Legislative Post Audit Committee 07/08/2026

Overview of the Industrial Revenue Bond Audit

Introduction to the Audit

• The session begins with a reminder for attendees to submit travel vouchers.

• Matt Berenbrook introduces himself and presents the audit on the Industrial Revenue Bond Program.

• Team members involved in the audit include Sam Dads, Ellen Slicker, and Kristen Rottinghaus, who managed the audit.

Key Questions Addressed in the Audit

• The audit focuses on three primary questions regarding fiscal impact, reporting accuracy of property tax exemptions, and foreign companies receiving bonds.

• Two additional findings related to question one will be discussed at the end of the presentation.

Background Information on Industrial Revenue Bonds

Purpose and History

• The Industrial Revenue Bond (IRB) program was established in 1961 to enhance economic growth by attracting new businesses and supporting existing ones.

Fiscal Impact of IRBs

Findings from 2010 to 2024

• Local governments issued approximately 955 IRBs valued at $18.3 billion during this period.

• A significant concentration of IRBs was found in Johnson, Sedgwick, and Wyandotte counties.

Trends Over Time

• The annual issuance of IRBs doubled from 39 to 82 between 2010 and 2024; total value increased from $336 million to $3.2 billion.

Estimated Foregone Property Tax Revenues

Analysis Results

• An estimated $1.1 billion in property tax revenues may have been foregone due to approved IRBX applications from 2010 to 2024.

Distribution Insights

• Approximately 40% of foregone property tax revenue would have benefited school districts; only about $13 million (1%) would have gone to state funds.

Accuracy of Property Tax Exemption Estimates

Cost-Benefit Analysis Requirements

• State law mandates local governments conduct cost-benefit analyses (CBAs), estimating future economic impacts before issuing IRB bonds or offering exemptions.

Review Process Findings

• The audit reviewed CBAs for discrepancies between estimated and actual foregone property tax revenues across various projects.

Discrepancies Identified in CBAs

Issues Leading to Inaccuracies

• Some CBAs underestimated property values leading to lower estimates than actual appraisals.

• Others overestimated financial impacts due to project delays or miscalculations regarding assessment rates used in their calculations.

Examples Highlighting Errors:

• One CBA significantly underestimated a distribution facility's appraised value ($30-$40 million vs. actual $167 million).

• Another CBA for an office renovation overstated potential increases due to uncompleted work resulting in inflated estimates by over 6,000%.

Lack of Oversight Mechanisms

Regulatory Gaps

• Statutory definitions do not establish accuracy standards or oversight mechanisms for CBAs submitted for review by the Board of Tax Appeals.

Overview of the Board of Tax Appeals and Cost-Benefit Analyses (CBAs)

Statutory Requirements and Local Government Practices

• The Board of Tax Appeals is not mandated by law to assess the quality or accuracy of CBAs, nor to verify the reasonableness of estimates used.

• Most local officials indicated they review CBAs but expressed that concerns over inaccuracies do not significantly influence their decisions regarding IRBX exemptions.

Recommendations on Addressing CBA Discrepancies

• No recommendations were made for reconciling differences between estimated and actual foregone property tax revenues due to varying causes across different CBAs.

• Factors like inflation, construction delays, and economic changes contribute to project outcome uncertainties; thus, some level of unpredictability in CPAs is anticipated. A recommendation was made for legislative consideration on developing standards for CBAs.

Analysis of Foreign Companies Receiving Industrial Revenue Bonds (IRBs)

Definition and Data Review Process

• The analysis focused on 2024 data, defining foreign businesses as those organized outside the U.S. or U.S. subsidiaries of foreign entities.

• Data from the Board of Tax Appeals was cross-referenced with records from Kansas Departments of Commerce, Labor, and Secretary of State.

Identification of Foreign Subsidiaries

• Businesses were classified as foreign based on specific indicators such as jurisdiction, IRS identification numbers starting with 9-8, mailing addresses, or assistance records from the Kansas Department of Commerce.

• Three U.S.-organized subsidiaries received a total of $282 million in IRB funds in 2024: CAMSO Manufacturing USA ($60 million), Garmin Realty LLC ($62 million), and CFC Global Supply Chain Incorporated ($160 million).

Findings Related to Sedgwick County's Processing of IRBX Applications

Application Submission Process

• Local governments must submit an application provided by the Board of Tax Appeals for IRBX offerings to their county appraiser for review.

• The county appraiser is responsible for verifying property value eligibility and forwarding applications along with recommendations to the Board.

Issues Identified in Application Handling

• At least 112 IRBX applications dating back to 2015 were identified as improperly submitted; this issue may have persisted for up to 30 years due to a former official's inconsistent processing practices.

• Delays in forwarding applications can lead taxpayers not paying property taxes while awaiting approval from the Board.

Data Quality Concerns at the Department of Revenue

Issues with Reporting Accuracy

• Several data quality issues were identified within the Department’s reporting related to IRBX properties; inconsistencies were found when comparing statistical reports against underlying data requested.

• Missing pilot payment statistics totaling $51 million from Johnson County and Wyandotte counties highlighted significant gaps in reporting accuracy.

Recommendations for Improvement

• Recommendations were made throughout the audit aimed at improving data quality processes within KDOR; however, it was noted that not all errors may have been identified or corrected during this audit process.

Cost-Benefit Analysis (CBA) and Local Government Decisions

Overview of CBA Estimates

• The estimates for cost-benefit analysis (CBA) range dramatically from 94% underestimation to over 6,000% overestimation, raising concerns about their reliability.

• A report indicated that many local officials disregard CBAs, with one official stating they merely "talk business."

Impact of CBA on Decision-Making

• Inquiry into whether a single instance exists where a CBA influenced the decision to grant or deny an exemption revealed no such cases among the analyzed data.

• This raises questions about the necessity of CBAs, suggesting they may serve as mere compliance theater rather than rigorous analytical tools for significant financial decisions.

Local Government Responses to CBA Findings

• Among the 23 local governments studied, instances were reported where unfavorable CBA results led officials to collaborate with businesses to revise proposals instead of outright denying them.

• Officials expressed a tendency to adjust proposals based on CBAs rather than strictly adhering to their findings when numbers were not favorable.

Suggestions for Improving CBA Processes

Recommendations for Enhanced Analysis

• Discussion arose regarding potential improvements in the CBA process, including suggestions for involving economists or creating more rigorous analyses.

• Concerns were raised that if CBAs are perceived as obstacles filled out carelessly, their value is questionable and may warrant reconsideration or elimination altogether.

Variability in CBA Practices

• The variability in circumstances surrounding the 23 CBAs examined was noted; some experienced delays while others were overly conservative in their estimates. Multiple preparers contributed differing methodologies and outcomes.

Legislative Oversight and Historical Context

Changes in Oversight Mechanisms

• Questions emerged regarding changes made in 2014 concerning oversight between different tax appeal boards (CODA vs BODA), though historical analysis was limited due to recent sampling focus.

• The impact of these changes on oversight effectiveness remains unclear without further investigation into past practices compared to current ones.

Fiscal Impacts and Long-Term Revenue Considerations

Examination of IRBX Fiscal Impact

• An inquiry into whether there was an increase in fiscal revenue for local governments beyond ten years after IRBX exemptions concluded highlighted that this aspect fell outside the study's scope but could be relevant for future economic development assessments.

• It was acknowledged that understanding post-exemption impacts could inform better decision-making moving forward regarding property taxes and revenue generation strategies after exemptions expire.

Timing and Relevance of Cost-Benefit Analyses

Early Stage Analysis Issues

• Cost-benefit analyses are conducted early in project applications before any substantial funding is secured or properties appraised, leading to potential inaccuracies reflecting actual project viability at later stages.

• Examples cited included projects where significant time elapsed between conducting a CBA and breaking ground, indicating possible disconnect between initial projections and final outcomes.

Local Government Utilization of CBAs

• Different local governments utilize CBAs variably; some view them as mandatory paperwork while others engage deeply with the data presented during decision-making processes related to project approvals or adjustments needed by businesses seeking exemptions.(1671]

Discussion on IRBs and Their Impact

Overview of IRB Duration and Issues

• The discussion begins with a clarification that all Industrial Revenue Bonds (IRBs) are limited to a maximum duration of 10 years as per statute.

• Senator Tyson notes an increase in the number of IRB issues, referencing a previous audit from 2022 that lacked detailed insights compared to the current report.

Fiscal Impact on K-12 Schools

• Questions arise regarding the fiscal impact of IRBs on K-12 schools, specifically whether community colleges were included in the financial assessments; they were excluded.

• A significant figure is mentioned: $436 million overall, with potential savings if fewer IRBs were issued.

Tax Implications for Approved Projects

• It is highlighted that once an application for an IRB is submitted, property taxes are not paid until a decision is made by the Board of Tax Appeals (BOTA).

• If an application is denied, back taxes would be owed from when it was submitted. This raises concerns about tax revenue loss during approval processes.

Reporting Mechanisms and Oversight

• There are indications that some projects may bypass county appraisers and go directly to BOTA, which could lead to data discrepancies.

• Senator Tyson suggests conducting a 100-hour audit to investigate reporting mechanisms related to ongoing and completed projects.

Need for System Improvements

• Emphasis is placed on establishing guardrails around IRB programs due to potential gaps in oversight by county appraisers.

• A motion for further investigation into reporting accuracy and management responsibilities within counties is discussed but later withdrawn for further consideration.

Clarifications on IRB Duration and Refinancing

Understanding Statutory Limits

• Confusion arises regarding the duration limits of IRBs; while some believe they are capped at 10 years, others suggest they can extend beyond this under certain conditions.

Refinancing Scenarios

• The conversation touches upon refinancing existing bonds; if new properties or expansions occur, additional funding through new bonds may be possible without violating original terms.

Frequency of Refinancing

• There’s interest in understanding how often refinancing occurs among entities holding IRBs but acknowledges limitations in current data collection efforts.

This structured summary captures key discussions surrounding Industrial Revenue Bonds (IRBs), their implications for education funding, tax policies, oversight mechanisms, and clarifications regarding statutory limits. Each point links back to specific timestamps for easy reference.

Overview of Property Tax Exemptions in Kansas

Historical Context and Participation

• The discussion begins with the historical context of property tax exemptions, noting that cities received these exemptions in 1961, followed by counties in the 1980s.

• A question arises regarding whether schools are compelled to participate in these exemptions or if they can opt out.

School Financing Concerns

• It is clarified that while hearings must occur for potential changes, schools do not have a veto power over exemption decisions.

• Concerns are raised about how removing property tax collection opportunities from schools impacts overall community financing.

Foregone Revenue Analysis

• Senator Claes highlights a report estimating foregone property tax revenue at $1.1 billion, emphasizing the complexity of interpreting this figure as it may not reflect actual lost revenue due to project dependencies on exemptions.

• The senator suggests alternative terminology like "gross taxes abated" to better convey the implications of such figures without misleading interpretations.

Evaluating Economic Impact of Industrial Revenue Bonds (IRBs)

Methodology and Effectiveness

• Questions arise about methodologies used to assess whether IRBs provide net benefits or losses to communities.

• There is a call for more comprehensive studies to determine long-term impacts on tax revenues from projects benefiting from IRBs.

Previous Reports and Findings

• Reference is made to a 2022 report which included metric modeling of eight IRB projects, generally finding them beneficial but acknowledging trade-offs in analysis focus.

Legislative Recommendations for Board of Tax Appeals (BOTA)

Audit Insights and Recommendations

• A comment on the 2022 audit indicates that questions remain regarding the effectiveness of current programs rather than confirming their success outright.

BOTA's Position on Legislative Proposals

• Kristen Wheeler from BOTA presents her remarks, indicating no objection to legislative deadlines for county appraisers submitting exemption applications but notes enforcement challenges.

Monitoring Mechanisms

• Wheeler discusses recommendations for establishing monitoring mechanisms but emphasizes the need for additional resources and staff commitments to implement such systems effectively.

Compliance vs. Cost-Benefit Analysis

Administrative Focus of Applications

• A representative questions whether BOTA's application process prioritizes administrative compliance over evaluating community cost-benefit analyses, highlighting limitations within current statutory requirements.

Discussion on Property Tax Exemptions and IRB Participation

Inquiry into Tax Exemption Rules

• Senator Tyson questions the Department of Revenue about the all-or-nothing nature of tax exemptions related to city and school participation in Industrial Revenue Bonds (IRBs).

• Bob Cant from the Division of Property Evaluation responds, indicating uncertainty regarding whether one governing body can opt out of IRB exclusions.

Follow-Up Actions

• A suggestion is made for Bob to research the question further and provide information via email to committee staff for clarification on current treatment and statutory requirements.

Audit Findings on IRBX Returns

Overview of Audit Results

• The audit indicates that while eight reviewed IRBX projects are expected to generate positive returns, none will cover their costs through increased tax revenues.

Introduction of Legislative Post Audit Presentation

Transition to New Topic

• Andy Brinzo from Legislative Post Audit is introduced, celebrating his 10 years with the organization. He prepares to discuss extracurricular activity policies.

Compliance with State Laws in School District Policies

Key Questions Addressed

• The audit aims to determine if school districts comply with state laws allowing virtual and non-public school students to participate in Kansas State High School Activities Association (KSHAA)-regulated activities.

Findings on Policy Alignment

• KSHAA and 19 out of 20 reviewed school districts have written policies aligning with state law; 16 districts allow participation in non-KSHAA regulated activities.

Role of KSHAA in Regulating Activities

Responsibilities Outlined

• KSHAA regulates various activities for grades 7 through 12, including sports, drama, music, etc., overseeing scheduling, eligibility requirements, practices, and compliance issues.

Changes in Legislation Affecting Student Participation

Recent Amendments Explained

• Since the 2023-2024 school year, state law mandates that eligible virtual and non-public students must be allowed participation in KSHAA-regulated activities at public schools.

Eligibility Requirements

• Students must reside within the district's attendance area.

• They need good academic standing and must pay required fees.

• They should attend tryouts alongside other students.

Application Process for Participation

Mechanics of Student Applications

• Students apply online for participation; KSHAA verifies eligibility due to limited interaction with local districts.

• Schools confirm residency but have varying methods for verification.

Popularity Trends

• Applications for participation have risen significantly over three years—from approximately 600 applications in 2023–24 to over 1,500 by March 2026.

Approval Rates

• An impressive approval rate exists: around 88% approved applications versus only a small percentage denied primarily due to academic reasons.

Discretionary Policies for Non-KSHAA Activities

Variability Among School District Decisions

• Unlike KSHAA-regulated activities where laws dictate student inclusion, participation in non-KSHAA regulated activities is left entirely up to individual school district discretion.

Overview of High School Policies and Compliance

Diversity in High Schools

• The study examines a variety of high schools across urban, rural, and suburban settings, noting that while the sample isn't statistically projectable, it reflects statewide trends.

• The findings indicate that Keisha's policy for the 2025-2026 school year is compliant with state law.

Policy Adoption by Districts

• Out of 20 districts reviewed, 19 adopted written policies aligned with state law based on a template from the Kansas Association of School Boards.

• Minor adjustments were made by some districts to ensure compliance without imposing additional burdens on virtual or non-public school students.

Written Policy Recommendations

• One district lacked a written policy but claimed compliance with state law; recommendations were made to adopt one for clarity and risk mitigation.

• The district agreed to implement a written policy following recommendations.

Review of Ancillary Documentation

Alignment with State Law

• Four districts had outdated ancillary documentation that did not align with their adopted written policies regarding participation in events for virtual and non-public school students.

• Recommendations were made for these districts to update their documents to ensure consistency with official policies.

Non-CASHA Regulated Activities

Participation Policies

• Non-CASHA regulated activities include Future Farmers of America, National Honor Society, school trips, and dances; participation is not mandated by law.

• Despite no requirement for participation, 16 out of 20 districts indicated they would allow involvement from virtual and non-public school students.

District Perspectives on Participation

• Some officials expressed that non-CASHA activities are intended primarily for district students' camaraderie.

• A few districts mentioned allowing virtual/non-public students to participate as guests at events like dances.

Audit Process Insights

Questions Raised During Committee Discussion

• Representative Clayton inquired about who requested the audit; it was confirmed that Senator Erickson initiated it.

• There was uncertainty regarding the average cost of such audits; further clarification was promised post-meeting.

Academic Requirements Clarification

• Questions arose about academic requirements for virtual/homeschooled students participating in KESHA-regulated activities; KESHA reviews applications for course approval.

Understanding Costs Associated with Audits

Opportunity Cost Considerations

• Senator Claes raised questions about whether audit costs consider salaries or opportunity costs related to staff time spent on audits versus other projects.

Summary of Audit Costs

• Chris clarified that costs are more about opportunity costs since resources could be allocated elsewhere if not used for this audit.

Standards Required by KESHA

Academic Performance Expectations

• It was noted that KESHA requires only five classes passed (equivalent to a D average), indicating relatively low standards.

Concerns About Homeschooling Regulations

Overview of Homeschooling Affidavits

• The discussion begins with questions about the requirements for parents to declare their child is homeschooled and in good academic standing.

• There is uncertainty regarding whether a simple statement from parents suffices or if detailed curriculum information is necessary.

Potential Loopholes in Homeschooling

• Concerns are raised about students who may be academically ineligible but can be pulled out of school to homeschool, potentially avoiding accountability.

• A scenario is presented where parents could falsely claim adherence to the code of conduct while homeschooling, raising ethical concerns.

Impact on Legitimate Homeschoolers

• The conversation highlights that while some homeschooling parents work diligently, loopholes could tarnish the reputation of all homeschoolers due to potential abuses by others.

• There’s a call for unified standards to ensure that hardworking homeschool families are not unfairly judged alongside those exploiting the system.

Academic Progress Affidavit Clarification

• State law allows for an academic progress affidavit from homeschooling parents but lacks specificity on what this should include.

• Questions remain about how these affidavits are evaluated and what constitutes adequate documentation for academic progress.

Audit Findings on Non-Public Student Participation

Legislative Context and Audit Purpose

• An audit was conducted following recent legislation passed in 2025 concerning non-public student participation in activities, which raised concerns among committee members.

Findings on School District Policies

• The audit revealed no evidence that school districts were actively excluding non-public students from participating in activities related to KSHAA (Kansas State High School Activities Association).

• It was noted that the focus of the audit was not specifically on exclusion instances but rather on policy alignment with legislative updates.

Transition into Executive Sessions

Committee Break and Session Resumption

• After discussing various topics, the committee takes a break before transitioning into executive sessions focused on security audits within specific school districts.

Motion for Closed Executive Meeting

Security Measures Discussion

• A motion is made to recess into a closed executive meeting under KSA 75-4319A to discuss security measures protecting information systems at Shawnee Mission School District, emphasizing confidentiality needs during discussions.

Consent Calendar Review

Items Included in Consent Calendar

• Matt Edsel presents items on the consent calendar including approval of previous meeting minutes and acceptance of performance audits related to fiscal effects and IT security controls at two different agencies: Shawnee Mission School District and Kansas Department for Aging and Disability Services.

Approval of Limited Scope Audits

Overview of Audit Requests

• The committee discusses the approval of two limited scope audits requested by Senator Tyson, each limited to 100 hours.

• The first audit focuses on Osawatomie State Hospital's implementation of past audit recommendations.

• The second audit pertains to the Kansas Office of Veterans Services and its implementation of previous recommendations.

Consent Calendar Discussion

• The chair has preliminarily approved both requests; objections can be raised before final approval.

• Members abstain from voting, including Representative Clayton and Senator Petty, who was not present during the initial discussions.

Objections Raised

• Senator Petty questions the necessity of reviewing a post-audit conducted just a year prior regarding the Kansas Office of Veterans Services.

• Concerns are expressed about conducting a 100-hour review so soon after an earlier audit.

Clarification on Audit Hours

• It is clarified that 100 hours is a maximum estimate for the review, not a guaranteed duration.

• A vote is called due to objections raised by Senator Petty regarding the veterans' audit request.

Voting Process

• A motion is made to proceed with the limited scope audit despite objections; members vote in favor.

• The motion passes, allowing continuation with the limited scope audit for veterans' services.

Recognition and Future Planning

Commendations for Audit Practices

• Chris highlights new report highlights implemented by legislative post-audit staff, which provide concise overviews of audits.

• Recognition is given for audio podcasts related to audits as valuable resources.

Awards Received

• Chris announces that their office received the Excellence in Evaluation Award from NCSL for outstanding evaluation practices in 2026.

• They also received a certificate for impact based on previous IT security audits.

Upcoming Audit Schedule

• An overview is provided regarding upcoming audits and their anticipated release dates, including IT security follow-ups and bilingual funding reviews.

Budget Approval Process

• Details are shared about budget approval steps involving an executive committee before submission to LCC in October.

Future Meeting Considerations

Scheduling Next Meetings

• Discussions occur around scheduling future meetings, particularly concerning budget preparations and potential conflicts due to election season.

Member Availability

• Members discuss personal commitments affecting meeting schedules, aiming for late September or early October dates.

Final Remarks

• The meeting concludes with thanks extended to all participants and acknowledgment of ongoing work within legislative post-audit efforts.