The lawsuit claims that the law that sent Sound Transit 3 to the ballot is unconstitutional because it references an outdated formula for calculating car tab fees.
Seven Puget Sound-region residents have filed a class-action lawsuit alleging that Sound Transit’s collection of car-tab taxes is unauthorized because the law passed in 2015 that let the agency send Sound Transit 3 to the ballot is unconstitutional.
The seven residents want Sound Transit to pay back $240 million in car-tab revenue the agency has collected since early last year.
The lawsuit, filed in Pierce County Superior Court on Tuesday, is the latest foray in a long-simmering battle over how Sound Transit collects car-tab taxes. The agency uses an outdated formula, inherited from the Legislature, to estimate a car’s value for the purposes of collecting taxes. The formula inflates newer cars’ values, relative to Kelley Blue Book values, resulting in higher car-tab fees.
Despite bipartisan support, the Legislature has repeatedly failed to pass bills that would correct the formula. Last fall, a Republican-led state Senate committee investigated Sound Transit’s actions, focusing, in part, on the same legal issue raised by the lawsuit.
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The lawsuit hinges on the 2015 law and the circuitous, convoluted legislative and judicial history behind how car-tab taxes are levied.
Responding to the lawsuit, a spokesman for Sound Transit issued an emailed statement late Tuesday.
“We are confident in the validity of the law and will be reviewing and responding to the lawsuit,” the spokesman, Geoff Patrick, wrote. “Any reduction of MVET [motor vehicle excise tax] revenues would delay or kill voter-approved transit alternatives.”
Washington developed a formula for estimating a car’s value for tax purposes in 1990. That inflated formula has technically been replaced but, in practice, is still in use today.
The Legislature replaced the inflated formula with a more accurate formula in 2006. But, because Sound Transit had already sold bonds based on the tax rate and the inflated formula, it will continue to use the old formula until the bonds are paid off in 2028.
When the Legislature authorized sending Sound Transit 3 to the ballot, the law they wrote specifically said the old formula would be used until the bonds were paid off. It did so by referencing an overturned section of law, the state code “as it existed on Jan. 1, 1996.”
The lawsuit says this makes the law unconstitutional, and means Sound Transit can’t collect those car-tab taxes.
“The schedule in place on that date had been repealed and was not in force in 2015,” said state Sen. Phil Fortunato, a supporter of the lawsuit, in a prepared statement. Fortunato, R-Auburn, does not live in the Sound Transit district and is not a party to the lawsuit, but said he recruited the lawyers — Joel Ard and David DeWolf — who filed the lawsuit.