State officials are right to undertake an intensive review of the state’s Sales Tax and Revenue bond programs before authorizing new STAR bond projects.
With few exceptions, the projects appear to have created a number of worthy tourist attractions that directly benefit their communities and indirectly help the state. But it’s also clear the tighter controls and better reporting are necessary.
“The sad reality is that, obviously there’s been very few if any dollars generated back to the state beyond the dollars going to paying off the bonds,” said state Sen. Tom Holland, D-Baldwin City, as the Legislature’s interim Commerce Committee began to review the STAR bonds program.
During the 2017 legislative session, lawmakers passed a three-year extension authorizing STAR bonds, but they also imposed a one-year moratorium on the creation of any new STAR bond districts. The moratorium provides time for the interim committee to review the program and recommend possible reforms.
STAR bonds are a tax increment-financing tool allowing municipalities to issue bonds to help fund infrastructure development of a project. The bonds are repaid by sales taxes generated within a district around the project. The mission of the STAR bonds program is to fund projects that attract visitation, especially from other states. Thirty percent or more of visitors to STAR bond-funded projects are expected to come from 100 miles away or more.
Kansas has spent $557 million the past 16 years financing STAR-bond projects. The most successful has been The Legends shopping and entertainment district in Wyandotte County, which includes shops and restaurants as well as Kansas Speedway, the Sporting KC soccer stadium, Hollywood Casino and Schlitterbahn Waterpark. The district is Kansas’ top tourist destination with more than 10 million visitors annually.
While that district’s STAR bonds were paid off early, the district has been expanded to fund more development, which Holland noted prevents the state from getting a direct return on its investment.
Other projects include Heartland Park Racetrack in Topeka, the Kansas Underground Salt Museum in Hutchinson, the Flint Hills Discovery Center in Manhattan, the Water Walk in Wichita, a multi-use sports facility and convention center in Wichita and Prairiefire at Lionsgate, a museum and retail-shopping district in Overland Park.
Some projects have run into financial troubles. At Heartland Park, sales taxes generated in the district haven’t been nearly enough to pay back the bonds.
And as Holland noted, even if the bonds are repaid, the state has no way of monitoring how successful STAR bond districts are because once the bonds are paid off the state stops tracking how much sales tax comes out of the district. That should be an easy enough fix by requiring continued reporting.
STAR bonds can be an effective way to spur tourism-focused development that helps the state. But projects should be more tightly defined with limits that support the ultimate goal of generating new revenues for the state rather than for further development.