In the next two years, Kansas lawmakers will decide whether to renew the sales tax revenue (STAR) bond program or allow it to sunset in July 2026.
Legislators’ approval of tweaks designed specifically to lure the Kansas City Chiefs and/or Kansas City Royals from Missouri has driven much recent attention to the program. But since 1999, STAR bonds have played a big, and sometimes polarizing, part in numerous area projects — from Village West, which paid off bonds years early and now yields more than $40 million in annual state sales taxes, to Prairiefire, where inaccurate revenue estimates led to the program’s first default. The Kansas City Business Journal’s Thomas Friestad spoke with Bob North, chief counsel of the Kansas Department of Commerce, about the state’s approach to STAR bonds. How do you assess the STAR bond program’s performance? First and foremost is financial success: Are the projects generating enough sales tax revenue so the bonds are going to be repaid? That’s a critical component, and around 80% of the projects have either paid off early or, based on current revenue streams, are going to pay off early (before their 20-year bond term). We also look at visitation. One of the purposes behind STAR bonds is to bring new visitors, new sales tax to the state, so we look at a couple things, one of which is how many people are coming from more than 100 miles away and how many folks are coming from out of state. State auditors in 2021 found that of 16 STAR bond projects reviewed, only three met Commerce’s tourism goals. Commerce disputed the audit, saying it should have considered other goals, like general and economic welfare. How does your department weigh goals with relation to each other? The 30% (visitors from at least 100 miles away) and 20% (out-of-state visitors) goals are, to an extent, aspirational. We do need new visitors. We do need new sales tax dollars. But that’s not the sole criteria that we would evaluate. General economic welfare and then quality of life is also an important factor. The state exports a majority of its college graduates, and we’ve got more jobs than we do people, and so … how do we keep those people here, and how do we attract them to come back? We think STAR bonds are a very effective tool, if you like museums or if you like water parks, if you’re into racing or if you’ve got kids that play youth sports.
(Auditors) are in the middle of looking at this quality of life and trying to quantify what that might look like.
Source: Kansas City Business Journal
