OLYMPIA — Democratic and Republican lawmakers are pushing drastically different responses to ease consumers’ fury at the surging cost of car tab fees to help pay for the latest voter-approved expansion of Sound Transit.
Both of their approaches force Sound Transit to immediately ditch an outdated vehicle calculation method used in collecting its motor vehicle excise tax that is a contributing factor to the large increases.
Not much else is similar about them.
Majority Democrats in the House want to require Sound Transit to switch from that 1996 depreciation schedule, which overvalues vehicles, to a 2006 table approved by the Legislature. This move will result in smaller increases right away.
Under a proposed bill, vehicle owners would get a rebate for what they save by going to a different schedule. Those who’ve bought tabs since the Sound Transit excise tax rate went up March 1, they’ll get a refund. Sound Transit would cover the cost with money it has not committed to repaying bonds.
Democrats say this process will preserve the transit agency’s ability to carry out projects in the $54 billion Sound Transit 3 plan as promised.
“We’re seeking a solution that will provide taxpayers some relief and at the same time make sure rail projects stay on track and on time,” said state Rep. Mike Pellicciotti, D-Federal Way.
Under the ballot measure approved by voters in November, the motor vehicle excise tax rose from 0.3 percent to 1.1 percent, the sales tax went up a half-percent in the taxing district and there’s a first-ever property tax assessment collected by Sound Transit.
The near quadrupling of the excise tax rate has led to some vehicle owners paying hundreds of dollars more for their tabs. Part of the reason is with the older depreciation schedule vehicle values dip only about 5 percent a year from the manufactured suggested retail price. The 2006 update depreciates vehicles 19 percent after one year and 55 percent after five years.
Under a 2015 law, Sound Transit gets to keep using the older method until 2028, when bonds sold in the earlier phases of expansion are retired. That’s also when the previously existing 0.3 percent rate expires.
Sen. Marko Liias, D-Lynnwood, played a leading role in crafting the way for Sound Transit to switch now without touching those bonds. This approach would provide an estimated $780 million in rebates for car owners through 2028, Liias said. Sound Transit would cover the cost with money from a source not tied to bonds, chiefly its new property tax.
He called it a “middle ground” that gives vehicle owners a little money back without messing with the agency’s long-term financing.
“If we do anything this session, it’s going to look like this,” Liias said. “There’s no other way to get taxpayers relief without blowing up bonds and not getting projects done.”
A public hearing on House Bill 2147, which Pellicciotti sponsored, is scheduled for 10 a.m. Monday in the House Transportation Committee. It is expected to be passed by the committee and could get a vote by the full House this week.
Rep. Mark Harmsworth, R-Mill Creek, a committee member and vocal critic of the car tab increase, said the Democrats’ approach doesn’t solve the problem, which is to get rid of the massive car tab increase.
“People are going to say, ‘I thought I was going to get real relief,’ ” he said. “This is chump change.”
He’s aligned with the approach of a bill approved by the Republican-led Senate on Thursday.
That legislation, Senate Bill 5893, slashes the tax rate from the current 1.1 percent to 0.5 percent and requires Sound Transit calculate car tab fees using vehicle valuations in the Kelley Blue Book. Also, it requires the transit authority pay a new fee of $1 per excise tax payment it collects. That money would pay for road and highway maintenance.
Sen. Steve O’Ban, R-University Place, the prime sponsor, said the Legislature needed to step in and provide comprehensive tax relief because Sound Transit isn’t being responsive to constituents outraged by their car tab bills.
Curbing that revenue stream won’t imperil the expansion plan, he said.
“I am not concerned about Sound Transit. They can take care of themselves,” he said. “They can cover any shortfall.”
Sound Transit will suffer a huge financial hit under the Senate bill, a Sound Transit official said Friday.
Reducing the tax rate plus moving to a different vehicle valuation system would trim car tab revenues by about 70 percent annually, Sound Transit spokesman Geoff Patrick said in an email Friday.
“The total financial impact cannot be calculated with precision or confidence but would likely be at least $12 billion,” he wrote. “It is impossible to know the exact amount by which the bill would reduce transit funding because it would shift MVET (motor vehicle excise tax) collection to a Kelley Blue Book or other similar framework. The only way for the mileages and conditions of vehicles to be factored into license renewal payments would be to institute some form of expensive and burdensome vehicle inspection system.”
During Thursday’s floor debate, Democratic senators argued that axing the voter-approved tax rate may be illegal and predicted a legal challenge if the bill somehow became law.
Liias offered an amendment that would have led to rebates that was voted down. He said cutting car tab receipts in half as Republicans proposed will mean a loss of billions of dollars for ST3 and jeopardize getting light rail to Everett and Tacoma.
Harmsworth couldn’t comment on the legality of the GOP bill but said it is aggressive because the regional transit authority has not responded in any substantive way to lawmakers desire to help vehicle owners.
“There’s no other way to do this. We’re trying to fix the problem,” he said.
Rep. Judy Clibborn, D-Mercer Island, chairwoman of the House Transportation Committee, said the bill seems to be aimed at punishing Sound Transit.
“I certainly don’t like it,” she said. “We’re not here to take Sound Transit down.”