STAR bond extension tentatively approved in House

The Kansas House on Tuesday approved legislation extending the Sales Tax Revenue bond financing program for five years in what Rep. J.R. Claeys described as an "overwhelming yes" voice vote.

The STAR bond financing act, set to expire July 1, is responsible for dozens of economic projects across the state.

Authorization for the STAR bond program, which allows development of projects financed with sale of bonds repaid through sales tax revenue, was due to expire July 1. House Bill 2184 would extend the sunset to 2022.

Claeys, R-Salina, said rejection of the measure would jeopardize at least five projects in Wichita, Salina, Garden City and Abilene. The list includes a $130 million hotel, museum and entertainment endeavor designed to revitalize the downtown Salina.

"STAR bonds are the most effective economic development tool in the state of Kansas," he said.

Claeys, who drafted and introduced the House bill extending the program, said the voice vote was favorable. He predicted a landslide victory when the final House vote is taken today.

kansas-state-capitol

That was positive news for Salina city officials. The city has received approval to issue $19 million in STAR bond financing for downtown improvements.

"That is good news on the House side, and we hope to get good news going on the Senate side," City Manager Jason Gage said.

But real action on the House floor were tussles over a proposal to reduce the state's sales tax on food and create a back-to-school sales tax holiday.

Claeys helped to defeat an amendment offered by Rep. John Whitmer, R-Wichita, to eliminate 11 statewide sales tax exemptions worth $56 million annually and plow that money into lowering the state's 6.5 percent sales tax on groceries. In 2015, the Republican-led Legislature and Gov. Sam Brownback increased the state's sales tax to help close a budget deficit.

"The vote to raise sales taxes two years ago was one of the most difficult votes we've taken. In particular, because we were uanble to carve out an exemption for sales tax on food," Whitmer said.

He said the objective of his amendment was to reduce the rate by 1 percentage point. Kansas has the second-highest sales tax on food in the nation, trailing only the 7 percent in Mississippi. At least 32 states exempt grocery purchases from sales tax, he said.

"I would encourage you to vote this item down," said Claeys, who didn't want to load the bill with amendments that should be studied by a House committee. "It's not that this doesn't warrant our time and our energy."

Whitmer's motion went down 45-79.

Sen. Randall Hardy, R-Salina, said the STAR program has not been addressed by the Senate.

"I think the governor (Sam Brownback) is very interested in the reauthorization of STAR bonds," Hardy said. "It may be used as an incentive to pass a tax package."

Typically, a bill approved by the House is sent to the Senate.

"That's the process. As we get toward the end of the session, the process gets mixed up a little," Gage said. "We think it will most likely be packaged with the tax bill. For us, it doesn't matter how long it will take as long as they get it done."

At one point, city officials thought the bonding process could be accelerated and STAR bonds could be issued for the Salina projects before the July 1 deadline.

Gage told commissioners last week that would not be possible.

The largest downtown projects city officials expect to use STAR bonds to help fund are the Salina Fieldhouse, which would get about $8 million; the car museum, $4.6 million; and the streetscape, $2 million.

The House bill also includes use of STAR bonds for funding the renovation and expansion of historic theaters.

Tribune Content Agency
Finance, investment and tax-related legislation Sales tax Kansas
MORE FROM BOND BUYER