State Senate pushes its own car tab tax reduction

Proponents say it will bring relief to taxpayers and maintain transit funding.

OLYMPIA — Just in time to meet the cutoff deadline to move bills out of committees, the state Senate Transportation Committee passed a bill that would lower car tab taxes, matching similar efforts in the House.

The bill, SB 5955, sponsored by Sen. Patty Kuderer, D-Bellevue, would require that the Puget Sound area’s Sound Transit agency adjust its vehicle valuation formula to better reflect a car’s actual market value when levying car tab taxes to pay for transportation projects.

Under the proposal, the agency’s current vehicle valuation formula — approved by the Legislature in the 1990s — would be updated to a 2006 version, and vehicle owners would be provided with retroactive credits if their car was overvalued.

In the state House, representatives passed a similar bill, HB 2201, with bipartisan support following complaints from lawmakers and some vehicle owners that Sound Transit’s dated car valuation system overvalued some cars, leading to much higher registration taxes.

The criticisms were prompted by a tax hike to fund a $54 billion transportation package that voters passed in 2016 by a wide margin in the Sound Transit taxing district. The district covers densely populated areas of Snohomish, King and Pierce counties.

Sound Transit and transit advocates had criticized the legislation as undermining the agency’s ability to deliver mass-transit infrastructure — namely link light rail — in a timely manner due to an estimated $780 million direct loss in revenue resulting from the altered car valuation system. They called for funding offsets if car tab tax reform efforts go through.

Kuderer and other Democratic senators presented SB 5955 as a middle-of-the-road approach that both brings car owners tax relief and maintains funding for Sound Transit.

“With this legislation, we can balance reducing some of that burden while honoring the voters’ decision to use the revenue from the car tabs to fund public transportation,” Kuderer said at the Jan. 24 Senate Transportation Committee hearing on the bill.

In an effort to provide Sound Transit some funding offsets, Chair of the Senate Transportation Committee, Sen. Steve Hobbs, D-Lake Stevens, introduced a substitute version of Kuderer’s bill at the Feb. 6 meeting — where the altered bill was ultimately voted out of committee — that allows the agency to withhold payments into a regional education fund until its board passes a resolution stating that the payments won’t impact its ability to deliver the projects in its latest package.

“This is not the perfect bill,” Hobbs said at the Feb. 6 meeting, “but I think it is the best bill that meets both goals and objectives.”

“We want our projects to show up when we’re still alive,” he quipped, referencing the long project delivery timelines for Sound Transit’s latest link light rail projects. Hobbs also called the bill a “work in progress” that will get tweaked later on in the legislative process.

However, many Senate Republicans — and some Democrats — argued that the bill didn’t go far enough in limiting Sound Transit’s taxing capabilities.

“This bill does not do much at all,” said Sen. Tim Sheldon, D-Potlatch. “We have to suck it up and start acting like legislators and have some oversight of this regional body.”

A longtime critic of Sound Transit, Sen. Steve O’Ban, R-University Place, criticized the new valuation system in Hobbs’ substitute bill as a legislatively “concocted schedule” that doesn’t reflect accurate market values.

“I wish I could vote for this bill,” he said. “I wish we could provide something that comes close to real tax relief.”

O’Ban attempted to attach several amendments that would’ve required that Sound Transit use Kelley Blue Book car values when giving out retroactive credit to vehicle owners and make $518 million in agency expenditure reductions. Another amendment would have eliminated the provision that Sound Transit wait until it passes a resolution before renewing its payments into the education fund. However, all his changes were voted down.

Geoff Patrick, a spokesperson for Sound Transit, said that while SB 5955 doesn’t cover the entire funding loss from the changed car valuation system, it’s a start. “It’s not a full offset, but it’s a partial offset and in that sense it’s positive,” he said.

He also said that due to the substitute bill’s allowance that Sound Transit not pay into the education fund — the payments total around $518 million — that Sound Transit will ultimately pay less in debt-financing costs because the bonds the agency took out to finance projects will be repaid faster with the new revenue. The agency will pay roughly a billion dollars less in extra financing costs, according to Patrick.

The fund, known as the Puget Sound Taxpayer Accountability Account, pays for educational programming targeting low-income, homeless and foster care youth at schools within the Sound Transit regional taxing district. It was attached to the transportation package that allowed Sound Transit to increase its taxing capacity that passed the legislature in 2015.

O’Ban explicitly criticized the use of the education dollars to cover the offset.

“I do not see Sound Transit as a vulnerable organization,” he said, adding that the agency should not be taking money from “those who need it more.”

Most Democrats voted for the bill, joined by Sen. Curtis King, R–Yakima. Those opposed came from both sides of the aisle: Sen. Rebecca Saldana, D–Seattle, Sen. Maralyn Chase, D–Edmonds, Sen. Sheldon, Sen. Phil Fortunato, R–Auburn, Sen. O’Ban and Sen. Hans Zeiger, R–Puyallup all voted against the bill.

The bill now goes to the Senate Rules Committee where it has until Feb. 14 to get moved onto the floor for a vote.