STAR Bonds, Sports Incentives, and Budgetary Risk

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Table of Contents

• A Border-War Stadium Gamble

• What Are STAR Bonds? Kansas’s Track Record

• Inside the New Stadium Financing Plan

• The Risks: Will the Revenue Play Out?

• Déjà Vu: Tax Cuts Limit the Cushion

• Collision Course for Kansas’s Budget

A Border-War Stadium Gamble

Kansas City and Topeka are abuzz with talk of stadiums and tax breaks—an unlikely pairing that could reshape the region’s sports landscape and the state’s finances. Kansas lawmakers made an aggressive push to lure the NFL’s Kansas City Chiefs and MLB’s Kansas City Royals away from Missouri by offering to bankroll new stadiums on the Kansas side. The key enticement? Sales Tax and Revenue (STAR) bonds that could cover up to 70% of construction costs for one or even two pro sports stadiums. These bonds would be paid off over 30 years using sales tax revenue from the stadium districts, rather than general taxpayer funds. It’s an aggressive strategy to reignite the Kansas-Missouri “border war” for economic development…but it comes just as Kansas is poised to trigger major income tax cuts.

Lawmakers backing the plan argue it’s a once-in-a-generation opportunity. They point to recent events across the state line: Missouri voters rejected a sales tax extension last year that would have helped finance a new downtown ballpark for the Royals and renovations at the Chiefs’ Arrowhead Stadium. Sensing an opening, Kansas legislators hurriedly convened last summer in a special session to craft a blockbuster incentive package; the resulting law expanded Kansas’s STAR bond program specifically for professional sports venues.

Normally, STAR bonds (intended for tourism and entertainment projects) are capped at financing 50% of a project and must be repaid in 20 years. The stadium bill blew past those limits: it authorizes covering up to 70% of a stadium project’s cost (for projects of at least $1 billion and 30,000 seats) with bonds that can be paid back over 30 years.

Kansas political leaders cast the move as a necessary offensive play. “Here in Kansas, we have the unique opportunity to solidify our region as the forever home of the Chiefs at no additional cost to Kansas taxpayers,” proclaimed one promotional campaign urging public support¹ . Indeed, proponents like Rep. Sean Tarwater (R) argue that only those who visit the stadium district will effectively pay for the project through their spending.

But as details emerge, the stadium financing scheme looks less like a free lunch and more like a high-stakes wager that could leave Kansas in a fiscal bind, especially when paired with looming tax revenue reductions. The STAR bond plan leans heavily on uncertain revenue streams (from sales taxes, sports betting, and lottery games) and assumes explosive growth around the new stadiums. Combined with Kansas’s new automatic tax-cut triggers set to erode the state’s income base, the strategy raises alarms that Kansas may be repeating the mistakes of its recent past.

“You are not going to generate enough net revenue to cover one of the facilities, let alone two,” warns Geoffrey Propheter, a public finance scholar who studies stadium deals. As Kansas doubles down on ambitious incentives and aggressive tax cuts, skeptics see a recipe for major budget shortfalls.

What Are STAR Bonds? Kansas’s Track Record

Before the current stadium push, Sales Tax And Revenue (STAR) bonds have long been a unique tool in Kansas’s development arsenal. They allow cities or the state to borrow money for major projects and repay investors using sales tax revenues generated within the project. In short, a STAR bond district captures the new sales tax that shops, restaurants, hotels, and ticket sales in the development produce, and diverts that money from the general fund to pay off the construction debt. If you never set foot in the district, your tax dollars don’t directly go to the project; if you shop or dine there, a the sales tax is used to cover the bonds. STAR bonds were envisioned to fund “transformational” attractions that draw tourists from outside the region, under the theory that the incremental tax revenue from visitors would not exist “but for” the new project.

Kansas pioneered STAR bonds in the late 1990s, and they’ve been used on a number of high-profile developments…with mixed results. The very first STAR bond project helped finance the Kansas Speedway in Wyandotte County in 1999. That NASCAR track, coupled with the adjacent Village West shopping district, is often touted as a STAR bond success story: $24.3 million in bonds were issued, and thanks to robust retail sales and tourism, the bonds are on track to be paid off ahead of schedule. Similarly, STAR bonds contributed a hefty $150 million toward building the Kansas City area’s pro soccer stadium, Children’s Mercy Park, which opened in 2011. That debt has already been fully repaid. Other ventures, like the U.S. Soccer National Training Center (built in 2017 with about $65 million in STAR financing), are still being paid down on schedule.

Unfortunately, most STAR bond bets have not paid off. One of the most notorious examples is the Schlitterbahn water park project in Kansas City, Kansas. In 2013, developers received $85.2 million in STAR bond financing to build a massive water park and resort. A few years later, tragedy struck: a child was killed on a water slide in 2016, and Schlitterbahn shuttered the park amid the fallout.

In suburban Johnson County, the outcomes have been more stark. In 2012, Overland Park issued roughly $65 million in STAR bonds for the Prairiefire retail and museum complex billed as an upscale regional draw (it even features a museum affiliated with New York’s American Museum of Natural History). But Prairiefire’s foot traffic never met projections, and the project defaulted on its bond payments. More recently, the Bluhawk sports arena and retail development received $53 million in STAR bonds in 2022 despite objections that a 3,500-seat local hockey arena is not a national point of interest.

As of this year, Bluhawk is reportedly underperforming its revenue targets³ .

The state technically requires that each STAR bond project attract at least 30% of its visitors from over 100 miles away, and 20% from out-of-state. Earlier STAR bond deals also sometimes diverted city and county sales tax revenue, leaving less for local budgets. Today, only the state’s portion of the sales tax is captured, unless local officials voluntarily opt in.

In other words, Kansas (through its 6.5% state sales tax)now shoulders most of the risk and reward of STAR bond projects.

Inside the New Stadium Financing Plan

The new stadium proposal turbocharges the STAR bond model to an unprecedented scale. Kansas could issue bonds covering 70% of the cost of building an NFL-caliber football stadium or MLB ballpark on Kansas soil. (For context, a modern NFL stadium can easily cost $2 billion or more; MLB ballparks are often in the $1–1.5 billion range.) The teams would be expected to invest the remaining 30% (and any additional private funds) to complete construction.

If one or both teams agree, the Kansas Development Finance Authority would issue the STAR bonds, providing the cash to build, say, a shiny new Chiefs stadium at Kansas Speedway or a Royals ballpark in suburban Johnson County. In return, Kansas would carve out the new stadium district as a special taxing area to pay back those bonds over the next three decades.

How will the bonds be repaid? The law directs multiple revenue streams into the stadium districts to capture as much value as possible:

• All state sales tax collected on-site – from tickets, concessions, merchandise, restaurants, hotels, or any retail in the immediate surrounding development – will go toward bond payments. This is standard for STAR bonds.

• A new sweetener specifically for stadium projects: liquor taxes generated within the district can be 100% dedicated to the bond.

• Sports betting tax revenues. The state legalized sports betting in 2022, with 80% of Kansas’s sports wagering tax revenue earmarked to pro sports team projects. That “Attracting Professional Sports to Kansas Fund” would be tapped to help pay off the stadium bonds.

• Traditional lottery revenues. Any annual lottery revenue over $71 million is now earmarked for the pro sports attraction fund.

In short, Kansas is sweeping together sin taxes and sales taxes–everything from game tickets and hot dogs to lottery tickets and sportsbook receipts–to funnel into these stadium projects.

Crucially, the law specifies that if the dedicated revenues fall short, bondholders are not guaranteed repayment from the state’s general coffers. The bonds are explicitly not backed by Kansas’s full faith and credit, in order to protect the state’s constitutionally limited debt capacity. Instead, the debt is solely supported by the new revenue streams in the project plan (sales, liquor, lottery, betting) and is issued through the state’s development finance authority. That means if the Chiefs’ or Royals’ new Kansas stadium district doesn’t generate the forecasted sales, the bonds could theoretically default without a direct taxpayer bailout.

Kansas officials insist this shields the general fund from risk. In practice, though, a default on such a high-profile project could carry heavy political consequences and damage the state’s financial reputation. The law tries to keep the process under wraps to avoid spooking investors: any revenue reports submitted to the Department of Revenue on these STAR bond districts will be kept confidential (with penalties for unlawful disclosure).

For now, Kansas’s offer is out there and the teams are taking notice. Both the Chiefs and Royals issued polite statements thanking Kansas for providing another option, even as they negotiate with Missouri. Neither franchise is obligated to do anything immediately; both are locked into their Missouri stadium leases until 2031. Kansas’s offer expires June 30, 2025 (extendable one year by a council of legislative leaders and the governor).

This ticking clock was meant to put pressure on the teams to decide and on Missouri to respond. Indeed, Missouri’s governor has called a special session to begin today to revisit the issue² .

The Risks: Will the Revenue Play Out?

On paper, the STAR bond stadium plan could cover an enormous chunk of construction without directly raising taxes or dipping into existing funds. But independent economists and fiscal experts are deeply skeptical that the proposed revenue streams will be sufficient—especially if Kansas somehow landed both teams. “You are not going to generate enough net revenue to cover one of the facilities, let alone two,” cautions Geoffrey Propheter of the University of Colorado Denver, who studies stadium financing. The fundamental issue, Propheter and others note, is that the sheer scale of these projects is unlike anything STAR bonds have financed before.

Financial red flags are obvious when examining Kansas’s plan and assumptions:

• Unprecedented Scale of Public Funding: Kansas is proposing to fund 70% of stadium costs with public tax revenues, far above the 50% cap used in past STAR deals. Even conventional stadium subsidies rarely reach this level. Such heavy public financing only “works” if the stadium district produces massive sales volumes for decades. Critics note STAR bonds have struggled to pay off just 50% of project costs before; covering 70% of two billion-dollar complexes is far more ambitious.

• Questionable “New” Revenue: The plan assumes that taxes generated around the new stadiums will mostly be new money. Analysts say much of it will simply be shifted from other spending. Local fans who spend a day at a Kansas ballpark are now spending their money through the stadium, meaning the state is diverting existing tax revenue to pay the bonds (while the net gain to the Kansas economy is minimal). The out-of-state visitor boost is also uncertain – Royals weeknight games, for example, are unlikely to draw “tens of thousands of out-of-town fans” on a regular basis.

• Sports Betting and Lottery – A Drop in the Bucket: Kansas’s much-heralded sports wagering revenue provides only a token contribution. In the first 15 months of legalized betting, Kansans wagered $2.8 billion, but the state’s take was a mere $12.2 million (about 0.4% of the handle). Thanks to promotional credits and slim margins, an entire month of frenzy–February 2023, when the Chiefs won the Super Bowl–netted Kansas just $1,134 in sports betting tax revenue.The annual haul directed to the stadium fund is on the order of $8 million. The debt service on a $1 billion bond over 30 years could easily run tens of millions per year.

Déjà Vu: Tax Cuts Limit the Cushion

Overlaying the stadium debate is a broader fiscal backdrop that has policy watchers on edge. Even as Kansas bets big on STAR bonds, the legislature also set in motion sweeping tax cuts that could severely constrain the state’s budget in coming years. In April 2025, Republican supermajorities overrode Gov. Kelly’s veto to enact Senate Bill 269, dubbed the “income tax trigger” law. The measure creates an automatic mechanism to ratchet down Kansas’s income tax rates whenever revenues come in above expectations and the state’s rainy-day fund is filled to a healthy threshold. Essentially, during flush years, instead of keeping surpluses, Kansas will progressively cut both personal and corporate income tax rates – aiming ultimately for a flat 4% income tax across the board.

Rewarding taxpayers in good times sounds reasonable. But the magnitude and structure of the cuts have drawn comparisons to the ill-fated tax experiment launched by former Gov. Sam Brownback in 2012. Those “failed experiments” are not a distant memory; Brownback’s aggressive tax cuts were billed as a “shot of adrenaline” for the Kansas economy. Instead, the state’s finances went into freefall. By 2015, Kansas was contending with repeated revenue shortfalls and mid-year budget cuts as revenues came up short. The state drained its reserves, delayed payments, and struggled to fund schools and services. The crisis peaked in 2017 when faced with a nearly $350 million budget hole, a bipartisan coalition in the legislature finally rolled back the Brownback tax cuts over his veto.

Fast forward to 2025, and many see shades of the same story. SB 269’s proponents argued it’s more prudent than Brownback’s plan because the cuts only happen if Kansas is running a surplus and maintaining a 15% budget reserve; however, once the rates ratchet down, Kansas loses that revenue permanently, even if the economy cools. The state’s own legislative staff confessed they couldn’t even estimate the full fiscal impact.

The concern is what happens when the music stops. Under SB 269, if Kansas experiences a moderate downturn after several years of triggered cuts, the state could face a steep revenue drop with no easy recovery lever. Tax rates would already be locked at low levels unless lawmakers affirmatively raised them (politically unlikely).

The new tax policy also reduces Kansas’s flexibility to respond to unforeseen costs or opportunities. One immediate example: bipartisan promises to boost K-12 education funding and provide property tax relief failed to materialize. As income tax receipts get pared back, it will be harder for Kansas to fund obligations like public schools (already underfunded in special education since 2010, a gap officials say will be “very difficult” to close now), infrastructure projects, or economic development initiatives.

Collision Course for Kansas’s Budget

This is the context in which Kansas’s big stadium gamble will play out. The state is simultaneously committing to major long-term expenses (or foregone revenues) with STAR bonds and slicing away its general revenue base with tax triggers. Either move on its own carries significant risk; together they put Kansas on a collision course with fiscal reality.

If Kansas lands even one team and issues, say, $1 billion in STAR bonds, it is essentially wagering a chunk of future sales tax growth on that project’s success. For 30 years, a stream of would-be general fund revenue–sales tax that, absent the STAR bond district, would flow to education, healthcare, or highways–will be redirected to bondholders. In the best-case scenario, the stadium district booms, generating abundant new sales that easily service the debt. But even that “success” means the state forgoes a large amount of tax revenue it might have collected if the same economic activity happened elsewhere. In the worst-case scenario, the stadium and surrounding development underperform, producing just a trickle of tax revenue. The bond payments would then extend far into the future or even default. Kansas officials insist the state won’t bail out a failed project, but it’s worth noting that Kansas has never let a STAR bond project collapse entirely, often finding ways to refinance or support faltering districts. A default on a billion-dollar bond would be unprecedented and could hurt Kansas’s credit rating, potentially raising borrowing costs for unrelated needs.

Now layer on the tax-cut triggers. As long as the economy hums, Kansas’s surplus triggers will be lowering income tax rates and shrinking the cushion of excess revenue that might otherwise cover fluctuations in the STAR bonds. Essentially, Kansas’s political leadership is choosing to give money back to taxpayers on one hand, while committing future tax streams to developers and sports teams on the other.

This combination could prove fiscally destructive.

As the June 2025 special session in Missouri convenes to possibly up the ante, Kansas finds itself in a high-stakes bidding war not just with its neighbor, but with its own balance sheet. The coming months and years will reveal whether this aggressive approach is visionary or foolhardy. For now, the state is all-in on a dual bet: that new stadiums will magically pay for themselves, and that tax cuts will pay for themselves too.

Kansans have seen how that story ends⁴ .

1  The rapidly-created entity, Scoop and Score, Inc., was incorporated in May 2024 to encourage public support for the STAR Bond stadium initiative. The listed incorporator, Paje Resner, was previously chief of staff for Rep. Ron Ryckman (R).

2  There had been a failed attempt to pass a stadium funding bill during Missouri’s regular session; that proposal capped the state’s contribution to only 50% of construction costs.

3  This statement comes from Molly Baumgardner (R), who was the Kansas Senator for the district containing the Bluhawk project.

4  Hint: The end of the Brownback tax program included a fracturing of the Kansas Republican Party, three consecutive years of electoral gains for Kansas Democrats, and a two-term Democratic governor.