Kansas Senate overrides Brownback’s STAR bond veto, but sustains Docking demolition veto
Topeka ? The Kansas Senate voted Tuesday to override Gov. Sam Brownback’s line-item veto of a budget proviso blocking the formation of any new sales tax revenue, or STAR bond districts in Wyandotte County.
But senators narrowly sustained Brownback’s veto of another bill that would block his administration from entering into any contracts for the demolition of the Docking State Office Building or the relocation of its power plant without legislative approval.
The STAR bonds override passed, 30-8. That issue now goes to the House for consideration.
But the veto of the bill blocking demolition of the Docking building went down, 26-13, one vote short of the two-thirds majority needed.
The issue of STAR bonds had particularly irritated lawmakers, including Sen. Jim Denning, R-Overland Park, after they learned early this year that the administration was planning to divert about $46 million a year in sales tax revenue from the Village West shopping center in Kansas City, Kan., to help fund new projects in other Wyandotte County districts, including one that has not yet been approved where the administration hopes to lure the American Royal livestock show now located in the West Bottoms area of Kansas City, Mo.
STAR bonds are a way of financing new infrastructure in a commercial development by using the new sales taxes generated by the project to pay off bonds that are used to finance the roads, water and sewer lines, and other infrastructure in the district.
The Village West area was the first STAR bond district established in Kansas, and sales taxes from that development are scheduled to go back onto the state’s tax rolls in January 2017.
“We put the proviso on the budget bill to prohibit new STAR bond districts from being developed in Wyandotte (County) until we could develop reform legislation to prohibit those transfers,” he said. “The STAR bond statute is very clear, very specific legislative intent. STAR bond districts stand by themselves. Property and sales tax revenue is not to be transferred between the districts.”
Denning said information about the administration’s plan to divert money that was scheduled to come into the state’s coffers starting in 2017 was only briefly mentioned in the November consensus revenue estimates, but the full details did not come to light until lawmakers started asking questions in later budget committee meetings.
In his veto message, Brownback did not address that issue, but said he thought it was unfair to single out one county for different treatment regarding STAR bonds. And Tuesday, just before the Senate voted to override his veto, he issued a statement saying he would block any new STAR bond proposals anywhere in the state.
“I am hereby informing the Legislature that the Department of Commerce will not approve any new STAR Bond projects in any other county,” he said. “This policy would apply to any project not yet approved by the Department of Commerce, and is within my authority under Article 1, Section 3 of the state Constitution.”
The bill dealing with the Docking building and its power plant, which provides heating and air conditioning throughout the Capitol Complex in Topeka, was passed last month in the wake of controversy over the administration’s decision to move forward with relocating a power plant from that 10-story office building to clear way for its demolition.
Lawmakers had raised concerns about the cost of that project after bids came in much higher than expected. But the Brownback administration moved ahead anyway, signing a lease-purchase agreement with Bank of America and a construction contract for the project.
Both the House and Senate passed the bill to cut off funding for that project, a maneuver they said would allow the project to be canceled without having to pay penalty fees to the bank or contractor. But Brownback vetoed the bill, and then canceled the contracts on his own, resulting in more than $2 million in penalty fees.
Before the override vote, the administration had warned that it could damage the state’s credit rating by sending a signal to bond markets that the Kansas Legislature was willing to cut off funding for previously approved projects.
That was the subject of heated discussion Monday in a Senate Republican Caucus meeting, and several members said they were not persuaded by that argument.
“Senate Bill 250 cannot impact Kansas’ bond rating unless it impacts a debt subject to annual appropriation. It clearly does not,” said Senate Vice President Jeff King, R-Independence. “The Kansas Legislature has not, and will not ever, fail to appropriate money to pay state debts.”
Others, however, said they worried that a credit downgrade was enough of a possibility to justify sustaining the governor’s veto.
“The bond attorneys who spoke to us said the odds of a downgrade may not be great, but it’s certainly a possibility, and the issue will have to be addressed when the next bonds are sold,” said Sen. Steve Abrams, R-Arkansas City. “Since the contract is nullified, and since there’s the possibility of a Kansas downgrade that could cost the state millions of dollars, the logical conclusion is that there’s another agenda at work behind the scenes.”