A day after Washington voters approved Initiative 976, which cuts car-tab taxes, details began to emerge about how local leaders will respond.
First up: Lawsuits.
King County Executive Dow Constantine said Wednesday he had asked the county Prosecuting Attorney’s Office to “prepare a lawsuit to challenge the constitutionality of I-976.”
Seattle Mayor Jenny Durkan’s office called the measure “unconstitutional” and said “the city will pursue litigation to block” it. The city and county did not share details of their legal argument.
Sound Transit Board Chair John Marchione said that agency is likely to sue, too. The strongest legal argument, he believes, will be that the agency’s bond contracts, to borrow money for construction, pledge the car-tab tax income as a source of funds to repay investors.
I-976 aims to reduce the various car-tab taxes across the state to a flat $30 and repeal city authority to charge car-tab fees for local transportation projects. It also attempts to roll back car-tab taxes used by Sound Transit. Most of the initiative would take effect on Dec. 5.
The measure was leading with about 55% of the vote Wednesday, and the opposition campaign said “the indication right now is that I-976 will pass.” Gov. Jay Inslee said Wednesday evening he directed the state transportation department to “postpone projects not yet underway” and asked other agencies to “defer non-essential spending as we review impacts” of I-976.
The measure was sponsored by Tim Eyman, a longtime anti-tax activist who faces a campaign-finance lawsuit brought by the state attorney general. Eyman found support for the measure among voters angry about increasing vehicle-registration costs or the way some of those taxes are calculated.
Drivers across the state pay flat car-tab fees levied by the state and some cities. In parts of King, Pierce and Snohomish counties, voter-approved taxes mean even higher car-tab costs to fund Sound Transit light-rail construction.
The formula used to calculate those taxes overvalues many vehicles compared to the commonly used Kelley Blue Book, angering some vehicle owners. State lawmakers considered changing the formula for several years, but didn’t.
“Suing the voters because you don’t like how the voters voted on Election Day is pretty arrogant stuff,” Eyman said. “That kind of attitude is why the initiative passed.”
On Wednesday, officials were discussing how they might respond to budget cuts.
“It is still too soon to say how the initiative’s effects will be felt by the traveling public,” said Washington State Department of Transportation (WSDOT) spokeswoman Kris Rietmann Abrudan in a prepared statement. But the expected funding cuts would be a “significant loss,” she said.
In the next two years, state accounts that fund WSDOT would lose about $451 million out of a $6.7 billion biennial budget, according to WSDOT.
Seattle City Council members, currently in the middle of crafting their 2020 budget, are still mulling over how they could replace about $33 million of city car-tab dollars that currently fund road maintenance and King County Metro bus service. That funding is expected to be wiped out by the initiative.
Seattle City Councilmember Lisa Herbold floated the idea of using money from a proposed new tax on Uber and Lyft rides to replace the lost car-tab money.
Metro cuts could materialize by next spring, or the agency could find temporary fixes.
“It’s hard to know for sure what we’re going to be doing, but we are going to be making cuts,” said King County Councilmember Jeanne Kohl-Welles.
To avoid cuts, Metro could reshuffle money, prepare a new tax package for voters or both.
Constantine said Wednesday there are “ongoing conversations about the possible use of onetime funding as a bridge until the Legislature acts or a replacement revenue package is presented to voters.”
Seattle car-tab fees and sales taxes that help fund Metro were already set to expire at the end of next year, but officials hadn’t indicated how they planned to craft a replacement. They could seek sales-tax increases from city or county voters.
Sound Transit hasn’t chosen its path forward yet, but Marchione said the agency is likely to sue to defend its car-tab tax revenues, which currently make up about 11% of annual income.
Marchione said the 18-member board will receive financial and legal briefings from staff Nov. 21.
Sound Transit successfully defended its car-tax revenue from an Eyman initiative, I-776, that statewide voters passed in 2002.
The state Supreme Court ruled the agency could continue collecting $30 a year per $10,000 of car value until 2028 despite the vote. Sound Transit had already sold construction bonds in 1999 that were to be repaid in part by car-tab revenue, and justices agreed with transit attorneys that bond contracts trumped I-776.
The counterargument is that plenty of other money flows into Sound Transit, which could retire or “defease” the bonds by cutting other spending, and still satisfy investor contracts. This would, of course, siphon cash from future projects, such as voter-approved tracks to Everett by 2036, or boost borrowing costs by millions or billions of dollars.
“Defeasement of bonds is irresponsible; it would delay the program and increase the cost of the projects dramatically,” Marchione said.
Another question is whether the cut would really be as deep as Sound Transit claims, even if I-976 prevails. The initiative text says that of the $110 per $10,000 of vehicle value that Sound Transit collects, the first $30 will remain due to the Supreme Court case, and that the agency may also keep collecting the next $20.
Sound Transit has already awarded construction contracts to build three lines by 2024 — to downtown Lynnwood, to downtown Redmond and to the Federal Way Transit Center. Marchione signaled those remain full speed ahead. The eight-mile Northgate-to-Lynnwood line, for around $3 billion, is actually a Sound Transit 2 project passed in 2008, while the other two lines were approved in Sound Transit 3 in 2016.
“Any project that we have construction projects for, needs to go ahead and be completed, otherwise they’ll be very expensive,” he said. It’s the next wave of projects that are at risk, he said.
But Pierce County Executive Bruce Dammeier, who is on the transit board, has gone against the flow consistently since 2017, by insisting that vehicle owners deserve relief. The 2016 Sound Transit 3 measure failed in Pierce County.
“We’ve been trying to get Sound Transit and Olympia to listen to us about car tabs, and we hope they finally get the message,” Dammeier said Wednesday. He said officials brought the situation on themselves by allowing public frustration to fester.
“If there’s a motion before the board to authorize a lawsuit against this, I will oppose it.”
Dammeier said he believes the agency can comply with I-976 and keep its promise to build light rail from Federal Way to Tacoma by 2030, if leaders strive enough.
If the agency can’t do both, he said, the public frustrations are high enough Pierce County should leave the Sound Transit district.
“If I had my preference today, I would dedicate the (I-5) HOV lane to buses, and get truly quick transit to Seattle tomorrow, and save the cost.”