Hollywood on the Plains: No. 21, Iowa City

Stephen Jennings (center) with his team at Devotay restaurant near his office in Iowa City.

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IOWA CITY (FORTUNE Small Business) -- When Stephen Jennings landed in California, he quickly shed his Iowan roots. His first job carried the only-in-L.A. title of "assistant flame artist."

At Digital Domain and Sony Pictures Imageworks, his animation and special-effects projects included Spider-Man and The Fight Club. He wore bowling shirts, hobnobbed with big-name producers at Oscar parties, and founded Grasshorse Technologies, an animation and special-effects film production company whose clients include the Cartoon Network and Warner Brothers Studios.

But when Jennings returned to his parents' Iowa farm last summer, he realized that the 80-hour workweeks in Los Angeles were growing tiresome. During his visit he heard about a new program called the Iowa Film, Television, and Video Project Promotion Program, which offers tax incentives to production companies that film in the state. Benefits include a 25% tax credit on all production expenses incurred in Iowa and a tax abatement for all film, video, or movie vendors working in Iowa.

"These incentives really sealed the deal," says Jennings, 35. He moved to Iowa City last September, working out of a transitional space just outside town; Grasshorse's new offices will open in June.

In recent years the economic corridor that stretches from Iowa City to Cedar Rapids has emerged as a powerful locus of economic growth, not only in film but also in computer simulation, bioengineering, and renewable energy. The University of Iowa, a major research institution, and Kirkwood Community College (with 15,000 students across seven counties and programs supporting emerging high-tech industries in the area) supply one of the best-trained work forces in the country. The falling dollar helps Iowa companies compete globally, as do generous local incentives such as a state tax exemption on profits from overseas sales.

"A key factor," says Jennings, "was being able to compete with animation studios in Korea and India."

You might be forgiven for thinking that a chunk of West L.A. had somehow shifted to east-central Iowa as you drive past Iowa City's cosmopolitan offerings: foodie shops, the Englert Theater (where Noam Chomsky recently gave a talk), and the gleaming new Hotel Vetro.

Downsides include few direct flights from major hubs and a lingering global snobbery toward middle American states that begin with the letter "I." Recently IDT Technologies, a local genetics-research firm with overseas ambitions, set out to hire a senior executive. Several international candidates withdrew applications when they found out that "IA" meant Iowa.

Still, Jennings is at home in a town with tailgate parties and affordable real estate on tree-lined streets. "It's out of Huckleberry Finn," says Jennings, who enjoys canoeing on the Iowa River during off hours. Then there's what might be called the "big fish/small pond" incentive.

"People are impressed," Jennings says, "and they go out of their way to try to help."