The proposed Kansas Outdoor Lifestyle Center at Clinton Lake would be a 1,500-acre facility hosting outdoor activities such as whitewater rafting and kayaking, zip lines, biking, running, hiking, climbing and paddle boarding.

The economic development incentive tool that could finance a proposed outdoor activity center at Clinton Lake will get a hard look in the coming legislative session, the state senator who chairs the Senate Commerce Committee said.

Earlier this month, Jeff Wise, Plei managing principal, was part of presentations to the Lawrence City Commission and Douglas County Commission regarding Plei’s proposed development of a $70 million outdoor recreational center at Clinton Lake State Park.

Wise said the outdoor recreation center planned for the undeveloped Campground No. 2 on the western portion of the state park would share the same features as Plei’s U.S. National Whitewater Center near Charlotte, N.C. Those include a manmade whitewater rafting and kayaking facility, zip lines, rock climbing, a trail system, outdoor amphitheater, restaurants, beer garden and conference center.

But even Plei officials concede that figuring out how to pay for such a large project is an issue that is unsettled. State officials, including Gov. Sam Brownback, have championed the idea of using STAR bonds, a type of special taxing district that would allow the project to keep large amounts of state and local sales taxes generated at the development.

But one of the state’s top legislators who oversees STAR bonds is raising questions about whether the aggressive form of public incentives will be an option for the Clinton Lake project or any other future development in the state.

“It’s something that will obviously get a lot of attention,” said state Sen. Julia Lynn, R-Olathe, chair of the Senate Commerce Committee, which is expected to conduct hearings on whether STAR bond authority should be allowed to continue. “We need to decide if the state should be in the STAR bonds business at all. It’s too early to predict what will happen. I think the whole program needs a lot of work and attention.”

Ins and outs of STAR bonds

For many Douglas County leaders, the idea of STAR bonds is a bit unfamiliar. No project in Lawrence or Douglas County has ever used STAR bonds. The state, however, has allowed the special form of financing to be used in several other communities. STAR bonds have been used to finance the Kansas Speedway in Wyandotte County, the Flint Hills Discovery Center in Manhattan, Heartland Park in Topeka, and the Prairie Fire shopping district and museum in Overland Park, among others.

The talk of STAR bonds for the Clinton Lake project has some residents questioning whether that would involve creating a new tax. Linda Craghead, assistant secretary of the Kansas Department of Wildlife, Parks and Tourism, told county officials at a briefing earlier this month that STAR bonds don’t work that way.

She explained the use of STAR bonds would not create new tax obligations for Lawrence or Douglas County residents. Rather, their use would allow the city to collect 49 percent of the city, county and state sales tax generated at the outdoor center to retire the bonds it issued for the development. In that sense, STAR bonds are similar to tax increment finance districts that have been used in Lawrence for a variety of hotel and shopping district projects. STAR bond districts, however, are more powerful because they allow state sales tax dollars to be captured and used by the project, while tax increment finance, or TIF, districts only allow local sales tax collections to be captured.

Craghead added that sales taxes from an associated mixed-use development on the west side of Lawrence or west of the city would provide the remaining 51 percent of the revenue needed to pay off the bonds.

Kansas law states that the city, county and secretary of the Kansas Department of Commerce would have to approve the creation of a STAR bonds district in which up to 49 percent of sales tax could be diverted for the retirement of 20-year bonds.

The state law also answers another question some residents have had: Would local governments be on the hook if the Clinton Lake project failed financially? The simple answer is the city and the county would not have to promise to pay off the bonds if the project failed.

In fact, the state’s STAR bonds-enabling legislation forbids cities or counties from using any other sources of revenue raised outside of a STAR bonds district — such as property taxes — to retire bonds, said Nicole Randall, spokeswoman for the Kansas Department of Commerce. The state’s STAR bonds legislation does allow TIF districts to be established in STAR bonds districts, with TIF diverted property, guest and franchise taxes applied to STAR bonds debt retirement.

The only revenue available to retire the bonds is from new taxes collected within a defined STAR bonds district. The only exception under state statute is when a STAR bonds project contains a motor sports raceway, such as the Heartland Track in Topeka and Kansas Speedway in Wyandotte County.

Any STAR bonds the city would issue for the Clinton Lake development would be special obligations bonds. As such, they would not be backed by the full faith and credit of the city as are general obligation bonds.

With no government jurisdiction obligated to back the bonds in the event of failure, bond investors would buy them based solely on their confidence of the proposal’s ability to succeed, Randall said.

That increases the importance of the third-party feasibility study required before proposed STAR bonds districts can be approved. By statute, STAR bonds projects must be found to be major commercial entertainment and tourism areas with 20 percent of their annual visitations originating from out of state and 30 percent from more than 100 miles away.

Sunset provision

Craghead said one possible obstacle to the use of STAR bonds for the Clinton Lake project was that the economic development tool’s enabling legislation will sunset on June 30, unless extended in the legislative session that starts next month.

The STAR bonds legislation needs to be thoroughly vetted before lawmakers make any decision on its extension, said state Sen. Lynn, R-Olathe, chair of the Senate Commerce Committee. That vetting would occur in her Senate committee, she said.

Specifically, the state needs a more transparent reporting process so that legislators can track the amount of sales tax the state will receive and what is being diverted for STAR Bonds debt retirement, Lynn said. That was necessary so that legislators could make sounder budget decisions, she said.

While the pending debate about the future of STAR bonds likely will be important to the Clinton Lake project, it may not be definitive. Lynn said even if the enabling legislation wasn’t renewed, existing STAR bonds projects would continue.

“Even if it’s not renewed, the law will still be on the books, so it could come back at any time,” she said. “Nothing is ever dead in Topeka.”