••• Tax & Spending •••

What the proponents of subsidies for the Chiefs aren’t telling you


At the beginning of the month, Speaker Dan Hawkins and Senate President Ty Masterson released a letter to Chiefs CEO Clark Hunt about incentives for the football team to cross the border for a new stadium in Kansas. A group called Scoop and Save has also emerged to promote incentives and includes people like former House Speaker Ron Ryckman, Jr. Their website positions incentives as a no-brainer, “zero tax” policy with no chance of going wrong. But there’s no such thing as a free lunch: STAR Bonds move money around instead of creating growth. Giving bonds to a multi-billion dollar sports team isn’t a “zero cost” decision, but rather spending on the taxpayers’ back with many shortcomings

STAR Bonds were created by the legislature but are authorized by the Department of Commerce state or local governments to issue a bond to an outside company for development.  When proponents say that a STAR bond “does not impose any new or higher taxes,” they are correct…but they are leaving out the part in which millions – or in the Chiefs’ case, (potentially) billions – of dollars are issued with sales tax receipts forgone to repay it.

The proposed STAR Bonds for the Chiefs are estimated to be $3 billion, significantly more than the $1 billion of STAR Bonds currently active in Kansas. According to a Division of Post-Audit report, by November 2020, $873 million in state sales tax revenue had paid off $1.1 billion in STAR bond project debt statewide since the program’s origin in 1993.  That’s $32.3 million a year, so assuming the state hasn’t issued more STAR Bonds since then (which hasn’t happened outside of the sake of this example), then the state won’t even be above water until 2027. In 2024, the Prairiefire development in Overland Park missed a maturity date for its $65 million in STAR Bond debt and is at risk of defaulting. If Kansas’s current STAR Bonds have already been slow to start producing returns, what will that of a bond three times its size be like? The project could take decades to even see a positive return. Since 2006, Topeka has used STAR bonds to finance repairs on its Heartland Park, but the project repeatedly went in debt, and in 2023, the park closed for the foreseeable future.

Let’s contextualize this in the case of a Chiefs stadium: the stadium will host games, concerts, and maybe other largescale events, but it also will sit idly for large amounts of the year. The money to pay off the STAR Bond will have to come from those football games or other businesses that emerge in the surrounding STAR Bond district. That’s significantly different from a business open all year that is continually making money to pay off the bond. The Chiefs are a massive enterprise, but uncertainty is a major cost.

It should be expected that any STAR Bond “district” will be drawn in such a way as to capture “development” around the stadium itself. Recall the Royal’s now-failed attempt to build a stadium downtown with hotel, retail, and office space as part of a massive (re)development. Stadium developments nationwide are being envisioned as wholescale mixed-use developments. This sort of thing means that a STAR Bond “works” because it includes the restaurant/retail/hotel/entertainment venue next to the stadium.  Practically speaking, it means that the state and local governments would lose revenue because you choose to eat at the restaurant with the STAR Bond district with taxes going to the developer and not the place down the road where taxes would go to the regular state and local coffers.

What’s more, the idea that locals paying for the new Chiefs stadium wouldn’t experience other tax increases is simply not true either. The new development of the stadium, stores, and other complexes is going to cause the appraised value of the nearby land to increase as well, leading to higher taxes on the people that people live locally. In Wyandotte County, whose STAR bond-funded Kansas Speedway has been touted as a project similar to financing a Chiefs stadium, government has had a 301% increase in tax revenue since 1997, more than the triple the rate of inflation and population growth combined. Similarly, the mill rate has only increased by 37%, meaning that much of the tax revenue growth is from appraisal increases.

Subsidies give Chiefs a win, but not Kansas

Proponents operate under the assumption that having the Chiefs on the Kansas side would be positive in all ways, including economically. But that’s not the case. The left-leaning Brookings Institution found no examples of a new, subsidized sports facility increasing higher local tax revenues or having a significant, positive effect on local employment. A separate study from the Journal of Urban Affairs found no effect of subsidized basketball stadiums on regional personal income. Between 1995 and 2015, 29 of the NFL’s 31 stadiums received a total of $7 billion in public subsidies, only to have practically nonexistent income or job growth in the long run.

Then, consider the documented ineffectiveness of STAR Bonds. A 2020 KPI study of STAR Bonds found that STAR Bond projects to develop Wichita’s downtown area “had no measurable effect on the persistent decline of business and job growth in downtown Wichita” and that the STAR bond-funded Greenwich project experienced growth that “would have happened anyway” if not through government subsidies. Another 2017 analysis by Nathan Jensen found little evidence that STAR bond recipients experienced a significant boost in employment.

The emergence of organized groups is characteristic of how STAR bonds turn economic investment into a game of lobbying for billion-dollar enterprises to receive handouts while ordinary Kansans still haven’t received significant income tax relief. Kansas would have a $4.5 billion surplus even with large tax relief, yet Governor Kelly and the legislature have failed to come to an agreement on relief. They are sure quick to continue doling billions of dollars in subsidies in one hand then refuse to deliver tax relief with the other.