Kansas bill would extend and expand STAR bond program

A Kansas bill would continue an economic development bond program that has fallen short of state goals for two years past its current July 2026 expiration date.  

The measure, which arrived in the House on Tuesday after passing the Senate in a 32-8 vote last week, would keep the sales tax and revenue bond program going until July 1, 2028 and allow STAR bonds to be used to redevelop shopping malls.

Republican State Sen. Stephen Owens, who presented the bill on the Senate floor, said the sunset was changed from July 2030 in the initial version of the bill, which now also prohibits the use of state general fund revenue to pay off STAR bonds and eliminates the ability of a city or county government to exercise eminent domain to acquire property for a STAR bond project.

“While I certainly can understand the concern of any economic development incentive, I think that the best economic development incentives are the ones that do not put state taxpayers and their dollars, their tax dollars, at risk,” he said.

STAR bonds are paid off with local and state sales tax revenue generated by the development. 

The debt program could help finance major projects.

In an effort to lure the National Football League’s Chiefs and Major League Baseball’s Royals from their Kansas City, Missouri, homes, Kansas lawmakers last year passed a measure permitting STAR bonds to cover 70% of the costs of two professional sports stadiums costing $1 billion or more. The move followed the April 2 defeat by Jackson County, Missouri, voters of a sales tax hike to help fund stadium projects.

While neither team has announced a decision, the clock is ticking with the Kansas law due to expire on June 30.

STAR bonds would also be issued for a Mattel toy-themed amusement park in Bonner Spring, Kansas.

Since the program began in the 1990s, 17 STAR bond districts have been created by 13 cities, according to the legislature’s post audit division. The first-ever payment defaults occurred with unrated STAR bonds issued by Overland Park for the 61.5-acre Prairiefire development that includes a museum, retail, offices, and housing. A June disclosure notice said a debt service reserve was tapped for a payment.

A 2021 Kansas legislative audit estimated only three of the 16 bond-financed attractions met the state Commerce Department’s tourism-related program goals for long distance and out-of-state visitors. The audit’s examination of three STAR bond districts, including Prairiefire, determined it would take decades beyond their bonds’ retirement for the state to recoup tax revenue it gave up.