STAR bonds are not general obligation bonds. There’s no dedicated tax increase, and no broad-based taxpayer guarantee. Instead, repayment depends entirely on new tax revenues generated within a defined “project district.” This fundamentally shifts how the bonds are priced and what kind of investor risk they carry.
Also, the following calculations do not include the additional $975 million needed for the Chiefs “Qualified Ancillary Development,” the corporate headquarters and practice facilities. Here I am just talking about the new stadium complex. Those other structures only make this deal more difficult.
To walk through the scale of this plan, I relied on four assumptions: (1) the state borrows $1.8 billion, (2) the repayment schedule is for 30 years, (3) it capitalizes payments for the first three years (no payments until year four), and (4) the bonds carry a 6% interest rate. I think that third assumption is in the ballpark; past STAR bond issuances, such as those for the Prairie Fire project, have carried interest rates of 7.5%, and that was under more favorable conditions.
Why such high rates? Because these bonds will likely be unrated. They won’t carry the State of Kansas’s credit rating—around AA-/Aa2—which would allow borrowing at roughly 4.4% on a 30-year schedule. Unrated debt, lacking any explicit taxpayer backing, can add 200–400 basis points (2–4%) to the interest rate. That puts the likely borrowing cost for a Chiefs stadium project between 6.5% and 8.5%, so my chosen interest rate is generous.
Geoffrey Propheter, professor at the University of Colorado-Denver disagrees with my 6% assumption. In an email, he responded,
6% interest is probably a tad high but trivially so. For forecasting purposes I aim to give teams and proponents the benefit of the doubt and use a rate closer to GO debt which is currently in the ballpark of 4.2%. This has the effect of understating the debt service cost in a context like STAR bonds, but it paints the rosiest (and least likely) picture defensible to see if the numbers work out
We don’t yet know what the interest rate will be on these STAR bonds, so I am happy to make an estimate and include Propheter’s disagreement. And for a fuller financial analysis than my back-of-napkin analysis here, Neil deMause at FieldofSchemes.com used Propheter’s interest rate on the whole project.
Under my 6% scenario, annual debt service starting in year four would be around $159 million, stretched over 27 years. Total debt service? $4.29 billion—more than double the original borrowing. That $2.5 billion difference is interest.
So what would it take for the STAR bond district to actually support that annual payment?
We already see the first sign in a STAR bond district that is 290 square miles—almost as big as the footprint of neighboring Kansas City, Missouri. Every new dollar in sales tax revenue—no matter its relevance to a new stadium—will be used to pay for the stadium.
Kansas’s Department of Revenue reports that in 2025, Wyandotte County generated about $30.6 million in sales tax and $4.8 million in liquor tax—call it $35.4 million total. Johnson County brought in $230.4 million between sales and liquor taxes. The STAR bond district includes only the western half of Johnson County, but even if we generously assumed that portion accounts for half the county’s collections, the combined baseline would be $150.6 million.
That’s not enough.
It gets worse. Kansas law restricts STAR bond repayment to new taxes generated in the district. So even if $150 million is collected annually today, only the portion above a baseline year would count. If that baseline year is 2025, revenues in the district would need to increase by over 105% just to meet the $159 million debt service.
Put another way, the STAR Bond district would need to generate an additional $2.45 billion in new taxable spending for the state’s 6.5% sales tax to collect enough to pay the STAR bond debt for the stadium alone.
But there’s some wiggle room for Kansas leaders. Page 22 of the agreement allows the Secretary of Commerce to pick the base year from which to calculate “new” sales taxes. He could use an older year—say, 2015—as the baseline, making it easier to meet the revenue needed to make bond payments. It would mean diverting existing state tax revenues—those already being collected to fund general services—toward stadium construction. But Kansas leaders have said there will be no existing tax money used to pay for the stadium.
Public officials have gone out of their way to say Kansas taxpayers are not on the hook. But without some third-party guaranteeing the debt, the plan requires one of three things to happen: (1) the STAR district generates over $159 million in new tax revenues annually for nearly three decades, (2) the state dips into existing tax revenues and quietly reclassifies them as STAR bond repayments, or (3) the bondholders eat the loss.
That third option is unlikely. Bondholders don’t back billion-dollar deals without some assurance of repayment. They will be paying attention to all of this—which is why the interest rate could go even higher if they perceive greater risk. Without a guarantor, if revenue falls short, political pressure will almost certainly push the state to make up the difference. The burden would fall back on the taxpayer—even if indirectly.
I expect the Secretary of Commerce will choose a baseline year at some point in the past, forcing state leaders to pretend that isn’t redirecting taxpayer money. Local governments such as Kansas City, Kansas, Lenexa and Olathe will be pressured to contribute their share of sales tax revenue in addition to using every other form of tax structure available to them, such as Community Improvement districts and the like, to help fund the project.
As a Missourian, I am relieved that Kansas has decided to take these costs off our hands. But as someone who cares about good government, I fear what is in store for my neighbors across State Line Road.
Kansas leaders are saying they can build a multi-billion dollar state-of-the-art domed stadium at no additional cost to taxpayers. The numbers suggest otherwise.
