Senate Democrats aim to cut car-tab fees with money meant for at-risk youth

Many Democrats in Washington’s Senate this year have been trying to cut new car-tab fees tied to the Sound Transit 3 construction package without endangering the light rail and bus projects approved by voters in 2016.

During the early-morning hours Thursday, the Senate passed a bill 30-14 that supporters say does just that. Critics object it comes at the expense of at-risk youth.

To keep the budget on Sound Transit 3 intact while offering tax relief, Senate Bill 5955 allows the transit agency to take cash as needed from a dedicated fund for education services in Pierce, King and Snohomish counties focused on homeless youth and children in foster care.

The account was set up as part of the $54 billion transit package approved by voters. It is expected to accrue roughly $518 million over more than 15 years from sales taxes paid on construction by Sound Transit. Raiding the balance would give Sound Transit its largest chunk of money to offset the $780 million for refunds of car tab fees under SB 5955.

Sen. Steve O’Ban, a Tacoma Republican and fierce Sound Transit 3 opponent, has criticized the idea. He said he would like to see greater car-tab relief without offsetting the hit to Sound Transit’s bottom line or taking money away from the education account.

“My friends across the aisle are more interested in protecting Sound Transit than protecting taxpayers and the fund created to help the homeless and kids,” O’Ban said in a statement released in the early-morning hours Thursday.

Some Democrats opposed it, too. Sen. David Frockt, a Seattle Democrat, launched a last-second amendment Wednesday to block Sound Transit from draining the account. It was shot down largely by members of his own party.

Supporters of the measure say opening up the fund, called the Puget Sound Taxpayer Accountability Account, is necessary to ensure the mix of light rail, rapid transit bus lines and other transportation upgrades are completed if car-tab fees are reduced.

“This really threads the needle,” Sen. Steve Hobbs, a Democrat from Lake Stevens, said in an interview with The News Tribune and The Olympian.

Hobbs, who chairs the Senate Transportation Committee, stressed raiding the account is only one of several cost-saving measures in the bill. He also said potential federal cuts to Sound Transit money also are driving an effort to allow the agency to use the education services account if needed.

In defending the move, Hobbs said the need for the educational services is less dire since the Legislature has poured billions into new K-12 spending in the last two years to meet a state Supreme Court order to fully fund public schools.

Much of that money has been booked for the state’s court-ordered requirement to take on the full cost of teacher and other school staff salaries paid in part by local property tax levies.

Hobbs said the “typical voter” likely would be surprised that ST3 taxes are going to education services and would prioritize finishing transportation projects.

Channeling constituents, Hobbs said: “I think these programs are important but that is not why I am paying these taxes. This is not the reason why I voted for Sound Transit.”

Many at the Capitol have been trying to cut car-tab fees since ST3 passed because of backlash over how the agency is valuing vehicles to raise cash.

The current method uses a formula from the 1990s to estimate values. It often overestimates a vehicle’s worth during the first 10 years of its life, inflating fees for some.

While some legislators expected Sound Transit to use a more accurate valuation schedule approved by the Legislature in 2006, Sound Transit planned to use the older method through 2028 when bonds from older transit projects are retired.

Many in the GOP contend Sound Transit misled voters about which valuation schedule would be used, a charge the agency and some Democrats reject.

Overall, the ST3 taxing package is expected to raise about $28 billion in revenue through a combination of increased sales taxes, car-tab fees and property-tax hikes over the next 25 years. It was approved by a majority of voters in its three-county taxing district. In Pierce county, most voted against it.

SB 5955, sponsored by state Sen. Patty Kuderer, D-Bellevue, would replace the older car-tab valuation schedule with the 2006 version and offer a refund for car owners based on what their fees would have been under the newer valuation method.

House Democrats have passed a similar bill, but it comes with none of the measures approved by the Senate aimed at offsetting the financial hit to Sound Transit.

Some Democrats have pushed to not cut car tabs at all.

Sen. Jamie Pedersen, a Seattle Democrat, said in a floor speech on SB 5955 that voters were not misled, and the transit package should move forward as is to offer more transportation choices in the traffic-packed Puget Sound region.

“The voters knew what they were doing, and they voted for these taxes,” Pedersen said.

Whether Democrats can reconcile their differences and pass any car-tab relief by the end of the 60-day legislative session on March 8 is an open question.

Hobbs said House Democrats might try to “protect some of that money” while still cutting car-tab fees, something Hobbs said he opposes unless there is another way for Sound Transit’s budget to remain intact.

“If they do that, it will not pencil out,” Hobbs said.

Rep. Judy Clibborn, a Democrat from Mercer Island who chairs the House Transportation Committee, could not immediately be reached for comment Thursday.

Geoff Patrick, a spokesman for Sound Transit, said the Senate’s bill would still not entirely back fill the lost revenue from the car-tab refund.

That’s becausethe $780 million redirected to car-tab cuts would have been immediate revenue for the agency, while the $518 million in the education account mostly comes years later when Sound Transit is doing more construction, Patrick said.

Patrick said without access to the education fund, the hit to Sound Transit’s bottom line would be roughly $2.2 billion dollars because the agency would have to borrow more. With the money from the account, it would be just a $1.2 billion when factoring in the borrowing.

Patrick said the agency is “grateful” the bill “does partially offset that revenue impact.”

O’Ban, the ST3 critic, argued in a floor speech the Legislature should not authorize Sound Transit to grab money in the education services account, which he said Pierce County is currently planning ways to use.

O’Ban said reducing salaries or cutting costs elsewhere could save the $518 million for the services if need be.

“My guess is they could come up with this money, and they wouldn’t have to raid this fund that is set aside for foster kids,” he said.

This story was originally published March 1, 2018 at 1:17 PM with the headline "Senate Democrats aim to cut car-tab fees with money meant for at-risk youth."