Committee hears bill to restore state food-sales tax revenue for pre-2023 Star Bond districts

House Bill 22 11 would direct the Kansas Department of Revenue to calculate and replace the portion of food sales tax revenue that Star Bond project districts—those established before Dec. 31, 2022—would have generated if the state rate had remained 6.5 percent. The Department of Revenue estimated the bill would require a state general fund transfer of about $15.9 million in fiscal 2026 and roughly $8.2 million in each of fiscal 2027 and fiscal 2028.

The bill’s sponsor and the reviser told the Committee on Taxation the measure creates a Star Bonds food sales tax revenue replacement fund and modifies the Star Bonds statute’s tax‑increment definition to include food and food-ingredient sales for qualifying districts established prior to Dec. 31, 2022. The reviser summarized the change as a grandfathering provision: pre‑2023 districts would receive a differential payment reflecting the revenue that would have been collected at a 6.5 percent rate going back through 2024 and forward until the bond expirations.

The nut graf: supporters said the bill addresses an ‘‘unintended consequence’’ of the state’s phased elimination of the food sales tax—lost revenue that local governments and bondholders had relied on when projects were approved.

Kathleen Smith of the Kansas Department of Revenue presented the fiscal note. She said, “We are estimating that House Bill 22 11 would decrease state general fund revenues by authorizing transfers that total of 15,900,000.0 from the state general fund to the Starbond’s food sales tax for revenue replacement fund in fiscal year 26.” She confirmed the agency’s FY27 and FY28 estimates at about $8.2 million each.

City officials from Derby and Goddard described local impacts and urged the committee to advance the bill. Kyle Mangus, city manager of Derby, said the county’s Star Bond district includes grocery anchors and that the food tax elimination “eliminates a substantial portion of revenue generated and allocated to pay down those bonds,” which in Derby’s case he said would otherwise free up local revenue for public safety and infrastructure. Mangus told committee members Derby estimates about $700,000 per year in lost grocery-related revenue for Star Bond repayment and said the city’s bonds had previously paid off years early until the final phase, which now faces dilution of its revenue pledge.

Craig Crossett, city administrator of Goddard, said his city took on $3.5 million in local general obligation debt to support its Star Bond project and currently has roughly $8.5 million and $11 million remaining on two bond issues. He told the committee that roughly $4 million in sales tax was collected in the Goddard Star Bond district in fiscal 2024 and argued the lost food tax revenue would delay distributions to the state and other tax entities and could increase local interest costs or prompt property tax adjustments.

Rachel Willis, director of legislative affairs for the Department of Commerce, told the committee the Star Bond Act (the Sales Tax and Revenue Bond Act, 1999) supports tourism-driven economic development and that there are 17 Star Bond projects at various stages across the state. She said HB 22 11 would keep previously established districts “harmless” following the food tax elimination and that the bill helps sustain state commitments made to developers, localities and bondholders.

Committee members asked whether any Star Bond projects were failing to meet obligations; Willis answered no. Members also asked whether the bill lists eligible cities; witnesses said the bill is tied to the district establishment date (pre‑Dec. 31, 2022) rather than an enumerated list.

The hearing record shows proponents asked the committee to restore the revenue stream to honor prior commitments and to avoid local service impacts. No formal committee vote on HB 22 11 was recorded during the hearing; the committee closed the hearing after proponents’ testimony and questions.

The committee also approved minutes at the start of the meeting by motion of Representative Francis, seconded by Representative Howerton; the motion carried.