutely vital tool in attracting production work to Illinois.”
