Illinois lawmakers voted to expand the state's sales tax and revenue bond program at the end of the recent veto session.
The new legislation,
It expands on a 2010 law that has thus far resulted in one
STAR bonds are a development financing tool that redirect sales tax revenue within a specified district in connection with major tourism, entertainment, retail and related projects.
Under the bill, STAR bonds may be issued as revenue bonds, alternate bonds or general obligation bonds. The projects require a projected capital investment of at least $30 million, and projected annual gross sales of at least $60 million with the creation of at least 300 new jobs.
A spokesperson for Gov. JB Pritzker said the governor will review the bill once he receives it from the General Assembly.
SB 1911 would also create a new category of special district: the New Opportunities for Vacation and Adventure district, or NOVA district, which requires 500 contiguous acres of STAR bond district. NOVA districts must show a reasonable expectation of capital investments at or above $500 million; annual gross sales at or above $300 million; at least 1 million annual visitors; and at least 1,500 jobs.
NOVA districts are unique and were not modeled on any other state's program, said Maura Kownacki, spokesperson for the Illinois Department of Revenue.
"While traditional STAR bond districts already exist for large-scale investments, the NOVA district was designed for very large projects… so the state could offer proportional incentives that match the size and impact of those developments," Kownacki said by email.
For NOVA districts, the bill would give projects a state sales tax increment composed of 100% of the state sales tax in excess of the tax for the same month in the base year, from transactions at up to four development users located in the district; and 50% of the state sales tax in excess of the tax for the same month in the base year from all other transactions in the district, as opposed to the 25% given to regular STAR bond district projects.
"The idea was to add another tool to the state's incentives toolbox to help attract a wider range of major development projects," Kownacki said.
The governor in May
The new legislation would require a market study to determine how well the proposed STAR bond project will gain market share locally and regionally and remain profitable after the repayment of the STAR bonds.
The market study is always paid for by the local government seeking to fund the project with STAR bonds, although the local government may seek reimbursement from the master developer for the study, Kownacki said.
"All project costs must be reasonable and necessary to carry out a STAR bond district plan," Kownacki said, noting that STAR bonds may cover the cost of public buildings within the district owned by a local government or public entity, but cannot be used for general government offices, maintenance or storage buildings, or to replace existing facilities unless the local government determines that a new building is needed.
Project costs would also include salaries for local government employees, if those employees worked on the management of a STAR bond district or any STAR bond project.
"We cannot speak to whether a political subdivision would terminate these positions once the bonds mature," Kownacki said.
The expansion "may seem a bit unusual in the context of STAR bonds," but it's not unusual or questionable in the broader context, Toby Rittner, president and CEO of the Council of Development Finance Agencies, said by email.
He cited as an example special assessment districts which require that an additional tax be paid by property owners within the district, and that is then used to pay for certain costs in that district including staff for operating programs or services in the district.
"Keep in mind, communities issue GO bonds all the time whereupon the proceeds are used to pay for government-owned facilities and to pay for employee salaries," he said. "This is just a natural evolution of that same concept within the STAR bond district."
Rittner added, "We have always suggested that when a community finances a big, transformational project, that they think about ways to ensure that some of the new, incremental taxes generated off of the new development be directed to pay for the long term costs of operating that district."
Outside Illinois, STAR bonds have been used for
Rittner said while STAR bonds are in use in only three states, revenue bonds tied to tax increment financing projects have been around for a long time. And he pointed to differences in the climate for bond financing in Kansas and Nevada as an explanation for different outcomes there.
"Nevada tends to be a more developmentally concentrated state with a big focus on two or three metro areas," he said. "Kansas is far more rural and they spread out their investments much differently. I would say that when it comes to issuing debt and investing in projects, Kansas is historically more proactive and willing to be heavily invested in economic development directly."
Rittner said the 23-year window for STAR bond projects makes sense as a way to motivate the community to invest, and most special district financing programs have similarly long runways.
"STAR bonds are intended to be used for the most transformative and catalytic projects," he said.
Kownacki said the June 2026 deadline for notice of intent "gives officials a clear window to review proposals and understand how much interest there is in using STAR bonds."
