GARDEN CITY, Kansas — On the last day of September, a bulldozer scooped dirt from an empty field between a hotel and a fence separating the land from a house-lined street in Garden City.
In 18-24 months, a massive $41 million sports complex, called Sports of the World, is slated to open at this site, with courts of all kinds — pickleball, basketball, volleyball. There’ll be a trampoline park and an outdoor recreation area with cornhole and a life-sized Battleship game. It’s expected to host cheerleading, wrestling and other sports tournaments, drawing in people from Colorado, Oklahoma and Texas.
“People will travel up to two hours to eat at a restaurant,” said Molly Basham, the marketing director for American Warrior Construction, which is building Sports of the World. “So we're trying as hard as we can to develop and make southwest Kansas the destination for our entire region.”
Partially financed by $25.4 million in Kansas Sales Tax Revenue (STAR) Bonds, the sports facility will need steady retail, dining and entertainment sales in the special tax district in order to pay back the bonding over 20 years. On top of online shopping currently disrupting traditional retail sales, some worry there’s little oversight when it comes to how Kansas has approved millions of dollars in STAR Bonds.
History & oversight
STAR Bonds started in 1999, an effort by the state’s Department of Commerce to fund tourist attractions. As of 4 p.m. Oct. 14, the department had not provided the requested total amount of STAR Bonds approved since 1999.
The bonds work like this: The Department of Commerce approves the creation of special sales tax districts, and then a STAR Bond project. A city or county issues bonds to finance the project, and a portion of the sales taxes collected by the city and state is diverted to back the bonds.
STAR Bonds require multiple feasibility studies that show estimates of how many people will visit, economic impact, how unique a project is, the number of possible new jobs created by the project and how much money could be drawn to the STAR Bond district.
It took almost five years for Sports of the World to get the go-ahead from the state, starting with the tax district’s creation in 2014. Garden City taxpayers voiced support for Sports of the World at a Garden City Commission meeting in October 2017, but the project never went up for a public vote.
Generally, voters also don’t get to decide whether a city or county will apply for STAR Bonds, nor do they approve the project plan that's submitted to the Kansas Department of Commerce. Ultimately, the commerce secretary decides which projects receive STAR Bonds.
It’s led some Kansas legislators to criticize STAR Bonds, including Sen. John Doll, a Republican from Garden City. He said in the past, too many STAR Bond projects were approved, though he backs the Sports of the World project.
“I think early (on the) Department of Commerce was handing them out like candy,” he said. “You can't do that.”
The Senate Committee on Assessment and Taxation proposed a bill in 2018 that would have required more transparency by publishing information about STAR Bond projects, project requirements and audits on the commerce department’s website.
Three years earlier, in 2015, at the request of Kansas lawmakers, the state’s Division of Post Audit office reviewed one STAR Bond project that failed to raise enough sales tax money, leaving the city of Topeka on the hook for the bonds.
Legislative Post Auditor Justin Stowe said concerns were raised about the project’s proposal and its marketing studies, especially whether they were “accurate and whether or not they might overstate the effects.”
Stowe said the audit team found the Heartland Park project’s feasibility studies may have been biased because people involved with the STAR Bond project conducted the studies.
Another STAR Bond project in Goddard, a sports complex similar to Sports of the World, secured $30 million. While construction has been impeded, the The Kansas City Star reported in July that STAR bonds are still being paid back with sales tax revenue from the district.
In July of this year, a new law took effect that will make more economic development incentive funding data available to the public. Now, the Department of Commerce must maintain a public database of state programs giving out $50,000 or more of economic incentive funding, which includes STAR Bond incentives and benefits. As of Oct. 14, it was not available online.
The STAR Bond statute also calls for potential projects to estimate the number of visitors. However, the commerce department struggles to track numbers once a project is built, according to Robert North, the agency’s chief counsel.
“(It’s) definitely something that we're focused on and want to look at better ways to see. One is the attraction bringing in people from areas across the region that we anticipated,” North said. “And secondly, where are people coming from.”
Two projects similar to Garden City’s STAR Bond project, the Wichita Sports Forum and the Salina Fieldhouse, both hold sports tournaments. Neither reported visitor numbers to the Department of Commerce in 2018, and the same is true of four other STAR Bond projects.
Read the 2018 STAR Bond annual report here.
Garden City’s sports dreams
Commerce Secretary David Toland approved the Sports of the World in March 2019, a project that the agency and the developers said would bring in more than 1 million visitors a year — that’s 37 times the size of Garden City's population. A little more than 200,000 people live in or within a 100-mile radius of Finney County.
While construction is expected to be done between March and September 2021, the development agreement gives G.C. Investments until 2038 to build Sports of the World. (See the full development agreement here.)
In addition to the STAR Bonds, developer G.C. Investments, owned and operated by Amro Samy and Cecil O’Brate, will receive $300,000 in utility credits from Garden City, according to the development agreement. Garden City also agreed to work with the developer to “facilitate efficient and affordable electricity rate structures.”
STAR Bond payments depend on shopping and people spending money on attractions in the STAR Bond district, which surrounds the future complex and earns just a portion of the city’s total sales tax revenue.
Overall in the last nine years, sales tax collection in Garden City has increased by $1.5 million — from $5,112,939 in 2009 to $6,626,121 in 2018 — but it hasn’t gone up every year. In fact, between 2016 and 2017, collections dropped by $81,072. Plus, rural Kansas’ population is continuing to drop, which could affect retail sales.
The STAR Bond tax began in April, and the first payment is due in December.
What if Sports of the World falls short of visitation and sales tax revenue projections?
“Well, you know, that’s what business is. You always throw the dice,” Doll said. “One of the great things about STAR Bonds is it’s a public-private thing. So this is just not, it's not going to cost taxpayers any money.”
North agreed regarding taxpayers’ risk, noting that the bond holders — in this case, two banks and an investment firm — are ultimately on the hook. He added: “There’s not an obligation of the local unit of government or the city.”