Lawmakers renew attempt to reform Sound Transit car taxes

OLYMPIA — Lawmakers are talking again about reducing the motor vehicle excise tax that helps fund Sound Transit expansion.

But leaders of the regional transit authority are cautioning, again, against leaving them without an adequate stream of dollars to build promised light rail projects.

It’s a familiar discourse. The past three legislative sessions ended without lawmakers doing anything to provide a modicum of financial relief for vehicle owners.

This session may bring a different conclusion, thanks to passage of Initiative 976.

Voters across the state revealed their frustration with the cost of car tabs. While the measure failed within the Sound Transit boundaries in Snohomish, Pierce and King counties, it enjoyed strong support in many of the taxing district’s cities, including Everett.

A bill introduced last week by Sen. Marko Liias, D-Lynnwood, requires the regional transit authority to stop using a 199os depreciation schedule to calculate the motor vehicle excise tax (MVET) on vehicle registration and switch to a schedule adopted by lawmakers in 2006.

The newer depreciation schedule better reflects a car’s actual value, and the change would result in a little savings for vehicle owners when they renew their car tabs. Senate Bill 6606 also revises the depreciation schedule to ensure older cars are not overvalued. It also retains the existing 1.1% excise tax rate by erasing language in the initiative to repeal the tax rate.

Sound Transit already must switch depreciation schedules in 2028, when bonds sold in the 1990s for the agency’s initial construction are paid off. The proposed legislation would make it happen much sooner — this year.

Liias said he didn’t expect pushback from Sound Transit directors, citing their comments in December urging lawmakers to make reforms to assuage taxpayer concern.

“We’re addressing the unfairness in the valuation schedule and keeping faith with the voters who want light rail,” he said.

Sound Transit leaders are concerned, however.

The bill will reduce collections by an estimated $1.0 billion, said agency spokesman Geoff Patrick. The overall impact would be in the neighborhood of $2.9 billion because of anticipated financing costs associated with borrowing money to cover the gap, he said.

“The core concern of Sound Transit is our ability to complete voter-approved projects on the timelines committed to voters,” Patrick said. “Our board continues to want any changes to be revenue-neutral, either offset by reducing costs that Sound Transit would incur or provide other revenues to offset the anticipated loss of collections. Our board is very interested in working with legislators.”

There are detractors in the Legislature, too.

“This bill should be called the ‘Thumb Our Noses at the Taxpayer Act’ or the ‘Sound Transit Dream Bill.’ I can’t decide which, but both are accurate,” Sen. Steve O’Ban, R-University Place, said in a statement Friday.

O’Ban criticized the bill for not doing more to reflect the will of the voters. Specifically, he decried the failure to switch to use of Kelley Blue Book values to figure the MVET, as prescribed in the initiative.

Liias’s bill will receive a hearing soon in the Senate Transportation Committee.

“It looks like a good candidate to come out” of committee, said Sen. Steve Hobbs, D-Lake Stevens, the panel’s chairman.

To get it through the Legislature won’t be easy. It will require a two-thirds majority in both chambers because it would revise content in Initiative 976.

“Everybody wants to do something. It shouldn’t be a problem,” Hobbs said optimistically.

Sen. Curtis King, R-Yakima, the committee’s ranking Republican, said “there’s a chance that it could happen. I can’t speak for my caucus. I think they’ll listen.”

Anger with the motor vehicle excise tax stems from the 2016 passage of Sound Transit 3, a 25-year, $54 billion expansion.

It hiked the MVET from 0.3% to 1.1%. When the increase took effect in March 2017, the cost of car tabs surged and caught many vehicle owners unaware.

Frustration further soared as it became widely understood that the taxes are calculated using a a 1990s depreciation schedule which overvalues newer vehicles, thus leading to higher payments for the annual registration.

That schedule is tied to the manufacturer’s suggested retail price and shows a car’s value dips only 5% or 6% a year. The 2006 schedule used in Liias’s bill shows a car loses 19% of its value after one year, 55% after five years.

Switching to the 2006 schedule is not a new idea.

“My bill fixing the valuation has been passed three times by the House,” said Rep. Mike Pellicciotti, D-Federal Way. “I’ve truly been focused on getting the schedule fixed and ensuring people are not paying inflated values for their vehicle.”

His successes came in the 2017 and 2018 sessions.

In 2018, legislative staff compiled examples of how car tab costs might change. Projected savings from switching to the 2006 schedule ranged from $13 on a 2009 Volkswagen Jetta to $53 for a 2016 Toyota Prius to $83 on a 2018 Tesla Model S, according to the analysis.

The 2019 version, House Bill 2123, did not emerge from the House Transportation Committee. It’s not clear if it will be revived this session or if the Senate bill will become a potential vehicle for the reform.

“I hope we get something,” Pellicciotti said.

Part of the reason for the past failures was political differences between the chambers and partly it was the difficulty of finding a revenue-neutral solution.

Rep. Jake Fey, D-Tacoma, chairman of the House Transportation Committee, said the latter problem isn’t resolved in the Senate bill.

“There’s more work to be done,” he said.

This story has been modified to update figures for the change in Sound Transit collections and the necessary borrowing costs under the proposed plan.

Jerry Cornfield: 360-352-8623; jcornfield@herald net.com. Twitter: @dospueblos.