Kansas lawmakers craft plan to finance new stadium for Chiefs or Royals with STAR bonds

Kansas lawmakers are expected to vote Tuesday on a plan to lure the Kansas City Chiefs and Royals across state lines by potentially financing the full cost of a new stadium.

The last-minute effort comes as lawmakers prepare to end their annual session on Tuesday and after Jackson County voters in early April rejected a stadium sales tax. Both teams had committed to remaining in the county had the 40-year tax passed.

Lawmakers are now attempting to boost Kansas’ negotiating position in a competition with Missouri for one or both teams. On Monday night, legislative negotiators adopted a proposal to authorize up to two supercharged STAR – Sales Tax and Revenue – bond districts for major professional sports.

“We’ve been working on some sort of a solution for them for some time now without their involvement. We just want to be sure that we have the right plan for when the time is right for us to start those negotiations,” said Rep. Sean Tarwater, a Stilwell Republican who chairs the House Commerce, Labor and Economic Development Committee.

The Senate would take up the measure first. If it passes, the House would then vote.

Tarwarter’s proposal would authorize up to two STAR bond districts within the state for two teams, which must belong to the NFL, MLB, NHL, or NBA. Tarwater and others are clear they are targeting the Chiefs and Royals specifically, however.

STAR bonds are a state-run program that allows municipalities to finance the development of major projects. Municipalities issue bonds to pay for construction, which are then paid off by future sales tax revenues.

But the proposal includes key differences from a typical STAR bond district. Most significantly, the proposal allows for 100% of the project to be financed through STAR bonds, instead of the typical 50%. The term of the bond would run 30 years.

“This would allow 100% of the project to be paid for with bonds and they could be up to 30-year bonds,” Tarwater said, adding that the Kansas secretary of commerce would have room to negotiate.

A $1 billion minimum investment would be required, with at least 30,000 seats required in a stadium. A new Chiefs stadium would likely cost upwards of $3 billion, for example.

Local governments would not have to pledge their share of sales tax revenue within the STAR bond district toward repaying the bond, a sharp break with typical STAR bond districts. Taxes on the sales of alcohol would also go toward repaying the bond.

Tarwater said he has not spoken to the teams. The Star reported over the weekend that both the Chiefs and Royals are in the early stages of determining a Plan B after the failed Jackson County vote, which saw residents reject a ⅜-cent sales tax by 58% to 42%.

The teams are likely to now pursue separate plans. Chiefs chairman and CEO Clark Hunt said “it makes sense” for the teams “to work independently” moving forward.

Tarwater’s proposal comes after former House Speaker Ron Ryckman Jr., an Olathe Republican, said after the Jackson County vote that he is working with unnamed parties seeking to bring the Chiefs into Kansas. Tarwater told The Star that he had consulted with Ryckman, calling him a “good friend.”

Tarwarter’s proposal would sunset after one year, but the State Finance Council – a panel of top lawmakers and the governor – would have the authority to extend it for another year.

STAR bonds in general are controversial because sales tax revenue from new development can be diverted toward paying off bonds for years, even decades, limiting the direct benefit to government revenues.

Critics say the program has also been used inappropriately for projects that are too small, but supporters say the bonds present a low risk to the state and bring in attractions that would not have otherwise been located in Kansas.

STAR bonds were used to develop the Kansas Speedway in Wyandotte County, a project generally seen as a model use of the program, and were also used to build Children’s Mercy Park where Sporting KC plays. A new Chiefs stadium – whether near the Legends or elsewhere – would almost certainly represent the kind of project envisioned for STAR bonds.

Rep. Jason Probst, a Hutchinson Democrat and a legislative negotiator on the measure, said he was comfortable with authorizing such an expansive STAR bond measure because a stadium should spur extensive new retail development.

“So I’m a lot more comfortable than I would be with a straight payout,” Probst said, emphasizing that the program uses future sales tax revenue to pay off bonds.

The Star’s Sam McDowell contributed reporting