When Wichita stadium STAR bonds fall short, guess who pays
Sales Tax and Revenue Bonds — better known as STAR Bonds — are public debt issued by the city, to get public money to pay for private development projects.
That bond debt has to be paid back. The loan is supposed to be paid off using sales tax money generated by the new development.
But things go wrong. And when they do, it’s taxpayers who end up paying.
STAR bond debt is tricky, because you can’t easily find the numbers.
Let’s look at the new Wichita baseball stadium and its $42 million in STAR Bonds.
First, if you took out a loan to buy a car, you couldn’t hide the loan from your bank. It would be a debt owed, a liability. But STAR bond debt never shows up anywhere in city reports. Between Riverfront Stadium and other projects, City Hall has more than $100 Million in STAR bond debt not shown in city financial statements. That’s a lot of hidden debt.
Second, every year the city has to make a payment for the interest and principal owed on the STAR Bond debt. You won’t find the loan payment schedule anywhere in the city’s books. If you want to know how much the city is paying back on the STAR Bonds, you have to find the bond underwriting documents.
In the case of the stadium, the repayment schedule is in the Official Statement STAR Series 2018. Good luck finding it — it’s not on the city’s website. However, the annual bond debt payment does show up in a tiny footnote in the annual budget. The footnote says funds are “reserved” in the general fund to make the annual bond payment.
Third, how do you find out if the new stadium made money? Answer: In March, the state Commerce Department releases the Annual STAR Bonds Report. Buried deep in it, you’ll find the section on Wichita with figures showing revenue coming in and bond payments going out.
Wichita stadium STAR bonds didn’t do well. There wasn’t enough money to pay for the bond debt.
Fourth, how did the city find the money to make the debt payment? It tapped into an earlier phase of STAR bonds that were supposed to be for the WaterWalk and other River District projects
But this can’t continue forever. Kansas Statutes are strict about how long a STAR Bond district can last — only 20 years. River District phase one bonds started in 2007, so the tapping of that revenue must end in 2026. That’s when the new ball stadium must pay for the bonds all by itself.
But wait, we have another problem. Even with the additional proceeds, there still isn’t enough money to make the annual bond payment on the stadium.
Mayor Brandon Whipple says the taxpayers and the city of Wichita don’t have to make up any shortfall. On that, he is completely wrong.
There is a backstop written into the Official Statement for the bonds: The city has to tap into local “available sales tax fund ” to make the bond payments when the STAR bond project doesn’t generate enough sales tax to pay its own way.
This revenue comes from sales tax that residents pay at businesses throughout the city, that have nothing to do with the new development.
STAR Bonds numbers are hidden from you, the taxpayer. The next time City Hall talks about a STAR Bond project, start asking questions.