Washington State Supreme Court Sides with Sound Transit in Car-Tab Case
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Keep on paying: Washington state Supreme Court sides with Sound Transit in car-tab case Feb. 13, 2020 at 9:06 am Updated Feb. 13, 2020 at 11:19 am Sound Transit’s light-rail line ends southbound at Angle Lake Station in SeaTac. (Ellen M. Banner / The Seattle Times, file) By Mike Lindblom Seattle Times staff reporter Sound Transit may continue to charge car-tab taxes at current rates that sometimes reach hundreds of dollars per vehicle, despite a class-action lawsuit that claimed the law is unconstitutional, the Supreme Court ruled Thursday. A 7-2 majority of justices agreed with the argument by Sound Transit counsel Desmond Brown, that the Legislature’s 2015 language correctly referenced laws from the 1990s that explain how taxes should be charged — that is, based on an inflated car- depreciation schedule, enacted in 1996 and trimmed in 1999, that overvalues newer cars by as much as 25% of their market worth. “The statute properly adopts both schedules by reference,” the ruling says in part. Thursday’s ruling denies a claim, filed by eight taxpayers in June 2018, that vehicle owners in three counties are owed refunds of $240 million, a sum that would have grown to $400 million. The decision helps Sound Transit afford its voter-approved expansion, called Sound Transit 3 (ST3), that features 62 miles of light rail and two major bus-rapid transit lines over 25 years, delivering a network similar in length to the Metro in Washington, D.C. Residents are paying the agency a total $355 million in car taxes this year, mostly for ST3. The class-action case is separate from another car-tab dispute involving Tim Eyman’s Initiative 976, which seeks to slash car registration fees to $30 statewide. A King County judge on Wednesday ruled most of I-976 is constitutional, but kept the measure on hold while other claims in the lawsuit are considered. In the Supreme Court case, Joel Ard, attorney for the vehicle owners, argued Sept. 10 that the 2015 bill to authorize ST3 taxes violated Article II, Section 37 of the state Constitution, which says, “No act shall ever be revised or amended by mere reference to title, but [unless] the act revised or the section amended shall be set forth at full length.” In other words, he said, lawmakers should have republished the vehicle-value matrix they would use to compute car-tab rates. “You would open the code, and read it, and it would tell you what your tax liability is,” Ard said. What lawmakers did instead, in Senate Bill 5987 in 2015, was write that an ST3 car-tab tax “must comply with chapter 82.44 RCW as it existed on January 18, 1996.” That old code deliberately inflated the value of used cars, because legislators back then wanted to collect more dollars for state and local roads. Sound Transit adopted the same practice upon winning its first tax measure in 1996, which didn’t cause much anger, because the initial rate was only $30 yearly per $10,000 of (inflated) vehicle value. In November 2016, voters in urban Snohomish, King and Pierce counties approved the $54 billion ST3 program, the nation’s most expensive transit measure, with a 54% majority, though most within Pierce County voted no. That raised the median household’s car-tab, sales and property taxes by about $325 yearly. When car-registration bills started arriving in the mail, nearly tripling the car tax, motorists and politicians focused on what they called an unfair valuation schedule. Pierce County Executive Bruce Dammeier, who is on the transit board, called for relief, while Sen. Steve O’Ban, R-University Place, wrote bills to cut ST3 taxes, or let some areas secede from the transit district. For instance, the matrix overvalues a year-old car at 95% of the sticker price when market rate is near 70%, or a 5-year-old car at 65% of sticker price when the market is near 39%. Brown argued the purpose of the law was never to help drivers calculate their motor vehicle excise tax, but to delegate power to Sound Transit through the Department of Licensing to collect revenues. Sign up for Morning Brief Delivered bright and early weekday mornings, this email provides a quick overview of top stories and need-to-know news. “The case is of enormous consequence, even to Sound Transit. The loss of the MVET revenue will represent a loss of between $15 (billion) to $18 billion in revenue that is needed to finish the system. Without that revenue, it means we cannot complete, we either have to eliminate or even substantially delay a number of major projects,” he told the court. The majority who ruled in favor of Sound Transit are justices Susan Owens, Charles W. Johnson, Barbara Madsen, Steven González, Mary Yu and Mary Fairhurst. Dissenters are Sheryl Gordon McCloud and Debra Stephens. In her dissent, McCloud reviewed the tortured 24-year history of how car-tab taxes were raised, lowered, canceled and re-enacted by lawmakers and citizens. That section of the RCW is so confusing that to simply cite a reference number isn’t adequate to fulfill Article II, she reasoned. “The MVET statute therefore violates the constitutional mandate designed to provide clarity to the legislative process,” she wrote. While the other car-tax fight over statewide I-976 plays out, Sound Transit continues to collect its full ST3 car-tab tax. Brown has said I-976 doesn’t force any tax cut, because Sound Transit has pledged car-tab taxes to pay off construction bonds. The agency prevailed in a 2006 Supreme Court case against Eyman’s I-776, when justices ruled the bond contracts trump the initiative until 2028. However, under political pressure the governing board of Sound Transit finally agreed in December that ST3 car-tab taxes should be lowered to reflect the market value of vehicles, but only if the Legislature finds replacement money. A new 2020 bill sponsored by Sen. Marko Liias, D-Lynnwood, would impose a new car- taxing method that’s close to real market values. His plan is based on provisions the Legislature passed in 2006, following public outcry over Seattle Monorail Project taxes. The 2006 method has never been used. Mike Lindblom: 206-515-5631 or [email protected]; on Twitter: @MikeLindblom. Staff reporter Mike Lindblom covers transportation for The Seattle Times. .