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

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