A fall ballot measure to cut car-tab costs across Washington state would blow a $4 billion hole in local and state transportation funding over the next six years, a new report says.
Local governments could lose about $2.3 billion and the state could lose about $1.9 billion over the next six years if Initiative 976 is passed, according to the fiscal impact statement released by the state Office of Financial Management this week.
“The numbers are pretty devastating,” said Andrew Villeneuve, executive director of the Northwest Progressive Institute, which opposes the initiative.
I-976 is backed by perennial anti-tax initiative sponsor Tim Eyman and will appear on the Nov. 5 ballot. Eyman, who faces ongoing legal challenges over his initiative business, argues voters saddled with increased taxes and fees are eager for relief.
“There’s just a tap-out moment,” he said.
The measure’s possible high-profile effects include cutting $328 million a year in funding for Sound Transit, which is in the early stages of its $54 billion expansion of light rail throughout the region and has faced criticism over the way it calculates car-tab fees.
After voters in three Puget Sound counties approved Sound Transit 3, which included a car-tab tax increase, some drivers had sticker shock in 2017 when they encountered a much higher car-tab cost. For a $10,000 car, Sound Transit’s car-tab fee went from $30 to $110 a year.
In the years since, lawmakers from both parties have said they support reducing car tabs but failed to reach an agreement on how to do that.
“Now that you know the truth about how expensive your car tabs are, do you think it’s fair?” Eyman said.
By cutting car tabs, vehicle sales taxes and other fees, the initiative would hit multiple state accounts. Among them: pots of money that fund some Washington State Patrol activities; state ferry maintenance; highway construction; county roads and bridges; and bike and pedestrian projects.
The measure also threatens projects at the local level as routine as building sidewalks, repaving streets and installing flashing yellow lights in school zones.
“This is not fancy stuff. This is redoing roads, trying to keep our roads in good shape,” said Reid Bennion, a management analyst in the Tacoma Public Works Department.
Tacoma is one of dozens of cities across the state that use car-tab fees to fund transportation projects. The city raises about $3 million a year from a $20 fee, which local governments would no longer have the authority to impose if the initiative passes.
In recent years, Tacoma has used the money for paving and maintaining streets, building missing sidewalks and installing beacons near public schools. The car-tab money makes up about 12% of the city’s street maintenance budget and is enough to fund about 40 blocks of street paving a year, Bennion said.
Fifty miles north, Lynnwood also uses a $40 car tab fee for transportation projects. Eliminating that fee would cost the city about $1.2 million a year, equal to about 40% of its paving budget.
“This is our routine maintenance,” said city spokeswoman Julie Moore, “things that keep our roads in shape so we can have residents and visitors traveling safely.”
Seattle, too, uses an $80 car tab for street maintenance and additional bus service. The city would lose $35.9 million through the end of 2020, according to the mayor’s office.
On Bainbridge Island, a $20 car tab fee set to increase next month raises about $400,000 a year, or 60% of the city’s yearly road maintenance, according to the city.
“It’s really kind of the basics of governing — ensuring that your roads work,” said Logan Bahr, a lobbyist for the Association of Washington Cities.
Statewide, 62 cities use car-tab fees to fund transportation benefit districts, according to the fiscal analysis. The fees totaled about $58 million last year. Some transportation benefit districts, including Seattle, also rely on non-car-tab revenues like sales taxes, which would not be barred by the initiative.
Eyman objects to transportation benefit districts created by local governments without a public vote, and argues other revenue sources are available.
“If the initiative doesn’t pass, it’s essentially a validation of state and local governments jacking up car tabs,” Eyman said. “There’s no reason to think they’re going to stop where they are now.”
The initiative’s hit to Sound Transit, long a target for Eyman, could be significant.
The measure would cut the car-tab tax rate Sound Transit can charge and require vehicle value to be determined based on the Kelley Blue Book.
Eyman and others have criticized Sound Transit over its use of a formula that overvalues vehicles when determining car-tab fees. Despite several years of debate in the state Capitol, lawmakers haven’t agreed on a bill to change the formula.
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The initiative would direct Sound Transit to refund, refinance or terminate bonds it has issued against the car-tab tax. However, “it is unknown if this is possible,” according to the fiscal analysis.
If Sound Transit does terminate the bonds, its revenue would be cut by about $328 million a year, or more than $6.5 billion over the next two decades.
The agency says it would lose even more money due to higher borrowing costs and delays. In total through 2041, Sound Transit estimates a financial impact of $20 billion.
