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Kansas might use STAR bonds to draw the Chiefs and Royals. How exactly do they work?

The Kansas City Chiefs announced on Wednesday their plans for renovating Arrowhead Stadium, which include improvements across all three levels, "offering an enhanced experience for every fan that walks into the stadium," according to the team's website.
Kansas City Chiefs
The Kansas City Chiefs released graphics in February showing proposed renovations to Arrowhead Stadium, if Jackson County voters passed a sales tax extension. The sales tax vote failed.

STAR bonds, or sales tax and revenue bonds, pay for tourist attractions and then use the sales taxes collected at those attractions to pay off the construction debt. But Kansas has a mixed record on STAR bond projects, and the state has never used them to subsidize an NFL or MLB team before.

Kansas could finance up to 70% of a Chiefs or Royals stadium under a new proposal to lure professional sports teams to the state.

Kansas lawmakers have returned to Topeka for a special tax-cutting session and are expected to vote on a STAR bond proposal to finance a new stadium.

STAR bonds, or sales tax and revenue bonds, pay for tourist attractions and then use the sales taxes collected at those attractions to pay off the construction debt. For stadiums, that means sales taxes on food, tickets or merchandise in that area are used to pay off the bulk of the debt instead of taxpayer dollars in the state general fund.

That also means that sales tax dollars that might have otherwise paid for public services — including entertainment spending that shifts from an existing business to whatever a STAR bond financed — go to the project that’s financed with state help. Cities can opt out of offering their sales tax under the proposed bill.

A Chiefs or Royals relocation from Missouri is marketed as a once-in-a-lifetime chance. Rep. Sean Tarwater, a Stilwell Republican, said the new stadiums and surrounding entertainment districts would pay for themselves.

“(Kansans are) not going to pay a dime unless they visit the district,” Tarwater said.

But Kansas has a mixed record on STAR bond projects, and the state has never used them to subsidize an NFL or MLB team before.

How often does Kansas fail to pay off STAR bonds?

A 2021 audit of the state’s STAR bond system found that some projects may need over 100 years to pay off their debt. But the Kansas Department of Commerce said almost 80% of STAR bonds projects are expected to pay off early — often in a few decades.

The audit and a 2019 Kansas CIty Star article paint a bleak picture of STAR bonds, though, saying they are risky and used too often.

The Prairiefire development in Overland Park — which has a museum, restaurants and shopping — defaulted on its bond just months ago. Heartland Motorsports Park in Topeka closed down and is up for auction. The Schlitterbahn Water Park never recovered from the death of a then-legislator’s son on a waterslide and is another closed-down STAR bond project.

“When everybody is talking about pie-in-the-sky dreams and all the different possibilities, you have to have an economist say, ‘Here’s what actually happens. Here are the facts.’ … STAR bonds … simply do not work,” economist Michael Austin told lawmakers.

The Kansas Speedway, opened in 2001, was the state’s first STAR bonds project. The original bond was for $24.3 million and has $10.6 million in outstanding debt, a 2023 report from the Department of Commerce said.

Kansas has successfully funded some stadium projects through STAR bonds.

Children’s Mercy Park, opened in 2011 and home of Sporting KC, was originally issued $150 million in bonds and paid off its debt early.

Do any current STAR bonds projects compare to a Chiefs or Royals stadium district?

In 2023, the Royals sold 1.3 million tickets and the Chiefs sold another 638,000. The Royals were a last-place team that year and poor play scared off some fans. The team sold 2.7 million regular-season tickets during its 2015 World Series run.

A STAR bond district bringing in 2.7 million visitors is comparable to the Wichita River District, which had around 3 million visitors in 2018 and 2019.

The river district is paying back a $55.3 million bond, while a Chiefs or Royals district could cost substantially more.

The cost of any stadium is purely speculative, but the new Las Vegas Raiders stadium cost $1.9 billion when it opened in 2020. The new Texas Rangers stadium was $1.2 billion when it opened in 2020. That could mean around $1 billion or more for just a new Chiefs or Royals stadium.

When the Royals asked Jackson County, Missouri, taxpayers to extend a sales tax to pay for a new downtown stadium earlier this year, that would have eaten up about $2 billion over 40 years to pay the principal and interest on construction costs. Half of that sales tax money would have gone to the Chiefs.

Tarwater, the Stilwell Republican, said he expects the stadium districts to draw far more than the river district. For starters, the stadiums could host concerts, college football playoff games or even March Madness Final Four visits.

Tarwater said the Arizona Diamondbacks draw millions more people who aren’t at the game because of a district around the stadium.

“You’re talking 70-80,000 people coming to a region several times a year,” he said. “That generates a lot of commerce.”

Some STAR bonds districts also went under because the attraction closed. It’s been decades since a major American sports team went out of business.

How much power does the secretary of commerce have on these projects?

The Legislature is expected to vote on a STAR bonds proposal on Tuesday. But the Legislature doesn’t have the final say on how much is spent. That falls to the secretary for the Department of Commerce.

Bob North, chief counsel for the Department of Commerce, said STAR bonds usually only fund 30% of the proposed projects. The department could authorize financing for 50% of the bonds, but it determines how much bond funding to use by looking at expected revenue.

Kansas is one of few states using STAR bonds to fund projects. North said that gives the state an edge in economic development.

Not only does it create new tourist attractions, he said, but it improves the economic well-being of the state.

“We believe STAR bonds work,” he said. “Over time, that’s going to continue to be proven to be true.”

This story was originally published by The Beacon, a fellow member of the KC Media Collective.

Blaise Mesa is based in Topeka, where he covers the Legislature and state government for the Kansas City Beacon. He previously covered social services and criminal justice for the Kansas News Service.
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