Sound Transit may continue to charge car-tab taxes at current rates that often 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, created 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 the claim in the lawsuit, signed by eight taxpayers and filed in June 2018, that vehicle owners are owed refunds of more than $240 million, a sum that would have grown to $400 million or so.
It also preserves Sound Transit’s financial plan as the agency tries to build a 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.
The class action is separate from another car-tab tax case involving Tim Eyman’s Initiative 976, which seeks to slash car registration fees. 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 case before the state Supreme Court, 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 setting tax sources to fund ST3, was merely citing the Revised Code of Washington by saying its car-tab tax “must comply with chapter 82.44 RCW as it existed on January 18, 1996.”
That code deliberately inflated the value of used cars, because legislators sought to collect more dollars for state and local roads. Sound Transit adopted the same methods after winning its first tax measure, which didn’t cause much of a stir because the initial rate was $30 yearly per $10,000 of (inflated) vehicle value.
Voters in urban Snohomish, King and Pierce counties approved the $54 billion ST3 program, the nation’s most expensive transit measure, in November 2016 with a 54% majority, though a majority within Pierce County voted no. That raised the median household’s car-tab, sales and property taxes by about $325 yearly.
But after car-registration bills started arriving in the mail, nearly tripling the rate, motorists and politicians around the region focused on what they called an unfair valuation schedule. Pierce County Executive Bruce Dammeier, who is on the transit board, called for relief, while some Republican lawmakers supported bills to cut or repeal ST3 car-tab taxes.
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 that the purpose of the law was never to help drivers calculate their tax but to delegate power to Sound Transit through the Department of Licensing to collect revenues.
“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 said told the court.
Other chapters in the car-tax saga:
- King County Superior Court Judge Marshall Ferguson ruled Wednesday that most provisions of Initiative 976, a Tim Eyman-backed measure to limit nearly all car-tab costs to a flat $30, are constitutional. But drivers expecting a car-tax cut will be kept waiting. Ferguson has yet to rule on other parts of the case, which will probably be decided by higher courts. Voters statewide approved I-976 in November.
- Sound Transit continues to collect its full ST3 car-tab tax of $110 yearly per $10,000 of vehicle value, using the inflated 1999 state depreciation tables. The regional agency’s transit board, on Brown’s advice, chose to sit and wait to be sued. Sound Transit contends that I-976 doesn’t force a tax cut, because it sold bonds that are to be repaid in part through car-tab revenue. 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.
- The governing board of Sound Transit agreed in December that car-tab taxes should be lowered so they’re based on the market value of vehicles, but only if the Legislature finds some source of replacement money.
- Legislative bills circulating in Olympia seek to trim Sound Transit’s taxing powers. A version sponsored by Sen. Marko Liias, D-Lynnwood, would impose a never-used 2006 state value schedule that’s fairly close to market or Kelley Blue Book rates.
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Keep on paying: Washington state Supreme Court sides with Sound Transit in car-tab case - Seattle Times
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