Sound Transit said that immediately changing the way it calculates car-tab taxes would cost $6 billion in revenue, but it nonetheless passed a symbolic motion Thursday instructing its CEO to keep working with a Legislature anxious to make changes.
The $6 billion figure, which was shared with legislators last week, represents Sound Transit’s estimate of what it would cost to immediately switch to a more modest, but more accurate, system of estimating a car’s value for tax purposes.
The agency has long used an inflated car-valuation formula that it inherited from the Legislature in the 1990s. Lawmakers changed the formula in 2006, but because Sound Transit had already sold bonds based on the old formula, it continued to use it, and will, barring any changes, keep using it until 2029, when those bonds are paid off.
Using the old, inflated valuation formula largely means that people with newer, more expensive cars have higher car-tab fees than they would otherwise.
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Last fall’s passage of Sound Transit 3 didn’t change anything about the valuation system, but it did more than triple the car-tab tax — part of a series of tax increases to pay for expanded bus and light and commuter rail — which brought new attention to the old valuation formula.
The revenue estimate shared with legislators contains few details or calculations, but Sound Transit said most of the cost would come from higher debt service and borrowing costs associated with the change.
If Sound Transit were to immediately defease — basically repay — its old bonds, it said that would be a direct $2 billion blow to its revenue. Because of a 2002 Tim Eyman-backed initiative, once those old bonds are repaid, Sound Transit must stop collecting the 0.3 percent car-tab tax that was part of the 1996 Sound Move initiative. The remaining ST3 car-tab tax, 0.8 percent of a car’s value, would be applied to the newer, more modest valuation formula, resulting in less revenue.
The bigger blow, Sound Transit said, would come from debt-service costs related to repaying the bonds and borrowing to make up for the lost revenue. That, combined with possible costs from impacts to the agency’s federal loans and credit rating, would cost $4 billion, Sound Transit said.
The conservative Washington Policy Center estimated that switching to the newer, more modest formula would cost Sound Transit $1.6 billion, although it did not account for borrowing and debt costs.
Still, Sound Transit is facing increasing pressure from legislators of both parties related to the car-tab taxes.
Nearly 20 bills have been proposed this spring targeting the transit agency, although most stand little chance of passage.
Sound Transit CEO Peter Rogoff has been to Olympia twice in the last several weeks to meet with lawmakers about car-tab taxes.
On Thursday, the Sound Transit board passed a motion authorizing Rogoff to continue meeting with the Legislature “to pursue options to address public concerns,” while keeping in mind that the agency’s priorities are to deliver its voter-approved projects and keep its commitments to bondholders.
The motion was symbolic. Nothing had prevented Rogoff from continuing to meet with the Legislature.
“It is showing that we, as a board, do take the concerns seriously, and we do want to act and we do want to talk to our partners in Olympia,” said Tacoma Mayor Marilyn Strickland, the board’s vice chairwoman.