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Committee Says Kansas STAR Bonds Program Needs More Study, Possible Changes

Republican Senator Julia Lynn (left) and  Democratic Senator Tom Holland at the Statehouse Wednesday. (Photo by Stephen Koranda)

Kansas lawmakers studying economic development policies say the Legislature should consider changes to a major incentives program next year. A special committee is recommending more study of the STAR bonds program, and members of both parties want more oversight.

Republican state Senator Julia Lynn said there hasn’t been enough accountability. She wants to see formulas used to determine whether proposed projects will create enough economic development to outweigh the costs.

“If they cannot prove that they can produce a positive return on investment, then either you have to go back and look at the project again, or you don’t do the project,” Lynn said.

Under the STAR bond program, local governments issue bonds to help pay for development projects. Tax collections from the development are diverted away from state and local governments and used to pay back the bonds.

The program has been used for some high-profile developments, including the Kansas Speedway, as well as smaller projects. The redevelopment of the Heartland Park racetrack outside Topeka is a less-successful example. A bank eventually took over the track and sold it to a new owner.

The committee heard about changing shopping trends and struggles facing brick-and-mortar retailers. Democratic state Senator Tom Holland said perhaps they should look at limiting STAR bonds to tourist destination projects and avoid retail developments. He said retail developments around a tourist attraction could be financed by private developers.

“If that kills the deal, then maybe it shouldn’t have lived in the first place,” Holland said.

Republican Representative J. R. Claeys was hesitant to recommend any specific changes right away. He called the STAR bonds program “wildly successful.”

Claeys said they need more information, including input from local economic development officials, before proposing changes.

“We need to have measurement,” Claeys said. “I don’t want to make recommendations that might have unintended consequences by stopping a project from going forward that has merit.”

Kansas lawmakers reauthorized the STAR bonds program earlier this year, but only for a three-year period. They also put a one-year moratorium in place on any new projects while lawmakers study the issue.

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