The first thing you are going to do is add an extra 2 inches to the top of your pattern....(or you can make your own pattern by tracing a pair of capris you already have.)
You then fold over the top and make the casing as the pattern suggests. You will just have an extra 1 or 1 1/2 inches at the top to gather into a cute ruffle above the casing--the paper bag part.
Here's what they will look like when you are done. I made a drawstring in the casing in this pair, but I've also made them with elastic in the casing and then sewn on a bow later. Like I did HERE for the clam diggers.