February 26, 2024

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Records requests show Commerce Department failing to oversee STAR Bonds

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A series of records requests by the Americans For Prosperity Foundation asking for information about STAR Bonds in Kansas shows a startling lack of oversight at the Kansas Department of Commerce.

Sales Tax and Revenue (STAR) Bonds are a tool intended to help Kansas municipalities finance the development of major commercial, entertainment, and tourism projects. The bonds are paid off through increased sales tax revenue generated by the development.

The scope of the issue, however, is unclear because nearly a year after filing the Kansas Open Records requests, AFPF still doesn’t have all the documents they requested.

AFPF’s Director of Investigations Kevin Schmidt said he filed the records requests in November 2021, and while he has received some of the records, he receives a monthly letter from the Kansas Department of Commerce saying more time is required to fulfill the requests.

“We’re getting close to a year now, and we’re still waiting on at least two categories of records,” Schmidt said in a telephone interview recently “We haven’t received anything from Secretary of Commerce (David) Toland; we haven’t gotten any emails. I think the only thing we’ve gotten are emails from the chief counsel Bob North.”

Commerce allows lawyers for developers to draft approval letters for STAR Bonds

One of the more disturbing things Schmidt said he found was that in many cases, attorneys for the entities requesting the bonds are writing the draft bond approval letters to be rubber-stamped by the Commerce Department.

“It seems sort of like the lawyers advising the folks getting the STAR Bonds are sort of just running the show,” Schmidt said. “I’m sure some of them are sort of form letters, but being able to just draft it for the agency that’s supposed to be doing this work and then approving it kind of just feels wrong, even if it’s not technically unlawful.”

In one case, at least, North wasn’t even aware of the details of a project for which he was drafting an approval letter.

In an email dated June 8, 2021, between North and Gina Riekhof of Gilmore and Bell, regarding a 60-acre expansion of the Village East project in Wyandotte, Kansas, North writes, “Hi Gina, we are working up an approval letter. Can you direct me to the narrative about the attraction /retail/entertainment components that will be part of the additional 60 acres? I’m sure it’s in here but a little nudge would help.”

“He’s basically saying he doesn’t know what’s in (the project), but they’re going to approve it,” Schmidt said. “There’s just red flags all through this on how much oversight commerce is doing over this.”

The e-mails produced to AFPF-Kansas — and provided to the Sentinel — show multiple instances where the Department of Commerce fails to provide any substantive oversight over STAR Bond projects. On more than one occasion, Commerce accepted draft approval documents from the law firms requesting STAR Bond approvals for their clients.

Effectiveness of the program is impossible to determine

Schmidt said one of his records requests included a follow-up to a request from the Sentinel.

The Sentinel, on November 14, 2019, requested reports done internally or contracted out since January 2017 examining the efficacy of Promoting Employment Across Kansas (PEAK), TIF, STAR bonds, and the High-Performance Incentive Program (HPIP).  Ryan Brinker, the Public Information Officer for the Kansas Department of Commerce, replied, “We are currently working to identify and review any records which may be responsive to your request and will need additional time to complete that review. The earliest date records may be available to you is November 26, 2019.”  There’s been no further response to this request.

Another KORA request submitted on December 16 asked for studies related to STAR bonds or economic development.  Commerce responded, “There was a study commissioned in 2018 which has not been completed and is exempt from disclosure under KSA 45-221(20) as a draft and research data in the process of analysis.  There have been no subsequent studies commissioned since then.”

Neither AFPF nor the Sentinel has received any substantive answers. While Commerce did not provide or comment on the McKinsey & Company study referenced in the Sentinel story,  it did provide a STAR Bond study authored by the Docking Institute of Public Affairs at Fort Hays State University. The lead author of the study, Dr. Brett Zollinger, told Commerce in an e-mail that the “project has been somewhat more challenging than we envisioned!”

According to Schmidt, that study seemed to be designed to justify the program rather than objectively examine the impact.

“It doesn’t show what it’s trying to show,” Schmidt said.

While the study examines the economic impact before and after the STAR Bond projects, it doesn’t determine if the project would have been developed with or without the bonds.

Moreover, a 2021 study by the Kansas Legislative Division of Post Audit found that only 3 of the 16 STAR bond attractions they reviewed met Commerce’s tourism-related program goals.

A 2020 analysis of STAR Bond projects in Wichita, commissioned by the Sentinel’s parent company, Kansas Policy Institute, found that they mostly shifted economic activity and jobs to other parts of the city rather than create incremental activity.

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