The Americans for Prosperity Foundation of Kansas filed a complaint with the attorney general alleging the Kansas Department of Commerce wasn’t sufficiently forthcoming with documents related to issuance of STAR bonds for economic development projects tied to tourism during the past 15 years. (Screen capture/Kansas Department of Commerce report)
TOPEKA — A conservative political organization wants the Kansas attorney general to investigate the state Department of Commerce’s response to record requests with an emphasis on the alleged failure to promptly and fully disclose information about a category of business tax incentives.
The Americans for Prosperity Foundation of Kansas submitted a request in 2021 under the Kansas Open Records Act for a trove of Department of Commerce documents, communications and reports regarding STAR bonds. State Tax and Revenue bond financing is available to municipalities for commercial, entertainment and tourism projects.
State law requires bonds for these economic development projects to be repaid by a city or county with the increase in sales tax revenue collected in the associated STAR bond business district. Once STAR bond debt has been eliminated, the full amount of sales taxes in the district goes to state and local governments.
The foundation, which also invested in a legal fight before the U.S. Supreme Court to limit disclosure of donor information to nonprofits, received from the commerce department a portion of requested internal or external studies or reports, feasibility studies and emails associated with STAR bonds.
The Department of Commerce has not yet released emails tied to David Toland, the commerce secretary and lieutenant governor to Gov. Laura Kelly. The state commerce secretary has direct control over issuance of STAR bonds.
“It shouldn’t take more than a year to access public records from a state agency running a corporate welfare program with over $1 billion worth of bonds,” said Elizabeth Patton, the state director of Americans for Prosperity Foundation in Kansas. “If commerce is slow-walking KORA request responses because of perceived political sensitivities, it should be held accountable.”
Patrick Lowry, spokesman for the Department of Commerce, said the original KORA request from the Americans for Prosperity organization in November 2021 sought “voluminous documents,” including every internal and external report dealing with STAR bonds from 2007 to present.
The request sought every STAR bond feasibility study during the 15-year period. Finally, the request asked for all emails regarding STAR bonds from Jan. 1, 2021, to Sept. 1, 2021, sent or received by the commerce department’s secretary, chief of staff and chief counsel.
“The commerce legal team, as well as clerical and IT staff, have spent an inordinate amount of time over the past 12 months working to fulfill this request,” Lowry said. “We have been in regular contact with the requestor, updating them of our progress.”
During the past year, he said, the commerce department reviewed tens of thousands of pages and examined tens of thousands of emails. Potentially relevant items were identified, scanned, sorted, printed and reviewed prior to analysis to determine which ones would be disclosed.
Lowry said 1,500 pages of information was delivered to the Americans for Prosperity Foundation in separate batches on Feb. 7, March 4 and April 29. The final bundle of approximately 1,000 documents was under review and would be delivered as soon as practical, he said.
He said work on the KORA request occurred at the same time the commerce department was advancing economic development projects. The list included work on the $4 billion Panasonic Energy electric vehicle battery manufacturing facility, which is the largest economic development project in state history, and 275 business agreements with companies that created or retained 13,500 jobs in Kansas.
Kevin Schmidt, director of investigations for the Texas-headquartered Americans for Prosperity Foundation, said the Department of Commerce sent the organization a dozen letters noting extensions of time needed to comply with the KORA request. He said those communications fell short of outlining in detail the necessity for delay.
“Why are we waiting so long for those records?” Schmidt said.
STAR bond audit
The Legislature authorized use of sales tax revenue for STAR bonds in 1993. In 2021, a report by the auditing division of the Kansas Legislature said an evaluation of 16 STAR bond projects supporting museums, racetracks and other attractions found only three projects fulfilled the Department of Commerce’s primary objective of elevating tourism among long-distance and out-of-state visitors.
The state has approved more than $1.1 billion in STAR bonds, including the successful mega-development at Village West in Wyandotte County. Supporters of STAR bonds have pointed to the shopping, entertainment and sports complex as the high-water mark of the bonding program.
In a separate review of STAR bond viability by the Legislature’s auditors, analysts considered how long it might take for the state to recoup sales tax revenue surrendered to support economic development projects. Auditors selected the Hutchinson salt mine, the Overland Park Prairie Fire Museum and the Wichita Sports Forum to test how those projects measured up to state’s opportunity cost of investing tax revenue in STAR bonds.
State taxpayers could expect to be made whole on the Hutchinson development after 2057, auditors said. The estimate was more promising for Prairie Fire, because sales tax revenue could pay off bonds after 2046. The sports forum might get there by 2030.
Patton, of the Kansas organization of Americans for Prosperity, said the STAR bond program was of public interest because it involved government picking business “winners and losers.” Government investments such as STAR bonds “incentivize unproductive behaviors of politicians and businesses who prioritize their gains over the true needs of those they serve,” she said.
“Between citizens’ eroded faith in the system and documented failures of the program, we think hardworking Kansans and their families deserve to know whether their tax dollars are being wasted on the program,” Patton said.
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