Sound Transit will continue to collect car-tab taxes but avoid suing to overturn Tim Eyman’s tax-cutting Initiative 976, approved by voters statewide this month.
That strategy emerged from a transit-board meeting Thursday in which Eyman said he will run for governor against Democratic incumbent Jay Inslee, only to have the microphone cut off by transit-board Chairman John Marchione, who cited a board rule against campaign speeches in public-comment sessions.
Vehicle owners will see the “RTA Excise Tax” for Sound Transit listed on their car-tab bills in the mail, even after most of I-976 takes effect Dec. 5. Any potential changes to the regional transportation authority tax “are not yet effective,” the state Department of Licensing said in an online fact sheet.
Marchione emphasized that 53% of voters within the transit district sided for keeping the car-tab taxes and against I-976. That followed 54% district support in the Sound Transit 3 (ST3) balloting in 2016 to impose the tax increase.
“They were responding to the fact that rapid growth of congestion has wreaked havoc and a heavy toll on people’s lives,” said Marchione, the mayor of Redmond where light-rail is due downtown by 2024.
“Congestion affects where people live and work, it affects equity, if affects how much time they can spend with their kids,” he said. “It undermines the region’s economic health. It spews pollution that fouls our air and warms our planet, but we’re already making a difference at Sound Transit as we move 160,000 riders a day.”
Unlike King County voters, majorities in both Snohomish and Pierce counties supported the Eyman initiative, including many precincts within Sound Transit’s territory.
Despite the nondecision Thursday, reached following a closed executive session, basic outlines of Sound Transit’s strategy emerged from open-session remarks by Marchione and chief counsel Desmond Brown.
Cities and counties, including Seattle, have already sued to challenge I-976, claiming it’s a “poorly drafted hodgepodge that violates multiple provisions of the Constitution,” including a ban on multiple-subject initiatives.
They’ve sought an injunction to block I-976 before Dec. 5, when much of the initiative is expected to go into effect.
If the measure takes effect in full, it would cut state funding for multimodal projects, ferries and state troopers; revoke city car-tab fees such as the $80 in Seattle for added bus service and roadwork; and remove 11% of Sound Transit’s roughly $2 billion yearly income.
But Sound Transit taxes can continue past Dec. 5, so there’s no rush to sue, Brown said. That’s because I-976 didn’t set a deadline to pay off some $2.3 billion in current debt early, he said, a move also known as “defeasing” the bonds.
The agency has entered bond contracts to pay for light rail, commuter train and express bus stations.
Sound Transit sold $400 million in new bonds, titled “Sales Tax and Motor Vehicle Excise Tax Bonds,” in December 2016 at a top AAA credit rating and 5 percent interest. The first page specifically pledges “taxes approved by voters on November 8, 2016” as security.
On the other hand, Sound Transit cautioned investors in 2016 that “a sponsor of an earlier initiative has stated that he may file another initiative in connection with Sound Transit 3.”
Sound Transit that fall also signed a separate $2.9 billion credit agreement with the Federal Transit Administration, in which all transit taxes including car-tab taxes are a repayment source.
If the city-county lawsuit fails to overturn I-976, the transit agency could defend its car-tax stream later in court, based on court rulings that protect contracts, Brown said.
That worked after Eyman’s I-776 in 2002, another statewide measure to cut car-tab fees to $30. The state Supreme Court agreed bond contracts signed in 1999 allowed the agency to collect the taxes until 2028 when those bonds expired.
In addition, Brown said, based on case law the state can’t force a local government like Sound Transit to go deeper into debt to raise money to pay off bondholders early.
Financing the entire voter-approved Sound Transit program, including 116 miles of light rail, without the car-tab taxes would add $25 billion in finance costs through 2061, Chief Financial Officer Tracy Butler said.
The 2016 car-tax increase raised the rate from $30 to $110 per $10,000 in vehicle value, which provoked outrage as car and truck owners received sudden increases in the mail — often hundreds of dollars higher. ST3, including property and sales taxes, cost about $326 per year for a median household.
The agency collects taxes based on an inflated depreciation schedule, allowed by the Legislature, that values cars at up to 40% above Kelley Blue Book or market values.
Pierce County Executive Bruce Dammeier, who supports tax relief, guessed that public frustration about overvalues, by itself, caused a 5% to 10% boost for Eyman’s measure.
“We have to get that issue resolved. That is issue number one,” he said.
I-976 also loomed over a Senate Transportation Committee on Wednesday. Lawmakers reviewed revenue cuts to state accounts, most significantly the multimodal account, which can fund transit.
Although Seattle, King County and others are asking a judge to halt I-976 while their legal challenge plays out, a top lawmaker plans to propose budget cuts.
“My intention is to do the cuts regardless of what happens, because you don’t know what’s going to happen,” said Senate Transportation Committee Chairman Steve Hobbs, D-Lake Stevens. “I’d rather just get ahead of the game on this one … Our job is to balance the budget and that’s what we’re going to try to do.”
Snohomish County Executive Dave Somers, who promised light rail to Paine Field and Everett by 2036, admitted he’s torn between that goal and the voter mandate to reduce car-tab taxes.
“I feel obligated to deliver the ST3 package at some point,” he said. To get the job done may require other sources than high car tabs, he said, which in turn requires help from the Legislature.
For now, drivers whose vehicle registrations renew on or after Dec. 5 will see a tax cut — unless a rapid court ruling blocks I-976. They don’t have to pay city transportation-benefit district fees ranging from $20 to $80, such as Seattle’s voter-approved charges for extra bus service.
Snowmobile and electric-car fees are lowered to $30. However, a recent $75 fee for both hybrid and electric cars remains, as the Legislature passed those after Eyman filed I-976.
Certain filing and service fees will stay on the books, so the lowest possible car-tab bill somebody pays is $43.25.
What about drivers who already paid higher car-tab fees ahead of time, for renewal dates after Dec. 5? The licensing department says it’s developing a refund process and will contact those car and truck owners.
Staff writer Heidi Groover contributed to this article.