Illinois film incentives fuel plans for downstate studio

A proposed film complex near Wood River is putting Illinois’ expanded production incentives at the center of a debate over economic development and public spending.

Developer Christopher Breakwell plans to build a $95 million studio on 105 acres in the southwestern Illinois town. The site, visible from a Mississippi River levee, once housed the headquarters of an ammunition manufacturer and later a recycling center. Breakwell has cleared trees, poured foundations and begun installing prefabricated studios.

His longer-term plans include a large sign bearing the name Hollywood River, an allusion to the landmark sign in California. The project is intended to attract film and television companies that can use Illinois’ unusually generous tax benefits.

KWQC reported that Illinois now allows qualifying productions to recover at least 45% of eligible spending through income-tax credits. The state’s base incentives were increased last year, with the share covering resident labor and vendor expenses rising from 30% to 35% under legislation signed by Gov. JB Pritzker.

The changes have helped place Illinois alongside New York, California and Georgia among the leading states for film incentives, according to industry publication Wrapbook. Supporters believe the policy could draw billions of dollars in production spending to Illinois.

A larger program beyond Chicago

Illinois began offering film tax credits in 2003, during Rod Blagojevich’s governorship. Productions receive credits tied to their expenses, and those credits can be transferred to corporations or wealthy individuals who use them to reduce their Illinois income-tax bills.

Over the past six years, the state has awarded nearly $1 billion through the program, according to the article. Recipients and purchasers have included Kraft Foods, U.S. Bank, Smashing Pumpkins founder Billy Corgan, Citadel Securities chief executive Peng Zhao and Jennifer Pritzker, a cousin of the governor.

Major beneficiaries have included productions of NBC’s Chicago Fire, Chicago PD and Chicago Med, along with Apple TV’s Dark Matter. State film spending reached $703 million last year, before the latest enhancements were enacted.

The program is not limited to major movies or television series. Illinois also permits qualifying commercials and music videos to claim credits, provided they meet a minimum budget of $50,000. Since 2005, nearly 3,000 small-budget commercials have received support, including advertising for McDonald’s, Illinois Lotto and Kraft macaroni and cheese. That total is almost three times the combined number of television and movie projects.

State commerce officials describe smaller productions as an important source of economic activity. One example cited by the Illinois Department of Commerce and Economic Opportunity was a Walgreens commercial filmed in Chicago with a $1.6 million budget. A $115,000 commercial made for Illinois House Democrats also qualified under the program.

The newer incentives are especially significant to Breakwell because his business depends on bringing larger productions to locations outside Chicago and Cook County. Pritzker has argued that downstate communities can offer settings unavailable in dense urban areas, including open landscapes and industrial surroundings.

Jobs versus public cost

The industry says the credits are necessary because filmmakers can choose from a growing list of states and international jurisdictions offering similar benefits. Chicago filmmaker Phillip Koch, whose company used the program for music videos by the Smashing Pumpkins and Chance the Rapper, has said the incentives can determine whether workers find enough employment to remain in Illinois.

State records show that productions receiving credits employed 153,000 crew members and performers over the past two decades. Illinois also added incentives for nonresident labor in 2022. A limited number of nonresident crew members and actors can qualify, with the number of eligible actors tied to a project’s budget. Salary limits and restrictions on nonresident participation are intended to favor productions that hire Illinois workers and businesses.

Critics question whether those jobs and expenditures justify the cost to taxpayers. University of Southern California public-policy professor Michael Thom has argued that film incentives mainly benefit a narrow industry while spreading the expense across the wider tax base. His research on 40 states, covering 1998 to 2013, found a small employment effect but no meaningful impact on wages or the industry’s concentration.

A 2018 study co-written by Penn State economics professor Mark Owens estimated that Illinois spent about $19,652 for each job connected to the program. The study also found that the state collected roughly 22 cents in revenue for every dollar issued as a credit.

Owens acknowledged the competitive pressure facing states: without an incentive, Illinois could lose productions to places that offer one. But he expressed doubt that the program pays for itself.

That tension now follows the Hollywood River proposal. Breakwell sees the new credits as a reason to invest in a former industrial site and build a downstate production hub. Opponents see an expensive subsidy whose broader economic benefits remain limited. Illinois’ decision to expand the program has ensured that both visions will be tested as new productions and facilities seek a place in the state.