Kansas lawmakers are considering changes to the state’s sales tax revenue bond program that could delay new development projects, including the possible move of the American Royal from Kansas City’s West Bottoms to Wyandotte County.
The Kansas Senate approved a measure last week that would put a moratorium on new STAR bond projects, which pay off debt using sales tax revenue, for 16 months.
In coming weeks, a House committee is set to take up a different measure that wouldn’t suspend new development projects but would place restrictions on the STAR bond program.
Mike Taylor, spokesman for the Unified Government of Wyandotte County and Kansas City, Kan., said there have been “productive” conversations with state and American Royal officials about locating the American Royal near the Village West development in Kansas City, Kan.
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STAR bonds have been part of the discussion, he said.
Gov. Sam Brownback’s office said last week that the American Royal was one of several economic development projects the governor was working on. In an email, American Royal president and CEO Lynn Parman said, “We have nothing to share at this time.”
STAR bonds allow municipalities to issue bonds to finance commercial, entertainment and tourism areas and to use sales tax revenue generated from the development to pay off the bonds. They were used by the Unified Government for the Village West development.
Some legislators have grown concerned that once project bonds are paid off, the sales tax revenue from developments is shifted to new projects when it should be flowing into state coffers. Lagging sales tax revenues have been cited in the state’s ongoing budget shortfalls.
In bringing his STAR bond amendment to the Senate budget debate Thursday, Sen. Jim Denning, an Overland Park Republican, said he wanted to restore legislative oversight to the bonds and to stop the diversion of sales tax revenue at a time when it’s particularly needed to balance the state budget.
Rep. Marvin Kleeb, an Overland Park Republican and House Taxation Committee chairman, said proposed legislation on the House side would keep sales tax revenues from being “redeployed into an expansion or overlay projects” so that the state sees a return on the investment.
“The American Royal would need to be viable and sustainable on its own,” said Kleeb, noting that there would be committee hearings on the STAR bond proposals.
Denning said he wrote the amendment after he realized that sales tax revenue, which has gone toward the expiring STAR bonds for the Village West project in Kansas City, Kan., wasn’t showing up in revenue estimates.
The bonds will be paid off Dec. 31, 2016, he said, and the amount of sales tax in the district would be a minimum of $42 million annually.
Options being considered by the administration included diverting all or a portion of the $42 million toward the American Royal project, he said.
“The idea of STAR bonds is to get a new project off the ground, and after the bonds pay off, the state receives all sales taxes going forward,” Denning said. “Given the state’s finances, we need all of those sales tax revenues to stabilize our budget and pay for core government services.”
Pausing the program under his amendment would allow for a legislative review of its effectiveness and would enable lawmakers to ensure that only worthy projects are approved, he said. It would apply only to new projects, not to existing and operating STAR bond districts.
Denning said he didn’t oppose the American Royal coming to Kansas.
“I just don’t want the taxpayers paying for it,” he said, “especially in this time frame when our tax revenues are not sufficient to pay for core government services.”