Latest Eyman initiative cuts cost of car tabs but hits transportation projects statewide

Initiative 976, which is on the Nov. 5 statewide ballot, would reduce or remove the authority of state and local governments to charge several motor vehicle taxes and fees that pay for transportation projects.

Anti-tax activist Tim Eyman led the effort that collected enough signatures of registered voters to present the initiative to the Legislature. Lawmakers this year did not take action on it, and so the initiative was placed on the general election ballot.

If approved, I-976 would cap annual state and local car tab fees at $30, unless voters approve a different amount in the future. The base annual car tab ranges from $30 to $93 for most passenger vehicles, but increases as state and local governments add to those amounts, according to a summary of the ballot measure by the Attorney General’s Office.

The initiative would eliminate the additional fee the state charges based on the weight of a vehicle, which can range from $25 to $65. I-976 also would bar local governments from tacking on car tab fees through transportation benefit districts. Currently, 61 cities including Tacoma, Bellingham, and Olympia raise revenue that way to help pay for transportation projects. Also, the initiative would eliminate the excise tax the state charges when vehicles are sold or leased.

I-976 would require Sound Transit to refinance or retire bonds — funded through the charge of a motor vehicle excise tax, referred to as an MVET — “if the bond contracts allow such action.” The MVET and a sales tax on rental cars then would be repealed.

If Sound Transit’s MVET-backed bonds can’t be refinanced or paid back by March 31, 2020, any existing voter-approved MVETs would remain unchanged and the maximum rate of future ones would be reduced from 0.8 per cent to 0.2 per cent, according to the attorney general’s summary.

The ballot measure also would require Sound Transit to use a valuation schedule for the MVET based on the Kelley Blue Book. That would scrap the transit agency’s use of an inflated valuation formula for vehicles that pumps more money into Sound Transit’s coffers.

If a majority votes “yes” to enact I-976 into law, revenue to local governments would decline by $2.3 billion in the next six years, according to the state Office of Financial Management. OFM’s nonpartisan staff provides fiscal services and policy support to the governor, Legislature and state agencies. The state’s revenue would drop by $1.9 billion for transportation projects in the same period, OFM said.

Affected state projects

Keep Washington Rolling, the ballot committee opposing the initiative, said I-976 puts several projects “in danger of never being completed” from the transportation package that the Legislature approved in 2015.

Those projects include:

State Route 167/State Route 509 Puget Sound Gateway.

Completion of widening over I-90/Snoqualmie Pass from Hyak to Easton

The North/South freeway/U.S. 395 project in Spokane.

Widening of I-405 between Renton and Bellevue.

Improvements to State Route 520 between Lake Washington and Interstate 5.

Other projects that are in danger if I-976 is approved include $1.3 billion in ferry vessel improvements through 2031, Amtrak service linking western Washington with British Columbia and Oregon and freight rail work, such as new bridges, sidings and better port roads, according to Keep Washington Rolling.

I-976 puts at least $20 billion through 2041 at risk for Sound Transit’s light rail expansion, bus rapid transit and commuter rail in King, Pierce and Snohomish counties, according to spokesman Geoff Patrick. That consists of $6.9 billion in lower MVET revenue and $13 billion in higher borrowing costs in part to replace those funds.

Voters approved Sound Transit 3 — the third in a series of transit packages — in 2016 with 54 percent of the vote in a taxing district that includes Pierce, King and Snohomish counties. Most Pierce County voters said no to the package, but it carried in King and Snohomish.

The measure called for a $54 billion transit expansion consisting of 62 miles of new light rail, along with new commuter rail and bus lines, by 2041. In addition to tripling the car-tab tax, the package included property and sales-tax increases in the urban areas of King, Pierce and Snohomish counties.

Eyman said the car-tab tax increase for Sound Transit 3 and how vehicles are valued has “ripped off” taxpayers.

“I-976 is a do-over for voters now that we know the truth. Getting rid of their dishonest vehicle tax gives back $7 billion to taxpayers,” he said.

Reduced money for cities

The initiative would eliminate about $60 million per year that 61 cities generate through car-tab fees to pay for road construction, maintenance and local transit service. The fee is charged through city transportation benefit districts. They include Olympia, which charges a $40 car tab; University Place ($35), Prosser ($25) and Tacoma, Lakewood and Richland — all of which charge $20.

Tacoma Mayor Victoria Woodards and the City Manager’s Office have asked the City Council to approve a resolution opposing I-976.

The city’s Public Works Department said if I-976 is approved, revenue would decline by $2.9 million per year, and the city might not be able to do 40 blocks of chip seal annually, 40 blocks of street repaving and 100 accessible curb ramps.

Olympia’s City Council has scheduled a public hearing on Oct. 8 and is expected to take a position on the initiative after hearing from the public.

The car-tab fee charged through the city’s transportation benefit district generates about $1.5 million per year for street repaving and repair, said Mark Russell, the city’s deputy public works director. The total budget for that work is $3.75 million, with the remainder coming from grants, gas taxes and a real estate excise tax.

The city should be spending about $7 million a year for street repaving and repair to deal with a backlog of projects, Russell recently told the transportation benefit district board.

For Prosser, a city of about 6,100 along the Yakima River in Benton County, losing the authority to charge a car-tab fee would mean it couldn’t do six maintenance and repaving projects totaling $687,000 through 2025, said city Finance Director Toni Yost. The fee generated $97,000 last year.

“Without those funds, we’d be at a loss. The TBD funds were a great way for us to actually address some of these (projects) that we weren’t able to do. So we worked really hard to be transparent with our community on what projects we’re doing and why,” Yost said.

Bellingham also has a transportation benefit district, but it would not lose revenue if I-976 is approved because it receives about $6.5 million per year from a sales tax. The funds are used to maintain arterial streets, which carry traffic from roadways to highways, and for bicycle and pedestrian projects.

“If you have cars coming from Canada into the city of Bellingham, affecting our transportation network and spending money in the city, that helps spread the cost of supporting that transportation system to those outside the city or the country,” said Eric Johnston, the city’s interim public works director.

Transit impacts

Transit agencies around the state are worried about a account that would see a $1.5 billion decline in revenue over the next six years if voters approve I-976.

In the state’s two-year budget, about $500 million is expected to flow into the multi-modal account. Transit agencies are expected to receive about $240 million, but part or all of that funding is potentially affected if I-976 becomes law, said Justin Leighton, executive director of the Washington State Transit Association.

“It’s tough to talk about because the state can’t talk about what will be cut. But everybody should do this — you plan for the worst and hope for the best,” Leighton said.

Pierce Transit’s funding potentially would get hit twice if voters approve I-976 — by reductions in revenue to the state and to Sound Transit, spokeswoman Rebecca Japhet said.

State grants to Pierce Transit that might be affected include:

$15 million for the bus rapid transit system between downtown Tacoma and Spanaway and $4.2 million for stations.

$4 million for a new park and ride/bus turnaround in Spanaway.

About $2 million per year to help the agency provide paratransit service for people whose disability prevents them from riding fixed route buses.

In addition to state funding, the Sound Transit 3 package included $60 million for Pierce Transit’s bus rapid transit project, which is projected to cost $150 million.

“If funding for Sound Transit is impacted, there’s a chance this funding would be impacted as well,” Japhet said.

State Rep. Jake Fey, the Tacoma Democrat who is chairman of the House Transportation Committee, said the biggest misunderstanding about I-976 is that it’s solely about Sound Transit’s MVET.

“Yes, it is about Sound Transit, but it’s about the state transportation budget. It’s about revenues to help keep roads maintained on the local level. People think it’s all about reducing their costs for Sound Transit. It’s far beyond that ...This initiative was written to do things in a broad fashion that has substantial consequences,” Fey said.

Eyman said “surplus tax revenue” — a reference to projections that the state’s “rainy day” account and reserves will total $3 billion by the end of this two-year budget — is “more than enough to easily back fill any affected government program.”

State government taps those funds during economic downturns to help maintain state services or respond to catastrophes.

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James Drew covers the state Legislature and state government for McClatchy’s Washington papers: The News Tribune, The Olympian, The Bellingham Herald and The Tri-City Herald.