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Tax credit luring producers

Published: Tuesday, Nov. 27, 2012 1:15 a.m. CDT
Caption
(AP)
The marquee at the Cadillac Palace Theatre promotes the musical “Les Miserables” Nov. 19 in the theater district in downtown Chicago. Illinois has been using a recent theater tax credit approved by state lawmakers to attract pre-Broadway and long-run shows to the state. Two musicals recently applied for the tax credit and officials say they’re in talks with at least nine other interested productions, and that all together they could bring millions of dollars to the city.

CHICAGO (AP) – The New York-bound musical “Kinky Boots” enjoyed a pre-Broadway run at a downtown Chicago theater this fall, but only after the state of Illinois lured producers with something that’s scarce these days – money.

The Cyndi Lauper and Harvey Fierstein production that’s based on a 2005 movie, along with a second musical, “Big Fish,” were the first to apply for a certificate making them eligible for a state theater tax credit. Lawmakers slipped it into a package of tax breaks approved late last year for corporate heavyweights Sears Holding Corp. and the CME Group Inc.

The breaks appear to be doing their job: Producers say the credit – worth up to $500,000 per production or a cap of $2 million per year – was instrumental in their decision to bring the shows to Chicago instead of going straight to New York or previewing in Seattle, Toronto or San Francisco.

In the highly competitive business of attracting big-name, revenue-generating productions, Chicago theater officials say they’re in talks with at least nine other productions.

The timing and principle of such a state tax credit primarily benefitting Chicago – given in the midst of Illinois’ almost unprecedented financial crisis – has raised some financial experts’ eyebrows. Currently, the state is nearly $8 billion behind in paying bills to social service providers and other state contractors; the state’s employee pension program is underfunded by $95 billion; and Illinois residents are being asked to pay higher income taxes.

But proponents, who argued for the tax break for five years, now can point to “Kinky Boots” and “Big Fish” as evidence of success. They say the unique tax break brings Chicago something more than money – a show-business shine that generates buzz. Only Louisiana and Rhode Island have similar legislation, intended to bring shows to cities like New Orleans and Providence.

“From a bigger picture standpoint, it has huge impact to the city and state and that’s the real motivation behind this,” said Lou Raizin, president of Broadway in Chicago, which runs five theaters. “We’re getting a bite of the Big Apple before they do and I love that.”

Producers often like to test shows outside of New York before debuting on Broadway. It lets them gauge audience reactions and make updates, improvements and changes. But producers say an out-of-town preview can be pricey. Besides “Kinky Boots,” Chicago has had two pre-Broadway shows since 2006 – “The Pirate Queen” and “The Addams Family,” starring Nathan Lane and Bebe Neuwirth.

“Big Fish” producer Dan Jinks said other cities wanted to host his show, but the tax credit made it easier to choose Chicago.

“It’s extremely smart of the legislature to realize if a brand new musical is spending all that money in Seattle, why shouldn’t they be spending it in Chicago instead?” Jinks said. “To give Chicago that competitive edge is a really smart thing to do.”

Gov. Pat Quinn signed the legislation in December 2011, offering tax breaks to productions headed to Broadway within a year and productions that run longer than eight weeks. It applies to theaters anywhere in Illinois that seat more than 1,200 and offers discounts on taxes related to labor and other production costs.

“Kinky Boots” producer Hal Luftig said his entire show costs about $13 million, including between $2.5 million and $3 million to come to Chicago. For him, the $500,000 was a motivator.

“Chicago is a great theater town and being able to have that help and that aid was a big driving force for us to come here,” Luftig said.

Nobody doubts the productions will bring the city valuable revenue, not only from the shows’ own spending, but also theatergoers shelling out for hotels, restaurants and shopping sprees. But exactly how much is hard to ascertain. Broadway in Chicago officials did not respond to requests for the per-show information, though they said their productions bring a total of $750 million to the city annually.

Illinois Department of Commerce and Economic Opportunity spokeswoman Sandra Jones said the agency did not have such figures.

Legislative supporters of the measure assured that the bottom line would not be a loss to the state.

“Taxpayers will get their money back,” said Illinois Senate President John Cullerton, a Chicago Democrat, who said he would support expanding the tax credit if it is successful. “We’re getting money that we otherwise wouldn’t get at all. It’s outside money. It’s why you should do it, because we get more back than we put in.”

Some critics, though, find it unwise for Illinois to be giving away any type of tax break while in a financial mess. Ralph Martire, executive director of the Chicago-based Center for Tax and Budget Accountability, said Illinois shouldn’t be contemplating tax credits when it has billions of dollars in debt.

“Every penny you use for poor theater decisions is a penny you can’t use to educate an inner-city child,” he said. “I know it’s a relatively small amount of money, but it’s absolutely unjust for state government to be kicking that money in that industry this year.”

Raizin, with Broadway in Chicago, said the tax credit’s impact goes beyond a monetary figure.

“When word starts to really spread nationally and internationally about the great city we have, that’s where the huge value is,” he said.

Luftig said he’s already told his fellow Broadway producers about his “positive experience” in Chicago.

“New York is looking,” he said.

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