Audit: Kansas industrial revenue bond exemptions may have reduced property tax receipts by up to $1.1 billion, auditors say

Legislative Post Audit presented findings that local governments issued about 955 industrial revenue bonds from 2010 through 2024 worth roughly $18.3 billion, and that exemptions tied to IRBX approvals may have reduced statewide property tax revenues by about $1.1 billion.

The presentation by Matt Farenbrooke, the audit presenter, said the IRB program — established in 1961 to attract business investment — has become concentrated in a few counties: Johnson, Sedgwick and Wyandotte. He reported that annually issued IRBs rose from about 39 in 2010 to 82 in 2024, while the annual dollar value of IRBs climbed from about $336 million to $3.2 billion.

Why it matters: auditors estimated that about 40% of the foregone property tax revenue would have gone to school districts, with counties, cities and local taxing units receiving the remaining share. That concentration makes the accuracy of estimates materially important for local budgets.

What auditors found: in a sample of CBAs (cost‑benefit analyses) and county appraiser data, LPA found huge variation between projected and actual foregone property tax amounts. Farenbrooke summarized the range this way: "CBA estimates were between 94% lower and, in one case, over 6,000% higher than county appraiser values." He gave specific examples: one distribution facility CBA assumed a first‑year appraised value of $30–40 million while the county appraiser recorded $167 million; another office renovation CBA anticipated large valuation increases tied to asbestos remediation and HVAC work that did not occur as projected.

The audit identified several root causes: CBAs prepared early in project development used preliminary or unfixed inputs; some used incorrect assessment rates (for example, applying a 25% commercial rate instead of the 11.5% residential rate), and some CBAs relied on unfinalized IRB values. LPA noted there is no statutory standard that defines acceptable CBA accuracy and the Board of Tax Appeals (BOTA) is required only to confirm required documentation, not to evaluate the reasonableness of economic assumptions.

Sedgwick County processing problem: auditors reported that Sedgwick County discovered at least 112 IRBX applications dating to 02/2015 that county staff did not properly forward to BOTA; county officials said the issue may date back up to 30 years. Because property taxes are not collected while an IRBX application is pending, delayed forwarding can defer tax collection for years. LPA recommended that BOTA and the legislature consider establishing deadlines and tracking to prevent missing applications.

KDOR data quality: LPA found missing or inconsistent exempt property values in KDOR's underlying data and noted approximately $51 million in pilot payments were omitted from KDOR statistical reports for 2020–2024 for Johnson and Wyandotte counties. LPA said it corrected some errors with KDOR but refrained from publishing county‑level statistics because not every error may have been found.

Foreign recipients: focusing on 2024, auditors identified three U.S. subsidiaries of foreign parents that received IRB funds totaling about $282 million: Camso Manufacturing USA ($60 million, subsidiary of an Indian parent), Garmin Realty LLC ($62 million, subsidiary of Garmin Limited), and CFC Global Supply Chain Inc. ($160 million, subsidiary of a South Korean parent).

Recommendations and response: LPA recommended the legislature consider developing standards for CBAs or reconsidering the statutory CBA requirement, and that BOTA and KDOR improve submission deadlines, tracking and data quality. Kristen Wheeler, chair of BOTA, told the committee she has no objection to a statutory deadline but noted BOTA lacks enforcement authority and would need staffing and programming resources to monitor filings effectively.

Committee follow up: Senator Tyson proposed a 100‑hour follow‑up review to examine reporting mechanisms and capacity to track IRBX projects; he withdrew a formal motion and said he would submit a 100‑hour request to staff for committee consideration. Committee members asked KDOR to clarify whether taxing entities can opt out of an IRB exclusion and sought further information on the timing of particular corporate ownership changes LPA identified.

What comes next: LPA made recommendations for legislative consideration and for KDOR and BOTA to improve tracking and data quality. Committee members signaled interest in a targeted follow‑up review of reporting processes and tracking for active and completed IRBX projects.