Last night, the Senate approved SB 5955, changing the valuation schedule for the ST3 MVET (Motor Vehicle Excise Tax). Up to two-thirds of the cost is remedied by reducing payments from Sound Transit to the Puget Sound Accountability Fund. The vote was 30 yeas, 14 nays, with 5 members excused. The bill now moves to the House of Representatives which has already approved similar reductions to the MVET, but without an offset for the lost Sound Transit revenues.
Sound Transit levied a 0.3% MVET in Sound Move in 1996. That levy used a schedule that overvalues newer cars relative to resale values. In 2006, the Legislature approved a new valuation schedule that aligns to resale prices. The 0.3% MVET, because of bond requirements, continued to use the older schedule. This levy expires in 2028.
In ST3, voters approved an additional 0.8% MVET. The enabling legislation specified that it should use the familiar older schedule until 2028, then snap to the more accurate 2006 schedule in 2029. At the time, few noticed how this works, but it became suddenly controversial in 2017 when owners of newer cars received their much higher car tab bills. Some felt overcharged because the effect of the higher rates was compounded by a schedule that “overvalued” their cars.
For car owners, the bill would credit car owners for the difference in valuations for the ST3 MVET. Effectively, they’d pay on whichever schedule shows the lower value. Owners of cars less than ten years old will see bills reduced, and owners of older vehicles are not affected. The bill includes refunds for past payments before September 2018.
The credits reduce Sound Transit revenues by $780 million through 2028. Offsetting this are up to $518 million in reduced payments to the Puget Sound Taxpayer Accountability Account. As the revenue reduction increases Sound Transit debt, there are additional debt servicing costs which could increase the total impact up to $2.3 billion by 2041 if not mitigated. However, reducing the revenue hit by 65% will proportionately reduce the associated debt servicing hit.
The Puget Sound Taxpayer Accountability Account is the outcome of a complex deal in 2015 where Sound Transit paid a sales and use tax offset fee to back-fill money taken from the general fund for the Connecting Washington highway package. An amendment from then-State Representative Jessyn Farrell ring-fenced the payments from Sound Transit so they went to local education. The County Councils in King, Pierce and Snohomish were expected to decide this year on how to distribute those funds for education starting in 2019. The accountability fund would contribute $318 million for King County, $111 million for Pierce County and $89 million for Snohomish County. King County was considering dedicating its portion to construction of early learning centers.
The bill ties the payments to the accountability fund to the delivery of ST3 projects. Essentially, Sound Transit is expected to make the planned payments to the Accountability Fund if they affirm by resolution that the payment of the fee won’t impact delivery of the ST3 program. As it will take many years for the many risks to the ST3 financial plan to play out, it is unlikely the Board could pass such a resolution soon.
Several amendments were attached to the bill. An earlier amendment that county permits do not apply to voter-approved RTA projects in unincorporated areas was removed, and replaced with language from from Senator Marko Liaas that requires permits be processed expeditiously.
Earlier versions of the bill identified a priority order for Sound Transit to reduce program scope as revenues fell short. While that becomes less relevant if revenues are mostly replaced from the accountability fund, Senator Guy Palumbo nevertheless added language to prohibit Sound Transit from eliminating light rail projects and bus rapid transit projects. Palumbo’s amendment should be viewed in the context of the debate over tolling on I-405. Palumbo argues Sound Transit should be required to operate Bus Rapid Transit on I-405 even if the Legislature ends the toll-managed lanes that BRT requires to operate reliably.
The bill now moves to the House of Representatives which previously approved a similar reform to MVET charges without any mitigation for the lost revenues. While both chambers have now approved bills, with large majorities, to correct MVET valuations, the path to approved legislation remains complicated by the argument over whether to use the education funds for mitigation. The legislative session is scheduled to end on March 8.