Elections

With Initiative 976, Tim Eyman tries again to curb car-tab taxes in Washington state

Tim Eyman has seldom received a warm reception in King County. The anti-tax crusader has failed to win the state’s most populated county in two previous efforts to sharply reduce car-tab taxes, even while finding broad support elsewhere.

Now, as Eyman tries to cut car-tab fees to $30 once again, he’s convinced that voters in King and two other Puget Sound counties who stand to gain from transit projects funded in part by those taxes are also angry enough about the hefty cost of vehicle licensing that they’re ready to revolt.

“I think even Seattle voters have reached the tipping point,” Eyman said.

At stake when voters decide on Initiative 976 in November are billions of dollars dedicated to expanding Sound Transit light rail and building and maintaining transportation projects across the state.

Sound Transit’s taxing district includes parts of King, Snohomish and Pierce counties, where voters districtwide have supported measures to expand light rail, paid for in part by car-tab taxes.

But some vehicle owners in those counties were outraged by the higher car-tab bills that followed the $54 billion Sound Transit 3 light-rail package approved in 2016. Sticker shock drew new attention to the formula used to calculate those bills, which overvalues some vehicles compared to the commonly used Kelley Blue Book, resulting in higher car-tab fees.

Lawmakers for three years debated changes to the formula but never reached a deal.

Voters across the state agreed with Eyman when he pushed similar ballot measures in 1999 and 2002, but courts later shot down all or part of both measures. King County voters said no both times. Pierce and Snohomish counties voted yes.

This time, Eyman is touting I-976 as he’s embroiled in a lengthy campaign-finance lawsuit in which he has twice been held in contempt and faces a potential lifetime ban on directing the finances of political committees. The lawsuit, brought by state Attorney General Bob Ferguson, alleges Eyman has used initiative campaigns to enrich himself and refused to comply with campaign finance laws.

Eyman’s initiatives predictably do well in more conservative areas of the state, but also rely on moderates in Western Washington who feel “crunched by taxes,” said Ben Anderstone, a political consultant who has studied the results of Eyman’s initiatives.

“A lot of it is just moderate Democrats who feel some need to put some restraints on the power of the governmental purse,” Anderstone said.

While anger over Sound Transit car-tab taxes could bolster the initiative, Anderstone is skeptical of a dramatic shift against light-rail funding. “As bad of a story as the car-tab story was, I don’t think that’s totally changed people’s opinions on transportation policy.”

Voters couldn’t be blamed for feeling déja vu.

Eyman has attempted similar initiatives at least four times before with mixed results. In 1999, a $30 car-tab initiative was eventually struck down in court, but lawmakers lowered tab fees anyway. In 2002, another initiative passed, but a court later said Sound Transit could keep collecting the tax because it had already sold bonds based on the revenue stream.

In 2016 and 2017, Eyman filed initiatives but did not gather enough signatures. After hiring paid signature gatherers, Eyman announced in January he had turned in 350,000 signatures for I-976, more than enough to place it on the ballot.

Vehicle owners across the state pay about $43 in a base registration fee, plus additional weight fees of $25 to $65. In some areas, like Seattle, they pay another car-tab tax that funds local projects.

In the Sound Transit taxing district, another car-tab fee goes toward building light rail, with drivers of higher-valued vehicles paying more. The owner of a 2016 Subaru Forester, for example, paid about $240 in Sound Transit car-tab taxes this year, while a 2012 Toyota Prius owner would pay about $150.

Calls to cap car-tab costs resonate because the taxes are on “something people see as a necessity in their life,” Anderstone said. “It’s a good symbol of penny ante government intrusion, like being nickeled and dimed.”

Eyman’s opponents say the projects relying on the tab fees are necessities, too.

In total over six years, local governments across the state could lose about $2.3 billion, including the hit to Sound Transit, and the state could lose about $1.9 billion, according to an analysis by the state Office of Financial Management.

The initiative would remove local governments’ authority to impose car-tab fees for local taxing areas called transportation benefit districts. Eyman argues cities could get permission from the state to pass those taxes with voter approval, but city officials say the results would be catastrophic.

Seattle, for example, collects a flat $80 car-tab fee to fund road maintenance, additional bus service and transit passes for students and public housing residents. The transit funding was approved by voters in 2014, and buses are sometimes seeing crushing demand.

“This really will take us backward,” said Mayor Jenny Durkan. “This is like sticking the car in reverse and flooring it.”

Dozens of cities across the state – including Tacoma, Lynnwood and Bainbridge Island – use transportation benefit districts to fund street paving, sidewalk construction and other projects.

Opponents are ramping up a campaign against the measure and so far have raised about $1.4 million in contributions. Top donors include Microsoft, Vulcan and Expedia, and the campaign recently released its first television ad. The ad focuses on the 2013 Skagit River bridge collapse on Interstate 5, claiming the initiative threatens critical transportation safety funding.

An ongoing political committee that Eyman has used for multiple initiatives has raised about $59,000, according to state records. Eyman said he plans to use some of that money to promote $30 car tabs.

What initiative would do

Here’s what I-976 would do, according to the initiative and analyses by state agencies.

Cap annual state and local vehicle license fees at $30 for vehicles weighing 10,000 pounds or less unless the fee is approved by voters.

Lower state license fees for snowmobiles from $50 to $30, for commercial trailers from $34 to $30 and for electric vehicles from $150 to $30.

Eliminate a 0.3% sales tax on vehicle purchases.

Repeal local authority to impose car-tab taxes as part transportation benefit districts. Districts could continue to collect sales and use taxes.

Cut car-tab revenue to Sound Transit and direct the agency to defease, refinance or retire bonds backed by car tabs. If Sound Transit is unable to defease, refinance or retire the bonds, the car-tab tax would remain in place in order to pay off the bonds, according to the state Attorney General’s Office and Office of Financial Management. Future car-tab taxes for Sound Transit would be reduced from $80 per $10,000 of vehicle value to $20 per $10,000 of vehicle value based on Kelley Blue Book.

The initiative includes new potential ramifications for Sound Transit.

The agency would lose about $328 million a year in car-tab tax money, according to the state analysis, or about 11% of its annual revenue. Sound Transit says it could lose another $13 billion or more over 20 years due to higher borrowing costs and potential project delays.

And the current initiative directs Sound Transit to “retire, defease, or refinance any outstanding bonds” backed by car-tab revenue. That’s in response to the earlier court ruling that said the agency could continue collecting car-tab taxes despite voters approving Eyman’s 2002 tax-cutting initiative.

Refinancing or retiring bonds early could make borrowing more expensive if interest rates went up or the agency’s credit rating suffered.

Losing revenue and taking a credit rating hit “would be sort of like a double whammy,” said Sharon Kioko, an associate professor at the University of Washington who studies the fiscal health of state and local governments. “The market is not forgiving toward downgrades.”

Eyman has made no secret of his dislike of Sound Transit, saying about a similar past initiative that it would “gut” the agency “like a pig.”

Sound Transit is staying tight-lipped about its potential legal strategy if I-976 passes, but a lawsuit is widely expected. After the 1999 measure, a bus drivers union and several government agencies sued. After the 2002 measure, governments and Sound Transit sued.

If the initiative passes and faces a legal challenge, the Attorney General’s Office – the same office suing Eyman over alleged campaign violations – would likely have to defend the initiative.

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