Prairiefire, the large shopping, dining and entertainment district on 135th Street between Lamar and Nall in Overland Park, has missed a key repayment deadline on its state-issued Sales Tax and Revenue, or STAR, bonds.
In December 2023, UMB, the project’s trustee, sent a material event notice to bondholders stating that Prairiefire had defaulted because the interest and principal for the STAR bonds “was not timely paid.”
Overall, the development received nearly $65 million in STAR bonds when it was created more than a decade ago.
Prairiefire by Dec. 15 was supposed to pay back $14.8 million in principal debt of that roughly $65 million total, plus about $1.75 million in interest, according to UMB’s notice.
This was the first major repayment milestone for the STAR bonds issued for the Overland Park project, and Prairiefire remains well short of recouping the funds needed to pay back its STAR bond debt. The project’s developers have repaid just $130,000 on its principal debt over the past decade, according to the city of Overland Park.
Merrill Companies LLC, Prairiefire’s developer, has yet to respond to the Post’s request for comment for this story.
What are STAR bonds?
- STAR bonds, first authorized in 1993 in Kansas, are designed to support development that will spur “major entertainment or tourism destinations,” according to the Kansas Department of Commerce.
- The debt accrued from the bonds issued to develop a project, along with interest, are then paid back over time with state and local sales taxes from businesses, including retail and dining, within a project’s boundaries.
- With tourism in mind, projects supported by STAR bonds are supposed to attract at least 20% of their visitors from out of state and 30% of their visitors from at least 100 miles away.
- STAR bond districts are usually in effect for 20 years.
- In addition to Prairiefire, Overland Park is home to one other STAR bond district at Bluhawk.
Prairiefire got $65M in STAR bonds
Data from the Kansas Department of Commerce’s transparency page for all STAR bond projects shows Prairiefire received $64.99 million in bonds.
The district was formalized in 2012 and was expected to have paid back its full STAR bond amount by 2032.
The tourist attraction at the heart of the STAR bond district is the Museum at Prairiefire, but it also features a fine art gallery, Pinstripes Bistro with Bocce and Bowling, a Chicken N Pickle, a dine-in movie theater and a nature trail through restored Kansas wetlands.
Surrounding retail and dining that creates the local and state sales tax that should furnish the debt repayment include national retailers, like REI and HomeGoods, as well as locally owned shops like Made in KC. Additionally, a grocery store is expected to open in the district soon.
So far, Prairiefire has repaid just $130,000 on its principal debt, said Overland Park Communications Manager Meg Ralph, though it collected more than $4.3 million in sales tax last year, per KDOC records.
That doesn’t mean city taxpayers are going to have to foot the bill even though Prairiefire has defaulted on this deadline.
“In the event sales tax revenues generated within the Prairiefire development are insufficient to repay these bonds the City does not have an obligation to repay these bonds from other funds,” Ralph said in an emailed statement to the Post.
Prairiefire got local incentives, too
- Prairiefire is also divided into two Community Improvement Districts, or CIDs, in Overland Park.
- That type of incentive essentially imposes an extra sales tax — in this case 1.5% — within a given project’s boundaries in order to help finance costs for development. CIDs also usually have a set expiration date.
- In 2012, Overland Park issued $14 million in CID bonds for the first improvement district, which covers the east and west edges of Prairiefire.
- Ralph said those bonds are to be paid back with the special CID sales tax revenue in 2025, 2029 and 2034.
- Previously, Prairiefire has defaulted on city bond debt.
- The second CID, for the central area of Prairiefire, has no bonds attached to it.
Prairiefire has been flagged for concerns before
An audit conducted by Kansas Legislative Division of Post-Audit in August 2021 that examined STAR bond projects across the state suggested that the state of Kansas could spend decades recouping sales tax revenues that were diverted to pay for Prairiefire.
It predicted the break-even timeline could be between 2046 and 2104 for that particular project.
That audit also questioned if state incentives were even necessary to support the project given its proximity to Overland Park’s 135th Street dining and shopping corridor.
The document concluded that without help from STAR bonds a similar development would have emerged by 2025 anyway.
The Kansas Department of Commerce and the city of Overland Park both pushed back on the audit’s findings. KDOC cited “flawed assumptions and methodologies” that went into creating the analysis.
Then-Overland Park City Manager Bill Ebel also questioned some of the assumptions used to formulate the report. He suggested specifically that the auditors undervalued the amount of property tax the state was getting from Prairiefire.
Ebel also cast doubt on the assumption that something similar to Prairiefire would have been possible without the bonds, saying the property likely would have been developed more for office uses, generating less sales tax.
More on Prairiefire: Messenger Coffee halts plans for shop at Overland Park’s Prairiefire
