TOPEKA — Legislators serving on an interim commerce committee could recommend a series of changes to a state bond program aimed at supporting large developments out of concern they don’t have enough information about the projects’ benefits.
The state’s Special Committee on Commerce met Tuesday to discuss sales tax revenue bonds, or STAR bonds, which finance development projects and allow them to be repaid through sales tax revenue. Since 2001, more than $546 million in sales tax has gone toward repaying bonds on 11 projects rather than to the state.
STAR bonds are meant to help develop large attractions, like Village West in Wyandotte County, and bring sales tax into the area and the state once the bonds are paid off. Some legislators, however, are concerned they don’t have the tools to evaluate the need and effectiveness of different projects.
Nick Jordan, interim secretary of commerce, recommended the committee consider several tweaks to the program to make sure tax dollars are invested properly, such as requiring independent market studies and narrowing the types of developments that can be eligible for the help.
Committee chair Sen. Julia Lynn, an Olathe Republican, said the state doesn’t have a way to calculate the return the state gets on its investment in a star bond. Kansas doesn’t know whether its STAR bonds projects are a net positive.
“We don’t know what kind of benefit we’re going to get back to the state because there’s not been any numbers put to the projects, so we’re just crossing our fingers,” Lynn said.
Jordan said in written testimony to the committee a staff economist in his department was helping refine the process of evaluating projects before they’re approved and looking into the return on that investment.
Lynn said project studies needed to be done by independent third-parties, not the developers or communities hoping to get a STAR bond project approved.
“Because these are taxpayer dollars that are being invested,” Lynn said.
Sen. Tom Holland, a Baldwin City Democrat, said the state needed proper “controls” over STAR bonds projects to make sure it will be beneficial investments. He said the Village West investment in Wyandotte County was an “outstanding economic success,” but he wanted to make sure the state wasn’t doing too much.
He said he thought developers who create STAR bonds projects should have to fund expansions themselves, not return to the state for more incentive.
Holland questioned the use of STAR bonds to build a new soccer complex near Village West. According to the Kansas City Business Journal, the project is being developed with $62 million in STAR bonds.
“Once again, why is the state having to finance that tourism attraction when you already have the Sporting KC stadium there?” Holland said. “The infrastructure is there to do it.”