Kansas Gov. Laura Kelly signed a supercharged tax incentive deal aimed at enticing the Kansas City Chiefs and Kansas City Royals to move across the state line.
During a special session, Kansas lawmakers expedited plans to allow temporary changes to the sales tax revenue (STAR) bond program. This comes despite data from existing STAR bond developments giving mixed signals about the program’s performance. The economic tool that lets municipalities issue bonds to finance developing big commercial entertainment and tourism projects throughout the state. City or county governments identify potential STAR bond district boundaries and submit the proposed map to the Kansas Commerce Department. If approved, the local city council or commission holds a public hearing and adopts an ordinance to create the district. From there, a feasibility study is completed, and project plans are submitted to local officials for further review. They then hold a second hearing to review and adopt the plan. The Commerce secretary then must approve the plans and the terms of the STAR bonds. Bonds can cover as much as 50% of project costs and are paid off over 20 years using the incremental sales tax revenue the project generates. In metropolitan areas such as Kansas City, Kansas, or Overland Park, STAR bonds can be used only for projects anticipating capital investment of $75 million, with at least $75 million in projected gross annual sales. The state does not set financial investment thresholds for STAR bond projects in rural areas. Since 1999, more than 20 STAR bond projects have been developed in 11 cities in nine counties. The bonds have been used to fund numerous tourist attractions, including the Underground Salt Museum in Hutchinson, the Museum at Prairiefire in Overland Park and Kansas Speedway in KCK. According to the state treasurer’s 2023 annual report, Kansas had 18 active STAR bond projects when fiscal year 2023 ended July 1, 2023. Katherine Carttar was economic development director for the Unified Government of Wyandotte County/Kansas City, Kansas, from 2019 to 2022. She now is executive director of the Urban Land Institute Kansas City. “The thing that really supercharges a STAR bond is the inclusion of the state sales tax. That’s just something that most states just do not touch,” Carttar said. “With the inclusion of the state sales tax, that just really makes it so much more powerful in terms of the amount of revenue that can be redirected back into the project.” Annual financial reports show Kansas diverted $40.5 million in sales tax through the STAR bond program in fiscal year 2021, $54.1 million in 2022 and $66.9 million in 2023.
Source: Kansas City Business Journal
