Kansas wins NFL Chiefs with STAR bond stadium financing plan

MANICA

Kansas won a tug of war with Missouri over the future home of the NFL's Kansas City Chiefs with an offer of a domed stadium largely financed with a beefed-up version of a sometimes troubled bond program. 

Monday's announcement by team and Kansas officials followed unanimous approval by the state's Legislative Coordinating Council of a sales tax and revenue bond district that includes a $3 billion stadium expected to be in operation for the 2031 NFL season in Wyandotte County. The team also has plans for an entertainment district and a $300 million training facility and team headquarters in the city of Olathe.

"We are turning Kansas into a national center for sports and entertainment," Gov. Laura Kelly said. "We are making Kansas a tourist destination for the region, for the nation, and for the world. The economic impact of all of this is massive."

In a special legislative session last year, Kansas lawmakers overwhelmingly approved a plan permitting STAR bonds to cover up to 70% of the cost of professional sports facility projects carrying a price tag of $1 billion or more in an effort to lure the Chiefs and Major League Baseball's Kansas City Royals from Missouri.

Under a public-private partnership unveiled on Monday, the public portion of the Chiefs stadium project is 60% and the private portion 40%.

The professional sports facilities STAR bonds, which could be issued by a city, county, or the Kansas Development Finance Authority, will be backed by the incremental increases in state sales and liquor taxes collected in the project's STAR bond district, according to a term sheet for the project. Slices of sports betting and state lottery revenue will also be used to secure bonds for the stadium, which will be owned by a governmental entity.

Wyandotte County and Olathe have the option to designate a portion of their local sales tax revenue generated by the project to back bonds. Aggregate public funding commitments are capped at $2.775 billion.

The 2024 Kansas law extended the maximum maturity of STAR bonds to as much as 30 years, up from 20 years. It also contemplated the possibility of a stadium project being located in an existing STAR bond district by mandating priority repayment for outstanding bonds. 

"What also makes this opportunity unique is that STAR bonds ensure that Kansas taxpayers are not on the hook," Republican House Speaker Daniel Hawkins said. "We would never use state general fund money or implement a sales tax just for this purpose, like we've seen other states do."

Missouri Gov. Mike Kehoe on June 16 signed into law a bill that offered tax credits and allowed for bonds backed by annual state appropriations to cover up to 50% of the total project costs of new or renovated stadiums for the Chiefs and Royals. 

The plan emerged after the April 2024 defeat of a Jackson County, Missouri, ballot measure to impose a sales tax earmarked for a new Royals ballpark and renovations for the Chief's Arrowhead stadium.

Kehoe told reporters on Monday the plan remains on the table for the Royals. 

At a press conference Monday afternoon, Kansas City, Missouri, Mayor Quinton Lucas said the neighboring state's STAR bond offer was a determining factor in losing the Chiefs.

"Our very fair and very responsible offer was surpassed by an even more robust offer," he said. "It's just unfortunate that myself and the city council can't create STAR bonds."

The issuance of Kansas STAR bonds began in the 1990s as a way to help finance tourist attractions. Following debt retirement, the additional sales taxes generated by the development would flow into state and local government coffers. There were 16 projects with STAR bond financing at various stages of completion and repayment in 11 cities, according to the program's 2024 report.

STAR bond projects haven't all lived up to expectations.

In December 2023, an event of default was declared by bond trustee UMB Bank after sufficient funds were not available to pay the entirety of debt service on nearly $65 million of unrated STAR bonds Overland Park issued in 2012 for the 61.5-acre Prairiefire development that includes a museum, retail, offices, and housing.

A 2021 Kansas legislative audit estimated only three of the 16 bond-financed attractions met the state Commerce Department's tourism-related program goals for long distance and out-of-state visitors.

The audit looked at three STAR bond districts, including Prairiefire, and determined it would take decades beyond their bonds' retirement for the state to recoup tax revenue it gave up. 

The Chiefs have played at Arrowhead since 1972 and have recently enjoyed great success, reaching five of the last six Super Bowls, winning three, though they will miss the playoffs this season.