Kansas lawmakers are likely to adopt legislation that will provide a new level of accountability and transparency to some of the state’s economic development incentive programs. House Bill 2006 would require regular legislative post audit reports that review, analyze and evaluate the state’s economic development programs.
The Kansas House overwhelmingly approved the legislation in February, and now the contents of the bill are part of a conference committee report, which the Senate approved before the break. When lawmakers return to the Legislature in May, the House is all but certain to consider adopting the report, making the contents of HB 2006 Kansas law with the governor’s consent.
While the state boasts a number of incentive tools designed to encourage economic growth, Sen. Julia Lynn, an Olathe Republican, says lawmakers have no way to measure whether those incentive tools are getting the job done. HB 2006 would help remedy that.
“It’s important because you want to make sure that if we’re going to continue using taxpayer money to fund economic development, you want to know if the taxpayers are getting a return on their money,” Lynn said. “Right now, we have no idea whether our tax credits and programs are working.”
The state’s economic incentive toolbox includes programs like the PEAK, or Promoting Employees Across Kansas, program and STAR bonds.
STAR bonds are a form of public financing that helped build a variety of entertainment and retail venues across the state including the Kansas Speedway and Village West in Kansas City, Kansas.
The program allows developers to use sales taxes collected from a particular to pay down debt on the project. For example, sales taxes collected on furniture purchases at Nebraska Furniture Mart, part of the Village West development, were used to pay off the cost of infrastructure for the developments. Half a billion dollars in STAR bonds were paid off in 2016, five years early. Now state sales taxes collected at Nebraska Furniture Mart end up in state coffers.
Other projects haven’t been as successful. In neighboring Johnson County, the Museum at Prairiefire in Overland Park didn’t collect enough in sales taxes in 2015, 2016, or 2017 to pay down its STAR bonds. Developers tapped reserve funds to make STAR bond payments.
In addition to providing legislators with a comprehensive review of some of the state’s economic tools, the legislation would also require the state to create a public incentive database.
“I believe that taxpayers are owed answers,” said Rep. Kristey Williams, an Augusta Republican who sponsored the bill. “When we spend money in the name of economic investment, it better work.”
For STAR bonds, for example, the database would include the names and addresses of those who receive STAR bonds, the names of principals and officers of developers who use STAR bonds on projects, the amount of incentives claimed and distributed to recipients as well as their qualifications for the program, like the numbers of jobs created through the project.
Williams said the names of those receiving STAR bonds have never been disclosed on financial reports. They are available through other means, but the average citizen might not know where to look for it. The database, she says, would be a clearinghouse for information–not just about STAR bonds but other economic development programs as well.
“Incentives are a necessary evil in today’s toolbox, but at the same time, they should be used cautiously and with a ton of accountability,” Williams said. “We want to know exactly how much, what are the parameters, if there are any clawbacks or requirements so we know, or we can see, if the taxpayers are getting back what they’re promised.”
Senators adopted the conference committee report 39-0, and Williams anticipates overwhelming support in the House when representatives vote in May. She’ll have it from J.R. Claeys, a Salina Republican.
“To make good decisions on which programs to keep and which programs to discontinue, we need good information to make those decisions,” he said.
Lynn says she’s been trying to get similar legislation passed for the last five years. She’s happy with the results but says there’s more work to do to increase transparency and accountability.
“This is just the beginning. The evaluations are the key,” she said. In the future, she’d like to see legislation that allows private sector professionals, experts in banking and financing, and what she calls the “silent partner” in incentives–taxpayers–to help assess a project’s potential return on investment. That assessment would occur before incentives are awarded.
“Watch for this issue to return next session,” she said. “It is the key to true transparency and accountability.”