The Kansas Reflector has done a deeper dive into how the STAR bonds for a new Kansas City Chiefs stadium in Kansas would work, and while it doesn’t change the likely total subsidies much — we’re still talking a couple billion here, a couple billion there — there are some worthwhile takeaways.

First off, this is the most coherent concise summary I’ve seen yet of the problems with Gov. Laura Kelly’s “no new taxes” argument:

It is accurate when state leaders say no new taxes will be implemented to move the Chiefs across the border, said Ian Graves, a Prairie Village City Council member and self-described public finance policy wonk who has been studying the details.

However, the project may require new taxes down the road to cover the loss of revenue growth that would normally flow into the state’s coffers, he said.

That’s exactly right: The issue isn’t that Kansas will lose money it’s getting now, but rather that it will lose money it would otherwise get in the future — which, since money is money, still has the potential to blow a huge hole in the state budget. And in fact Kansas could even lose some money it’s receiving now: The state secretary of commerce would have the power to set the base value (taxes that won’t be handed over to the Chiefs) at below what the state is receiving now in the stadium district, cutting into public funds currently available. “They could just make everything zero,” notes Washburn University economist Paul Byrne. “If they choose a base value that’s below what would typically be a base value, well then you’re even more clearly capturing sales tax revenue or property tax revenue, or whatever would have gone to the state and to the local government.”

There’s also that issue of local governments: Kansas Commerce Department chief counsel Bob North said he “anticipates” both Olathe County and Kansas City, Kansas, to kick in their share of increased sales taxes to help pay off the STAR bonds, calling it “really important, and something that we’re monitoring very closely.” Local governments would seem to have zero motivation to kick in out of their own future tax revenues — it would just shift costs from the state budget to city and county budgets — but maybe if state officials argue that it would otherwise blow up the Chiefs moving in, they can be arm-twisted to contribute.

To make sense of all this, or at least show the range of possibilities, Graves, the Prairie Village council member, has created an interactive STAR bond site where anyone can tweak the parameters of the deal to see how it affects two key metrics: 1) whether the bonds are viable (i.e., if the STAR bond fund actually runs dry) and 2) how much tax money will eventually be diverted into the Chiefs stadium project. For example, here’s the default settings, with a 5% bond rate and Olathe and KCK kicking in funds:

The good news: The amount of new tax revenue raised starts being enough to cover bond payments after five years, after which it just siphons off a flat $175 million a year in sales taxes, but anything over that goes back into the general fund. The bad news: That’s still nearly $5 billion in state money over 30 years, which would be around $2.7 billion in present value, still the second-most expensive NFL stadium subsidy in history, by a wide margin.

And if we change the assumptions just a bit, things could be much worse. Let’s say we assume a full $3 billion for STAR bonds for both the stadium and accompanying development (plus financing costs), ratchet the interest rate up to 6% because these are risky bonds (if the economy collapses, any reduction in sales tax growth could quickly put them underwater), and say that Olathe and KCK decline to participate:

Now it’s 12 years before the state of Kansas can start using any new sales taxes from the stadium district on actual state needs, and the total subsidy has swelled to $8 billion over 30 years, which is nearly $4.8 billion in present value. And Chiefs owner Clark Hunt’s share of the costs sinks from 24% to 17% — and that’s before accounting that he can pay off his share out of stadium revenues, while the state would get none of those, not even naming rights on a publicly owned building. (The state would get whatever incremental tax revenues it could steal from across the border in Missouri, but that would require a whole other set of sliders depending on your assumptions about who’d be seeing Chiefs games and where else they’d be spending their money otherwise.)

Sorry for sounding like a broken record, but while there are still lots of unknowns here, it’s still largely a question of whether this Chiefs stadium deal would be real bad for Kansas, or catastrophically bad for Kansas. It’s at least good to see these questions being asked, by both local media and local elected officials, before all the final signoffs are made on the plan. It’s not often that terrible stadium deals are blocked or improved once they’re announced, but it does happen from time to time; the ball is now in the court of city, county, and state officials in Kansas, as well as Kansas residents who need to decide how much lost state revenue is too much to pay not to have to drive a few extra miles to see Chiefs games across the Missouri line.

Judging from my email, the proposed Kansas City Chiefs stadium deal with the state of Kansas has set off a wave of cognitive dissonance among sports fans and taxpayers: Gov. Laura Kelly says that the state will spend $1.8 billion on a new stadium — really more like $4 billion, counting tax breaks and subsidies for additional development around the stadium — but also claims that the deal “requires no new funds from the current state budget and no new taxes on Kansans.” How can a stadium both cost taxpayers billions of dollars and also be free?

This is a topic that deserves a full analysis with lots of numbers and math, but those are still being compiled. In the meantime, let’s examine more closely that “no new taxes” claim, what kind of logic it relies on, and whether it holds water.

About $3 billion of the Chiefs subsidy will come from STAR (Sales Tax and Revenue) bonds, which are a kind of tax increment financing, or TIF: A governmental body, in this case the state of Kansas, calculates the current total amount of taxes being paid in a designated district and guarantees that this amount will continue to be collected. (For STAR bonds this is only for sales taxes, making it technically a STIF.) Any additional revenue that comes in — the “increment” — gets diverted to pay off the bonds, which in this case would pay off the stadium.

The idea here is to only spend what new value you get from a project: If moving the Chiefs across state lines increases sales tax receipts by X dollars, then only X dollars will go toward paying off the bonds. State taxpayers, the theory goes, are held harmless: The state is collecting the same amount of taxes as it would without the Chiefs, so the stadium pays for itself. Here’s Gov. Kelly, telling the New York Times how she plans to spend $3 billion paying off STAR bonds without costing anyone anything:

Kelly said Kansas will take tax dollars only above and beyond what was previously generated in the area — thanks to the Chiefs’ arrival — to fund the new initiative.

“So the shopper, the diner, they will not be paying any new tax,” Kelly said.

The problems start to arise when it comes to calculating what “thanks to the Chiefs’ arrival” means. TIFs don’t actually try to calculate how much in tax revenue is actually created by the new development — they just assume that any new spending was caused by the project, and kick that amount back to developers as a presumed windfall. This leaves lots of room for subsidizing projects that would happen with or without the subsidy: Chicago famously created so many TIF districts under Mayor Richard Daley two decades ago that it had to raise taxes on the remaining parts of the city to cover for all the holes it was blowing it its tax base.

It also leaves open the possibility that a lot of the “new” taxes being siphoned off would have been collected regardless, thanks to natural economic growth, inflation, etc. University of Colorado Denver economist Geoffrey Propheter, who has clearly spent a lot of his Christmas week explaining tax increments to reporters, describes it this way:

This seems obvious if you think about how spending works: There’s almost zero chance that sales taxes in a district covering most of Wyandotte and Johnson counties would stay flat for 30 years if the Chiefs didn’t move in. But we can also perform a simple thought experiment here: How much Chiefs-related spending would there have to be to pay off the STAR bonds by itself? A $3 billion bond at 4.25% interest over 30 years will cost about $175 million a year in tax receipts. Kansas’s state sales tax is 6.5%. (Liquor taxes also go into paying off STAR bonds, but they’re a tiny fraction of the sales tax total.) That means Chiefs-related new spending would need to be $2.7 billion a year — this for a team whose total annual revenue, including TV money that isn’t subject to sales taxes, is currently less than a quarter of that total.

Looked at another way, if you assume that a new 65,000-seat stadium would sell out ten games a year, that means each and every Chiefs fan would need to spend an additional $4,000 per game in Kansas, over and above what they would spend in the state regardless, for the state to break even. Anything less than that, and Kansas taxpayers will have to make up the difference, just as was the case with Chicago’s TIFs.

This is, on some level, a variation on the Casino Night Fallacy, where any tax money touched by a team is designated as “team-related” and therefore fair game for the team owner to demand to keep. Only in this case, it’s money that the team may never have touched in the first place: All those new lawnmower purchases get credited to the Chiefs’ account regardless of whether they have anything to do with a football stadium being built elsewhere in the county. The net fiscal benefit of luring a pro football team across state lines isn’t zero, but after subtracting out spending that would have taken place regardless, spending that is cannibalized from elsewhere in the state, and tax money that will be needed to pay for new costs like police and fire services to a new stadium development (and schools if it includes residences), the amount of actual new money is certain to be way, way less than the state’s $4 billion expense. We can debate how much red ink Kansas taxpayers will end up swimming in if this stadium comes to pass — and I do hope to have more specific numbers soon — but it’s likely to be somewhere between a lot and a whole hell of a lot.

It’s been a whirlwind couple of days since Monday’s announcement that the state of Kansas was offering Kansas City Chiefs owner Clark Hunt billions of dollars in cash and tax breaks to move across the border from Missouri, and more details are still only now becoming clear. Catching up on the latest:

• After I guesstimated that the total public cost of the deal for Kansas taxpayers would be $3 billion or so — up to $2.775 billion in state-backed STAR bonds to build an up-to-$4.4 billion stadium-and-other-development complex, plus an unknown amount of property tax breaks — sports economist Geoffrey Propheter jumped in with some more fine-grained math:
  The number we want to focus on is the “PV” (for present value) column; the “nominal” column is for payments added up over years, which would be like figuring out the cost of your house by adding up all your mortgage payments over time. Still, Propheter has the total cost to state taxpayers at more than $4.1 billion, including:
  • More than $3.1 billion in payments on the STAR bonds. As Propheter notes above, “cap is not what is owed to bondholders but what the state commits to project”; in other words, while the amount of money going to the Chiefs is capped at $2.775 billion, the state still needs to provide for bondholder profits, bank fees, and the like, so Kansas ends up spending more than Hunt gets.
  • $497 million in property tax breaks thanks to the state taking possession of the land, a number that I’m willing to take as gospel given that Propheter literally wrote the book on this stuff.
  • $444 million in future maintenance on the stadium. In my calculations yesterday, I dismissed this as being covered by the Chiefs’ $7 million a year rent payments, but those won’t come close to paying off $444 million in present value. Plus, as Propheter noted to me in an email, rent payments could legitimately be seen as, you know, rent payments — if the state of Kansas is choosing to spend those on stadium upkeep, that’s its choice, but it doesn’t make it less of a subsidy.
• Also yesterday, I noted that paying off almost $3 billion in bonds solely with state sales and liquor taxes from in and around a Chiefs stadium could be a tough lift, and quipped that “if all else fails, they could just expand the stadium tax district until it stretches all the way to Topeka.” I should really learn not to make jokes, because it turns out there’s a draft stadium district in the stadium agreement, and it looks like this:
  That’s a bit bigger than just the stadium and its immediate surroundings — it would cover 293 square miles, cannibalizing sales and liquor taxes from an enormous chunk of the northeast corner of the state. This handily puts the lie to Gov. Laura Kelly’s claim that the stadium “requires no new funds from the current state budget,” since sales and liquor taxes from those 293 square miles currently go to the state budget, and replacing them is 100% going to require new funds. And that mammoth stadium district is still just a preliminary estimate: Because STAR bonds can only by law be paid off with taxes from within the district, Kansas will eventually have to draw a big enough district to make bond buyers confident that the proceeds can pay off the state’s stadium debt — meaning Topekans might still wait to hold on to their wallets, just in case.
• I also noted yesterday that the current public price tag estimate was made “without even knowing if Hunt plans on seeking any city or county money,” and indeed, the Chiefs owner appears to have designs on that as well: The Kansas Commerce Department website declares that county and city officials “will now have the opportunity to approve an ordinance to pledge local incremental general sales tax within the STAR bond project area to the project.” Lucky them! It at least looks like any city and county sales taxes would just go to help pay off the $3.1 billion in STAR bond costs already planned, in which case it wouldn’t raise the total public cost any, just shift it between the state and local governmental bodies, but I’m kind of afraid to assume anything now, for fear of conjuring my worst fears into reality.

All this has led one sports business writer to call the proposed Chiefs agreement “the most lopsided stadium deal in NFL history,” thanks to the public taking on the vast majority of the costs while team owners keep 100% of the revenues. That may be pushing it — the $6.6 billion Washington Commanders deal is still the benchmark for governmental malpractice here — but however you slice it, the Chiefs deal is real lopsided. Given all the glee from Kansas state officials at having pulled this off, it’s probably too much to hope that cooler heads will prevail, but after seeing Tampa Bay Rays and Anaheim Angels and Philadelphia 76ers deals collapse after they were seemingly set in stone, anything can still happen.

Meanwhile, let’s give the closing words to Propheter, who from the looks of my RSS feed has spent the last 24 hours doing nothing but talking to reporters:

“I just can’t believe, in my lifetime, we went from a couple $100 million stadiums to billions and no one caring,” he said. “When I say ‘no one caring,’ that’s hyperbole — lots of people care — but lawmakers in no way, shape or form pausing to think: ‘We can’t find something else to do with billions of dollars? It has to be for this?'”

The Kansas City Chiefs are moving to Kansas! The Kansas City Chiefs are … maybe moving to Kansas? The Kansas City Chiefs have said they’re moving to Kansas, somewhere, definitely, once they work out the details of how to cash an enormous check from state taxpayers.

Here’s what we know so far:

• The Kansas state legislature’s Legislative Coordinating Council met yesterday and unanimously approved using state sales and liquor taxes in and around a stadium district to pay off bonds covering 60% of the cost of a Chiefs stadium, pretty much just like they said they would a year and a half ago. (The original authorizing legislation would have covered up to 70% of the stadium cost.)
• Kansas Gov. Laura Kelly announced: “This agreement to bring the Chiefs to Kansas takes our state to the next level. With this new stadium, we’re creating thousands of jobs, bringing in tourists from around the world, attracting young people, and most importantly, we’re continuing to make Kansas the best place in America to raise a family.” The stadium, she said, “requires no new funds from the current state budget and no new taxes on Kansans.”
• Chiefs owner Clark Hunt put up a statement on the team website saying “we have entered into an agreement with the State of Kansas to host Chiefs football beginning with the 2031 NFL season” and “we look forward to designing and building a state-of-the-art domed stadium and mixed-use district in Wyandotte County,” though “we have a lot more work to do to make this vision a reality.”

What’s the more work to do? KMBC spells out that yesterday’s agreement (full text here) is a “nonbinding term sheet” — a draft proposal, basically — that would tremendously up the ante for Kansas taxpayers:

• With a Chiefs stadium now coming it at a staggering $3 billion, state taxpayers’ 60% share could be as much as $1.8 billion. (It’s unclear if there would be enough sales and liquor taxes in the stadium district to cover that much state spending, but once the bonds are sold, it would be the state’s problem to figure out how to cover the bills — if all else fails, they could just expand the stadium tax district until it stretches all the way to Topeka.) Then a second phase of development around the stadium could cost between $1 billion and $1.4 billion, with the public on the hook for as much as another $975 million — bringing the potential total taxpayer cost to $2.775 billion.
• Good news: The Chiefs would pay rent! Bad news: It would only be $7 million a year, which even if it scaled up for inflation would only come to about $200 million in value over a 30-year lease, which is a whole lot less than $2.775 billion. Worse news: Much of the rent money would be set aside to help pay for stadium maintenance and upgrades, so that wouldn’t be revenue that could be used to offset the state’s stadium costs regardless.
• The state or a quasi-governmental authority would own the stadium, so presumably the Chiefs would get out of paying property taxes.
• The Chiefs would have to repay the public’s costs if they tried to leave in the next 15 years, but after that the penalties would gradually decline until they were at zero in year 30.
• According to the draft agreement, the Chiefs would retain all naming rights revenue from the building, even though it would be owned by the state and public money would pay for 60% of the construction cost.
• The agreement is only an exclusive negotiating term that lasts until next October 31, after which Hunt can resume negotiating with Missouri if he wants. The Chiefs can also back out of the deal early if they don’t have a site acquired by next May 15.

I’m still trying to finalize the numbers for the value of that tax break [UPDATE: early estimates by Geoff Propheter are that it would be worth about $500 million in present value], but clearly we’re looking at a deal that would cost Kansas more than $3 billion, which would be the second most costly stadium project for taxpayers in history, behind only the off-the-charts insane Washington Commanders deal. And that’s without even knowing if Hunt plans on seeking any city or county money, or if the eventual lease would include a state-of-the-art clause that could allow the team owners to demand future upgrades. (One thing we do know: State lawmakers will get one luxury suite, but will have to pay for their own food.)