Voters in Washington who nearly a year ago OK’d a measure to cut car-tab fees won’t see that tax cut after all. Government budget writers and people who rely on transit, meanwhile, may be breathing a sigh of relief.

The Washington Supreme Court on Thursday struck down Initiative 976, ruling the measure was unconstitutional because it contained too many subjects and its title misled voters. 

The initiative attempted to lower many state vehicle-registration fees to $30, repeal local car-tab taxes and roll back Sound Transit’s car-tab taxes. Longtime anti-tax activist Tim Eyman sponsored the initiative last year, saying voters were fed up with car-tab taxes, which vary based on each vehicle and where in the state a driver lives.

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The initiative would have had major implications for city and state governments who use the fees to fund road and transit projects, and for people who rely on transit. Seattle, King County and others sued to block the measure. 

The high court’s ruling comes as Seattle officials attempt to plug a revenue hole due to the pandemic and the state faces a projected shortfall of about $4.2 billion through 2023

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Seattle politicians praised the court’s decision Thursday, with some indicating they may soon consider new car-tab fees here.

In Olympia, Eyman railed against the ruling Thursday, saying the justices were ignoring the will of the voters, and some Republican lawmakers pledged to propose their own tax-cutting bills. 

“If the voters vote for it, whether it’s a liberal initiative or a conservative initiative, they ought to have that right respected,” Eyman said. “I’d like to think that you would have extra respect for an initiative that wasn’t a fluke, that passes three different times.”

Latest defeat of car-tab tax cut

Eyman twice before led successful car-tab initiatives, only to have them fully or partially struck down in court later. 

In their decision Thursday, Supreme Court justices said I-976’s ballot title was “deceptive and misleading” by promising to lower car-tab taxes “except voter-approved charges” while also rolling back taxes voters had previously approved, the court found.

In 2014, Seattle voters approved a $60 car-tab fee to fund bus service, but the initiative would have stripped cities of their authority to impose that type of local car-tab tax.

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The measure also contained multiple subjects, in violation of the state Constitution, the justices found. 

The decision was nearly unanimous. Justice Steven González wrote the opinion and seven other justices signed on. Justice Barbara Madsen agreed I-976 was unconstitutional but disagreed that its ballot title unconstitutionally misled voters.

The decision means state and local car-tab taxes can remain at their current levels.

Most car-tab charges in Washington are flat fees. 

Vehicle owners pay a basic fee of $43.25, plus an additional $25 to $72 based on the weight of their vehicle and any additional local or regional taxes.

Sound Transit uses a formula to charge its car-tab taxes based on the vehicle’s value. 

Those fees drew fresh anger in recent years because a formula long used by the agency inflates vehicle values compared to the commonly used Kelley Blue Book. After voters in 2016 approved a measure to increase those fees and expand light rail, some drivers had sticker shock. Only vehicle owners in the Sound Transit taxing area, which covers parts of King, Pierce and Snohomish counties, pay Sound Transit car-tab taxes. 

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I-976 passed in 2019 with about 53% of the vote statewide. Most voters in Sound Transit’s taxing district rejected it. Voters in Snohomish and Pierce counties supported the tax cut, while voters in King County rejected it. 

In statements Thursday, Seattle Mayor Jenny Durkan, City Council members and transit advocates celebrated the ruling.

“Vehicle license fees are a key tool that funds transit and key safety and maintenance projects including our pothole budget,” Durkan said in a statement. “With the Seattle Department of Transportation facing significant budget challenges in the current economic landscape, this decision will help our City with needed resources to keep our residents and workers moving as we recover from the pandemic.”

Car-tab debate will return to Olympia

Eyman declared Thursday he would continue to refuse to renew his own expired car tabs — and might someday put forth another initiative.

He waved around a 20-year-old Seattle Times story that quoted then-Gov. Gary Locke calling for lawmakers to act in a special session on car-tab reform after a King County court ruled on Eyman’s first version of the measure, Initiative 695.

Eyman and Rep. Jim Walsh, R-Aberdeen, both called on Gov. Jay Inslee to call a special legislative session to implement voters’ wishes.

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“I think the weight is on the Legislature and the executive now to act,” said Walsh, who called on lawmakers to bring themselves into a special legislative session if the governor wouldn’t do so.

Sen. Steve O’Ban, R-University Place, said he plans to introduce legislation to “make $30 car tabs a reality,” despite the court ruling. Republicans were unable to pass similar proposals in the last legislative session.

Inslee this year has resisted calls by Republicans and some Democrats to bring lawmakers back to Olympia to work on issues related to the coronavirus pandemic.

The governor said in public remarks Thursday that he is open to changes on the state’s portion of car tabs, according to Inslee spokeswoman Tara Lee.

Those remarks “did not address special session,” wrote Lee, but “my understanding was that would be when the Legislature convenes in January” for its regularly scheduled business.

The court ruling will help with concerns about the state transportation budget when lawmakers return to Olympia in January for their regularly scheduled legislative session, said Sen. Steve Hobbs, D-Lake Stevens.

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Hobbs — who chairs the Senate Transportation Committee — said he was relieved that cuts to paratransit due to the initiative won’t come to pass.

“There’s a lot of folks out there that really rely on this special-needs transit,” he said.

But lawmakers must still contend with a drop in transportation revenue due to the coronavirus pandemic, said Hobbs, and lawmakers still might want to consider voters’ wishes on car tabs.

“I think it’s fair to say that in the future, whether it’s a local municipality or the Legislature, we take a good hard look” at car tabs, he said, “because the public doesn’t like it.”

Eyman also ran an unsuccessful campaign for governor this year and is mired in a long-running campaign-finance lawsuit. 

A Thurston County Superior Court judge ruled in February that Eyman was in violation of state campaign-finance laws for at least seven years and concealed nearly $800,000 in political contributions. A trial on the full case against Eyman was expected this fall. 

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After I-976 passed, the state set aside its portion of car-tab tax money in case the measure was upheld, according to Inslee’s office. Seattle collected but didn’t spend its car-tab revenue after the initiative passed, said Seattle Department of Transportation spokesperson Dawn Schellenberg.

Seattle could consider new car-tab fees

In Seattle, where voters rejected I-976, the ruling clears the way for politicians to consider new car-tab fees. 

Today, Seattle charges a $20 car-tab fee for pothole repair and other basic projects. Another $60 fee funds bus service on routes serving Seattle. 

That $60 fee will expire at the end of this year. Under state law, the city could increase its $20 fee to $40 and then, once that had been in place for two years, increase it again to $50. 

City Hall has a long list of possible uses for new revenue, including transit service to address the closure of the West Seattle Bridge. A recent audit report found the city’s spending on bridge maintenance is inadequate.

Asked Thursday whether the City Council should pass a new car-tab fee, Councilmember Alex Pedersen, who chairs the council’s transportation committee, said in an email, “I would personally lean toward that option and look forward to working with my colleagues and our Seattle Department of Transportation on specifics once we have a fuller picture of total revenues.”

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A representative for Councilmember Teresa Mosqueda, who chairs the budget committee, said her office was still looking into possible effects on the city budget.

The ruling doesn’t affect Sound Transit much because agency leaders have continued to finance projects based on the full amount of car-tax revenues, said Claudia Balducci, chairperson of the regional agency’s System Expansion Committee.  

Sound Transit leaders believe I-976 wasn’t a threat because they already sold construction bonds against the car-tab income and the Eyman measure didn’t impose a deadline to retire transit-agency debts. 

However, Sound Transit did delay certain contracts and planning for one year when the COVID-19 recession threatened long-term revenues.

If the Legislature were to impose I-976 cuts, losses could total $7 billion from 2021 to 2041, the agency estimated.

“I have always questioned why it was fair and OK for our [whole] state to roll back the taxes that the region voted for itself,” Balducci said.

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King County has considered car-tab taxes for more buses, but didn’t reach the ballot this November.

Balducci said she’s reluctant to propose those until ridership improves. As of early October, passengers counts were only 35% of normal, state data show.

This story has been updated to include information about how the justices voted.