The STAR bond program has been a boon for some economic development projects in Kansas, but it apparently was due for a little tune-up.
STAR (Sales Tax Revenue) bonds were first used in Kansas to finance the development of the enormously successful Village West retail and entertainment district in Wyandotte County. The financing tool allowed the development to use new sales taxes generated in the STAR district to pay off bonds that were used to finance roads, water and sewer lines and other infrastructure for the project. Those bonds now have been repaid and the sales tax that made that possible is scheduled to start flowing back into state coffers in January 2017.
At least that was the intention of state legislators. However, Gov. Sam Brownback is pursuing another plan for that money. Legislators learned earlier this year that Brownback’s administration wants to divert about $46 million a year in sales tax revenue from Village West stores to entirely new projects in Wyandotte County but outside the existing STAR bond district. His hope was to use that money in not-yet-approved districts to help lure the American Royal livestock show from Kansas City, Mo.
Legislators were right to cry foul. Although Brownback’s plan may not have been illegal, it certainly isn’t the spirit of the law. The use of STAR bonds was approved for Village West, and the state shouldn’t be allowed to divert money raised in that district for another purpose without additional approval.
The governor and the Legislature are still sorting out this problem. A bill that would block Brownback’s plan was passed and vetoed. That veto was overridden by the Senate, which then passed another bill that makes changes in the STAR bond rules and would force the administration to start over on the American Royal plan. The House has not voted on overriding the governor’s veto, which may become moot if the House approves the new STAR bond bill.
The governor likely isn’t pleased by these developments, but allowing revenues in STAR districts to be diverted to new projects without additional approval provides too great an opportunity for abuse at a time when many taxpayers already are questioning the use of large tax rebates as an economic development tool.
STAR bond can be an effective tool to encourage diverse business development in the state. The American Royal project may be a worthy use of STAR bonds, but it should have to gain separate approval based on its own merits. If the project doesn’t measure up, the state certainly can find another good use for that $46 million in tax revenue.