What are STAR bonds?
The Sales Tax Revenue bond program in Kansas is a mess. In fact, growing questions about STAR bonds should prompt Kansas lawmakers to consider letting the program expire in July 2020 when its current authorization ends.
That’s the inescapable conclusion from The Star’s investigation of the STAR bond program, which uses future sales taxes from a project to pay back upfront costs. The story revealed missed projections, poor record-keeping and analysis, and potential overuse of the development tool, potentially costing the state millions in revenue.
No one can say with certainty that STAR bonds are doing what they’re supposed to do: Attract new dollars to boost the state’s economy. For that reason alone, the program’s demise may be inevitable.
The problems are not a surprise to longtime observers of STAR bonds. What began as an effort to help build regional tourist attractions has morphed, in some cases, into state support for “pork projects,” as Kansas state Sen. Molly Baumgardner, a Republican from Louisburg, called them.
In 2018, a special Kansas legislative committee called for changes. “Any new legislation should be focused towards reforming the program so that it returns to its original goal: Increase economic development geared towards major, destination tourism,” the committee said.
Questionable STAR bond projects abound. In 2012, nearly $65 million in STAR bonds were issued for the Prairiefire development in Overland Park. Today, seven years after the bonds were issued, Prairiefire still owes more than $64.8 million, in part because sales tax revenue has fallen short of projections.
In Dodge City, more than $13 million in STAR bonds were issued for the Boot Hill Museum and Heritage Center and the Long Branch Lagoon Water Park. STAR bonds guidelines say 20% of visitors to the attraction should come from another state, and 30% from 100 miles away or more.
Is that happening? No one knows, apparently.
“The district has not provided up to date visitor information,” the state’s most recent STAR bonds report says. “The data currently available is insufficient to provide a comparison of the number of out-of-state visitors with the number of in-state visitors.”
Past projects aren’t the only problem. The Kansas Commerce Department, which has the final say on STAR bonds, recently gave preliminary approval to two arena projects within a few miles of each other in Johnson County. Using STAR bonds for both simply doesn’t make sense.
This year, lawmakers told the Legislative Post Audit Committee to “conduct a systematic and comprehensive review, analysis, and evaluation” of economic development incentives, including STAR bonds. It also ordered the state Department of Commerce to make STAR bond data readily available, in digital form, for the public.
Those requirements will provide important context for a needed debate on extending the STAR bond program. A state that taxes groceries at one of the highest rates in the nation can ill-afford to hand millions to developers without proof the program works.
If STAR bonds aren’t working as intended, the program needs to end. And that time may be fast approaching.