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Hold the Hoopla

Not everyone's psyched about Illinois' expanded tax credit for filmmakers.

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When The Break-Up, the new comedy filmed in Chicago, had its local premiere at the Music Box on Memorial Day, Governor Blagojevich and Illinois Film Office managing director Brenda Sexton were celebrating more than the attendance of Vince and Jen. Blagojevich was also presiding over a signing ceremony for legislation that will extend and vastly expand the state's film production tax credit. Sexton says that since the bill was passed by the General Assembly early last month some of Hollywood's most successful producers have come calling. But despite the hoopla, a few nagging issues remain unresolved--like whether the credit is worth the money it costs and whether it will create the jobs it promises.

The tax credit program was started three years ago to help the state revive its sagging movie industry. In 2001 there were 231 productions filmed in the state, creating 14,096 jobs; according to the Illinois Film Office, production companies shooting locally spent $72.7 million here. By 2003 the number of productions had fallen to 117 and in-state spending was down to $25.7 million. The problem, says Sexton, was locations--Toronto especially--offering better deals. "This is a very competitive business," she says. "Other states and Canada had the jump on us."

To keep up, Blagojevich sponsored and the General Assembly passed legislation in 2003 providing a 25 percent tax credit on Illinois corporate income tax--up to $6,250 for every Illinois resident hired to work on a local movie or television production. "At the end of a production, [the producers] give us a two-foot-high mountain of invoices, and we go through those invoices," says Sexton. "The film office service--it's all about tax credits. It's all about numbers. That's what keeps you on the playing field."

In addition, the film office helps production companies sell their tax credits. Under the legislation a California production company that doesn't pay much in the way of Illinois taxes can sell the tax credits it doesn't really need to someone who does--a widget manufacturer in Elk Grove Village, say. "In effect we're the brokers," says Sexton.

The new bill sweetens the deal for filmmakers even further. In the past the tax credit applied just to labor costs, but this year's legislation offers a 20 percent tax credit on all in-state production costs, with no cap. It also lowers the bar for eligibility. Previously production companies had to pay at least $100,000 in salaries to Illinois residents in order to qualify. Now that's been changed to $100,000 in any in-state spending, or $50,000 for productions of 29 minutes or less.

Some Illinois legislators--in particular state rep Ken Dunkin--find the tax giveaways problematic. Dunkin's major complaint is that the tax credit subsidizes an industry that's been slow to hire blacks and Latinos for the higher-paying crew jobs. "We have some real legitimate questions about how many black people get to work on these shoots," says Dunkin, who represents a district that stretches from Cabrini-Green to the near south side. "I'm talking about the tech jobs, and the legal, the public relations, the accounting--all the good jobs. Not just extras, and not just day players."

Dunkin originally had a bug put in his ear on the issue by his former chief of staff, Lun Ye Marsh. According to Sexton, about 9 percent of those working on local tech crews are black. But Marsh, who's worked for years doing hair and makeup on the sets of local film and television productions, insists the actual number is much lower. She counts three black crew members out of a production staff of 149 in the official credit list for The Break-Up. "I don't know where they're getting that 9 percent number," she says. "I know all the black people in the business. I'll go over any crew list for any shoot with anybody anytime--show me the black people!"

In 2004 and '05, when the tax credit came up for extension, Dunkin demanded that the state force tax credit beneficiaries to hire more minority crew members. Lawyers for the state countered that language mandating racial quotas might be challenged in court. So last year Dunkin, working with state senate president Emil Jones, hashed out a compromise, adding a provision to the bill that offers an additional 10 percent credit on labor costs for "residents of geographic areas of high poverty or high unemployment."

This year, under pressure from Jones, Blagojevich added a provision to the bill requiring tax credit recipients to make a "good-faith effort" to hire minorities and submit a "diversity plan setting forth proactive steps they will take in achieving a crew that represents the diversity of the State." The governor also agreed to increase the additional tax credit on wages paid to residents of high-poverty areas from 10 to 15 percent.

The bill swept through the senate in April, but Dunkin and a coalition of black lawmakers stalled it in the house, insisting that the extension be limited to one year so they could see how many minorities got jobs. As Dunkin dug in his heels, folks at the film office began to sweat--moviemakers were talking about moving projects to states such as Massachusetts, which has a generous new film tax credit program. "We clearly lost Daddy's Girl, a Disney project that's now leaning toward Boston," Sexton says. "Disney would call and ask about the tax credits and I could only tell them 'It's in the house.'"

Sexton says that the early success of the tax credit shows that the new bill will be a winner for the state. According to the film office, the state has extended about $14 million in film production tax credits over the last two years ($5 million in 2004 and about $9 million in '05). It estimates that over the same period about $170 million has been spent on productions shot here ($76.5 million in 2004 and $94 million in '05). "The tax credit is clearly working--we're back on the playing field," Sexton says. "When studios and producers talk about where they want to shoot, they talk about coming to Illinois."

Sexton also touts the psychological lift the state gets when celebrities visit and folks get to see their home on the big screen. "I think it's a huge boost for the state to have movies filmed here," she says. "It's fabulous business for the state of Illinois, and it builds our self-esteem, gosh darn it."

Dunkin and Marsh say it's not so easy to draw conclusions about the tax credit's record. True, the tax credit has helped Illinois snag Hollywood features like Spider-Man 2, Ocean's Twelve, The Weather Man, and The Break-Up. But they note that the film industry is notoriously cyclical--there's no guarantee that productions will continue to flock here, particularly if other states start upping their incentives. And they say it's not at all clear how much tax revenue the state actually generates when set against the giveaways. "The state is not very good at providing financial information--they only give us general information," says Marsh.

To put an end to the standoff, Blagojevich agreed to limit the tax credit to one year, and on May 3 the bill passed the house. Sexton was ecstatic. "When this passed, Harvey Weinstein's lead producers called me and said, 'You are now the most qualified state in the country to get our business,'" says Sexton. "They're planning to bring Quebec in. That's written by Steve Conrad. He wrote The Weather Man. It was just announced that John C. Reilly--who I love--is starring in it."

For his part, Dunkin wants to see how many jobs the bill creates before he agrees to extend it next year. "They'll have to come back to us," Dunkin says. "We'll be watching."

Art accompanying story in printed newspaper (not available in this archive): photos/Barry Brecheisen/wireimage.com.

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