Kansas overdrive to woo ‘STARS’ Chiefs-Royals

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The Kansas (US) Legislature passed an aggressive plan on June 18^th to attract the National Football League (NFL) team Kansas City Chiefs and the Major League Baseball (MLB) team Kansas City Royals, triggering a process that could lead to the State (Kansas) issuing billions in bonds to build new stadiums – debt that will take decades of sales tax, sports betting and lottery revenues to repay.

‘THE KANSAS CITY STAR’ stated that the sweeping proposal, which the Democratic Governor of Kansas Laura Kelly is expected to sign or allow to become law without her signature, sets up a confrontation between Kansas and Missouri (US State) over the future of the teams. Benefiting are the teams, who can now ask Kansas to finance the bulk of the cost of building stadiums.

The Kansas City Chiefs are a professional American football team based in Kansas City, Missouri (US). The Chiefs compete in the National Football League (NFL) as a member club of the league’s American Football Conference West division.

The 76,416-capacity GEHA Field at Arrowhead Stadium is an American football stadium in Kansas City, Missouri (US). It primarily serves as the home venue of the Kansas City Chiefs of the National Football League (NFL).

The ninth 2024 Coliseum US meet was held at the GEHA Field at Arrowhead Stadium in Kansas City, Missouri (US) from June 5^th-6^th.

The Kansas City Royals are an American professional baseball team based in Kansas City, Missouri (US). The Royals compete in Major League Baseball (MLB) as a member club of the American League Central Division.

The 37,903-capacity Kauffman Stadium, often called ‘The K’, is a baseball stadium located in Kansas City, Missouri (US). It is the home ballpark of the Kansas City Royals of Major League Baseball (MLB).

‘THE KANSAS CITY STAR’ further stated that the vote represents a major bet by Kansas that both teams and their sports will remain popular, economically viable enterprises into the second half of the 21^st century and comes despite extensive research that shows stadiums don’t often generate enough revenues to pay back the public benefits they receive. It followed an intense lobbying blitz in favor of the plan, with both the Chiefs and the Royals working to instill a sense of urgency among the lawmakers.

“Are you going to step up today and take a leap of faith and make this happen – keep them in the Metroplex and bring money to Kansas?” Sean Tarwater, a Stilwell Republican who has championed the proposal, told lawmakers.

The House passed the Bill 84-38. The Senate followed in a 27-8 vote. The votes scrambled typical partisan divides, with a mix of Republicans and Democrats providing the support necessary for passage. The lawmakers passed the plan in a special session initially called for tax cuts. The legislation came after the Jackson County voters in April rejected a stadiums sales tax that would have guaranteed the teams remain in Kansas City. The broad support for the plan reflected a clear desire to ensure the Chiefs and the Royals don’t leave the Kansas City region, as well as the lure of a major league sports team calling Kansas home. Still, a sizable minority of lawmakers objected, warning that the legislature was rushing into a process without adequate consideration. The legislation authorizes Kansas to potentially issue Sales Tax and Revenue, or STAR bonds to pay for up to 70 percent of the cost of stadiums for one or both teams – up from the 50 percent in current law.

The STAR bonds are an economic development tool. They allow the local Governments to use bond proceeds to help finance the tourist attractions within the development districts they create. The STAR bonds can help pay for property acquisition, site preparation and infrastructure costs.

A Chiefs stadium alone could cost at least $2 billion. A Royals stadium could be another $1.5 billion, if not more. The debt would be repaid over 30 years by a combination of tax revenue from the stadiums and the surrounding development, sports gambling revenue and lottery revenue. As part of the Bill, the annual lottery revenues above $71.5 million each year will now be redirected into a fund to help pay off the bonds, a change likely worth about $10 million a year.

Stated Senator Molly Baumgardner, a Louisburg Republican, “I understand the excitement behind the prospect, it is like this Christmas Eve and there are visions of sugar plums only it’s royal blue and crimson and gold in this case. But we haven’t seen tremendously successful STAR bond projects that haven’t brought us anything other than what would have naturally developed in that area.”

The Chiefs and the Royals have not promised to come to Kansas if the Bill becomes law. But they have made positive comments about the legislation, describing it as an “option” as they evaluate where to head after their leases at the Truman Sports Complex expire in 2031.

The Truman Sports Complex is a sports and entertainment facility in Kansas City, Missouri (US). It hosts two major league sports venues: The Arrowhead Stadium, hosting the National Football League’s (NFL’s) Kansas City Chiefs, and the Kauffman Stadium, hosting Major League Baseball’s (MLB’s) Kansas City Royals.

Korb Maxwell, an Attorney representing the Chiefs, told lawmakers recently, “We’re here talking about the Kansas City Chiefs coming to Kansas. How unbelievable is that? It’s just a pinch ourselves moment.”

The Chiefs in a statement after the vote expressed appreciation that the Kansas legislative leaders had proactively approached the team for input on the STAR bonds legislation – “We support their efforts to expand the existing program and congratulate them on passing the legislation in a special session. We look forward to exploring the options this legislation may provide.”

The Royals in their own statement thanked the lawmakers and said the STAR bonds Bill provides the State with a “pragmatic tool” to achieve its economic development goals. The team said it looks forward to additional conversations as it evaluates where it will play baseball in the future – “We will always prioritize the best interests of our fans, associates and the taxpayers in this process.”

The Kansas City Mayor Quinton Lucas said he remains confident the City will retain the teams. He cast the Kansas Legislature’s vote as a regrettable violation of the Kansas and Missouri’s truce in the so-called border war that limited the use of economic incentives to attract businesses across the State lines. – “We don’t have some exception where anything cool that wasn’t explicitly written is exempted from it.”

The STAR bonds have been a controversial program used over the past two decades to build projects large and small across the State. It financed the 48,000-capacity Kansas Speedway in Kansas City, Kansas, arguably the most successful use of the program, but also financed the Prairiefire (neighborhood) in Overland Park, Kansas, which defaulted last year.

A Chiefs or Royals stadium – or both – would mark the largest STAR bond project ever. The Bill passed in a lightning-fast single day (June 18^th). The House began debating the plan just hours after it was introduced. A single hearing – using unofficial Bill text – was held recently.

Remarked Representative Jason Probst, a Hutchinson Democrat, “It is amazing to me the speed with which we can solve problems when they’re oriented around wealth, when they’re oriented around business.”

Kelly has not been outspoken about the proposal. The Governor told reporters that the plan was “not something I’m going to invest a lot of energy in”. Her Chief of Staff, Will Lawrence, later said the Governor had no concerns “that would warrant a veto”. In a statement immediately after the vote, Kelly said she had pledged to work with members of both the parties on policies beneficial to the State – “The bipartisan effort to invite the Chiefs and the Royals to Kansas shows we’re all-in on keeping our beloved teams in the Kansas City Metro. Kansas now has the opportunity to become a professional sports powerhouse with the Chiefs and the Royals potentially joining the Major League Soccer (MLS) team Sporting Kansas City as major league attractions, all with robust, revenue-generating entertainment districts surrounding them providing new jobs, new visitors and new revenues that boost the Kansas economy.”

J.R. Claeys, a Salina Republican, said a sense of urgency exists around securing the future of the Chiefs. He emphasized that the Bill contains guardrails and that while the Bill authorized 70 percent STAR bond financing, it doesn’t require it – “This is probably the least risky STAR bond project in the history of STAR bond projects in line with the Speedway.”

Academic studies consistently show that the stadiums are not major drivers of economic growth. A 2022 review found that nearly all empirical studies found “little to no tangible impacts of sports teams and facilities on the local economic activity” and that the level of subsidies typically provided for stadiums “far exceeds any observed economic benefits”. Any identified economic effects typically occurred in the area immediately surrounding a stadium, but those impacts weren’t always present and “cannot be generally applied to all stadium projects”.

Some lawmakers voiced deep reservations with the proposal and the long-term consequences to the State. Bob Lewis, a Garden City Republican, said studies uniformly show that the stadium projects almost never yield the benefits promised. The taxpayers end up footing the bill, he said.

The legislation will allow the cannibalization of the current sales tax revenue, Lewis argued. He also questioned claims that the bondholders are the only individuals on the hook if a stadium project fails and said a default could place the State’s credit rating at risk –“Can you imagine the political pressure that would occur … if the bondholders are not being paid?”

Some lawmakers have also questioned whether the Chiefs or the Royals would be able to secure STAR bond financing and then layer on additional economic development incentives. One program mentioned multiple times was PEAK, which allows some out-of-state businesses that relocate into Kansas to retain 95 percent of payroll withholding taxes for the new jobs created.

“We don’t have all the details of this,” said Henry Helgerson, a Wichita Democrat. Helgerson said on the House Floor that Kelly had used interest from the Federal pandemic dollars to aid the renovation of football practice facilities at the Washburn University in Topeka, Kansas. He suggested the facility could be used for Chiefs training.

Tarwater responded that the new practice facility “also could be used at some point to relocate the Chiefs training camp from St. Joseph, Missouri. That was just a byproduct of it”.

The location of practice and training camp facilities is key because the Bill allows the STAR bond districts to be drawn around any team facility, not just the stadium itself. If the Chiefs move their training facility to Washburn, it could result in a STAR bond district in areas of central Topeka.
 

Calling the Shots

The Cities and the counties would have the option to pledge local tax revenue from inside the STAR bond district toward repaying bonds, but wouldn’t have to. But any local Government that decides against pledging revenue would likely lose leverage during negotiations over the terms of a STAR bond agreement with one or both teams.

The Bill authorizes the Kansas Secretary of Commerce, currently the Lieutenant Governor of Kansas David Toland, to negotiate a STAR bond agreement. Any deal would have to be approved by the Legislative Coordinating Council, which includes the top House and Senate leaders from both the parties. The Republicans hold a 6-2 majority in the Council. While the LCC’s vote on an agreement would be public, it could deliberate privately. The proposal keeps the revenue reports filed on a STAR bond district confidential. The supporters of the plan spoke about it in glowing terms, offering a generational, even “once-in-a-lifetime” opportunity.

Pam Curtis, a Kansas City, Kansas, Democrat, said the Wyandotte County residents over the past few weeks have gone from opposition to excitement. She urged the lawmakers to acknowledge that they won’t have many details right now – such as an exact location and deal – but are setting up a framework for future negotiations. Curtis said many Wyandotte County residents are excited about the prospect of one or both of the teams coming to the area – “They are excited about this opportunity and definitely the Wyandotte County would welcome these discussions and the opportunity to bring a professional sports team to Kansas.”

Rob Olson, an Olathe Republican, predicted that a new stadium would host a Super Bowl within a few years. Discussing the potential revenue the event would bring in, he called the proposal a “goldmine for Kansas. We owe it to the Kansas City Chiefs if they want to come to Kansas.”

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