A Kansas economic development tool involving industrial revenue bonds (IRBs) carried a hefty cost as the amount of taxes exempted for businesses increased between 2010 and 2024, according to a
Property tax revenue may have been reduced by an estimated $1.1 billion during that period, while the amount of forgone sales tax revenue — which could not be determined due to data limitations — could be in the hundreds of millions of dollars, Matthew Fahrenbruch, senior auditor with the legislature's Division of Post Audit, told state lawmakers on Wednesday.
The audit noted that "because sales tax is largely a state tax, this is a potentially significant forgone revenue to the state that [neither] we, nor the Kansas Department of Revenue, can fully quantify."
These tax breaks can be available for up to 10 years to businesses seeking to locate or expand their facilities in the state through city or county IRBs, which can serve dual purposes.
"They are a financing tool that local governments may use to support eligible projects and, under Kansas law, they may also provide certain tax benefits, including sales tax exemptions and property tax abatements," according to the Kansas Department of Commerce. "Whether those benefits are provided is determined by the issuing city or county as part of the local IRB process."
About 955 IRB issues totaling roughly $18.3 billion were issued between 2010 and 2024, with about 520 of the issues accounting for the estimated reduction in property tax revenue, which rose from a low of $30.7 million in 2013 to a high of $155.8 million in 2024, the audit showed. Most of that forgone revenue — $436 million or 40% — would have gone to public school districts, followed by counties losing $316 million and cities $182 million.
Tax incentive-linked taxable IRBs in
New Mexico's Doña Ana County
In Kansas, officials in DeSoto — a city of around 6,500 located 25 miles southwest of Kansas City —
"The project is a multi-billion-dollar private investment, and the IRB framework simply defines the conditions under which parts of that investment can qualify for temporary tax abatements or construction sales-tax exemptions," according to a city web page on the development. "The 'up to $50 billion' number refers to the maximum amount of developer investment that could qualify for certain incentive tools over the life of the project — not money the city is giving away, and not city funding."
Kasia Tarczynska, a senior research analyst at Good Jobs First, a nonprofit nonpartisan watchdog on economic development incentives, said public presentations often focus on community benefits projects promise to bring.
"We hear almost nothing about the costs, the value of these subsidies, how much money will not go to school districts or city or county governments, and without having this accounting of costs and benefits, it's really hard to have any good discussion about this project," she said, adding that audits, like the one in Kansas, "are extremely important" for public and fiscal accountability.
"Now it's up to state legislators to do something about it because now it is evident that these industrial revenue bonds are extremely expensive," Tarczynska said.
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IRB use is growing in the state, according to the latest audit.
The number of IRBs issued by cities and counties climbed from 39 in 2010 to a high of 84 in 2018 and totaled 82 in 2024, while the amount grew from $336 million in 2010 to $3.2 billion in 2024.
"A significant portion of the increase in the total amount of IRBs in 2024 was driven by three major projects that accounted for over $1 billion in IRBs," the audit said. "These included $300 million for a dairy processing facility in Dodge City, $350 million for a bottling and canning plant in Olathe, and $375 million for a soybean processing facility in Cherryvale."
Cost benefit analyses (CBA) produced to obtain IRB-related tax breaks for projects are submitted to the Kansas Board of Tax Appeals (BOTA), which is limited to checking whether all required documentation was submitted and if projects meet statutory requirements to receive so-called IRBX tax incentives, according to Fahrenbruch.
"The Board of Tax Appeals is not required by statute to review the quality of the CBAs or determine if the estimates and assumptions are accurate or reasonable," he said.
State Sen. Joseph Claeys said if CBAs are not being scrutinized as part of the process to grant or deny an exemption, "it just seems like it's some sort of compliance theater that's happening."
"We have these billion-dollar revenue decisions being looked at without really any rigorous study, which, as a taxpayer, I would find that to be more than a little problematic," he said.
The audit recommended the legislature could consider statutory amendments to either require and enforce standards concerning the accuracy of CBAs or consider eliminating the CBA requirement altogether.
Auditors, who were directed by the Legislative Post Audit Committee to determine if foreign businesses received IRBs, found three U.S. subsidiaries of companies based in India, Switzerland, and South Korea received IRBs valued at $282 million in 2024.
"All three projects had IRBXs approved by BOTA in 2025, but they aren't far enough along for us to determine how much tax revenue will be forgone during the exemption period," the audit said.
