Earlier this month, Commerce Department Chief Counsel Robert North told The Bond Buyer, “I don’t think we know enough today to be able to say [the bonds are] going to be 100% tax-exempt, but certainly the vast majority we expect to be tax-exempt.” That’s a striking admission. Officials rarely speak this cautiously about stadium finance packages. And the distinction matters. Tax-exempt municipal bonds carry lower interest rates, saving public entities millions over time. Taxable bonds, by contrast, cost more. If projected tax revenues fall short, Kansas could end up paying far more than expected to lure the team.
The structure of the deal helps explain the uncertainty. Though the stadium would be publicly owned, the Chiefs would operate it, keep all revenue, control scheduling, and receive state-backed funds for a new team headquarters and practice facilities. Under IRS rules, this kind of private benefit can disqualify bonds from tax-exempt status—even if the stadium is technically public.
Officials seem to be bracing for that outcome. The STAR Bond agreement allows for taxable tranches, and North said that if the bonds go unrated, they’ll likely be marketed to “sophisticated investors”—a move that gives the state more flexibility, but limits demand and raises costs.
The revenue streams backing the bonds add more risk. Instead of relying on general state sales taxes, the deal depends on project-generated revenues: increases in sales and liquor tax collections, plus portions of lottery and sports wagering revenue. On paper, these are public funds. But if they depend on team activity, the IRS may treat them as private payments.
This makes the deal more risky. North noted the financing is still “probably 10 to 12 months away.” That suggests state officials are still working to strike a delicate legal balance: preserving tax-exempt status while handing the team control and profit.
This also isn’t Kansas’s first go with STAR bonds. A 2021 legislative audit found only three of sixteen STAR bond projects met Commerce’s goals for attracting out-of-state visitors. One high-profile STAR bond project, the Prairiefire development in Overland Park, defaulted on its STAR bond payments in late 2023 and has since struggled with a second bond default. While courts have clarified how limited funds should be applied, the debt has not been fully cured, and bondholders—not taxpayers—remain on the hook.
Given that history, the Commerce Department’s caution makes sense. But it also points to a larger concern for taxpayers: If this were a clean, easy case for tax-exempt financing, officials wouldn’t be managing expectations this early. That they are should prompt serious scrutiny—not just of the numbers, but of the whole public-private model on offer.
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