Merry Christmas, Kansans – or should I say the Whos in Whoville?
We are finally getting a major professional sports team. To quote my baby sister, “We got what we wanted, but there was that one thing.” Isn’t there always just that one more thing we want? In this case, we all know it’s the Royals – but it doesn’t stop there. We need to talk seriously about the overuse of the state’s STAR bonds.
Yes, I’m feeling particularly Grinchy this year.
To be fair, STAR bonds have served good purposes in Kansas for nearly 30 years. The Legends building and the Kansas Speedway peeling off were good things for Wyandotte County and Kansas City, Kansas, which was once a food desert. Other communities across the state such as Dodge City, Hutchinson, Wichita and many others have benefited from STAR bonds by improving the cultural and entertainment appeal of their communities.
However, this Professor Grinch is starting to believe that STAR bonds are becoming a problem. This is a blowout year on the STAR bond credit card – because we buy the gifts now, but then pay for them for the next 20 years. All the Whos will insist that they are not really raising taxes with STAR bonds, but that is not true. The state and its municipalities are giving up all the additional income that it would have naturally caused anyway.
In the case of the Chiefs, the proposed stadium and entertainment district spans two counties and eight municipalities by my count. The big dollars, however, will come from the state of Kansas, which has a sales tax rate of 6.5%, compared to 1.25% in my little corner of Douglas County. So, Kansas will be paying for the stadium project with lower sales tax yields for the next 20 years than the already fast-growing part of the state.
The Whos can also point out that like all STAR bonds, the ones offered to the Chiefs are designed to increase sales tax revenue, so they only capture that expansion. Professor Grinch points out that inflation is almost constant, which means that the sales tax yield still increases naturally.
And that was it already it will be a blowout year on STAR bonds, with projects in Wichita, Lawrence, Bonner Springs and others. At least three previous STAR bond projects have failed, including the Schlitterbahn water park, Heartland Park in Topeka and the Museum at Prairiefire. It’s hard to see where this ends, but when communities can put the state on the hook for new amenities, they and their developer partners won’t be asking for the STAR bond program to go away.
The question that needs to be asked is whether projects like sports arenas and amusement parks are things the state needs, and whether all the Whos in Kansas are willing to pay for them.
Professor Grinch’s heart is probably two sizes too small, but he really wants someone to go steal that STAR bond credit card, cut it into a million pieces and throw it in the trash.
Zach Mohr is an associate professor of public budgeting and finance at the University of Kansas, and even his kids think he’s a Grinch.