Proponents of the effort to use STAR bonds to build a billion-dollar domed stadium for the Chiefs are adamant that no new taxes will be levied to pay for the project.
In Kansas, Sales Tax and Revenue (STAR) bonds are a state-level form of tax-increment financing, similar to taxing districts created by municipalities in Missouri. The state issues bonds to pay for development costs and then repays that debt using only the additional state sales taxes generated inside the project district. The claim is that the project’s shoppers—not general taxpayers—will cover the cost.
The sheer size of the STAR bond being considered for the Chiefs is staggering, and Kansas leaders will likely need to be creative to satisfy the risk being taken by potential bond buyers. I don’t envy them in that task.
The tax question is another issue. The STAR bond will determine the base year of sales tax revenue. You might assume that the base year would be 2025 or 2026, but it could conceivably be 2020 or 2015. But whatever the year, once that dollar figure is determined, everything collected anywhere in the approximately 300-mile district in excess of that dollar figure will be dedicated to pay for the Chiefs’ projects for 30 years. Mind you, the cost of delivering public services will continue to rise due to inflation or, say, due to huge infrastructure projects developed to support the stadium. But the sales tax revenue to pay for those needs is frozen at the base year level.
What then happens?
In Missouri we got the answer in 2016. Due to Kansas City’s profligate subsidy culture, property tax revenue, which libraries depend on, was flat. And so the Mid-Continent Library system sought an increase in property taxes. In doing so, the library observed:
[T]ax incentives and abatements by local government have impacted the revenue that would generally result from the growth of the Library’s tax base. The Library’s budget has been essentially flat for the past 8 years.
Advocates of subsidies often argue that they are free, because they are paid for with funds that wouldn’t exist anyway. This is exactly the argument Kansas Governor Laura Kelly makes ad nauseam. But as we learned in Missouri, that just isn’t true.
Kansans might not see tax increases going to the Chiefs’ project, but they are very likely to see tax increases because of the Chiefs’ project.
