A State Braces for Major Transportation Funding Cuts As Ballot Measure Nears Passage

Billions of dollars in anticipated revenue slated to go toward transportation projects in Washington state is on the cusp of getting slashed, as a ballot measure capping vehicle licensing fees at $30 and rolling back taxes appears to be on track to pass.

The city of Seattle and surrounding King County are planning to file a lawsuit in King County Superior Court next week to try to block the measure, which local officials say especially threatens transit programs in the booming metro region. 

Initiative 976 was passing with about 52.9% of the vote as of Friday afternoon. Washington state residents vote by mail, so there’s a time lag before determining final election results.

Seattle Mayor Jenny Durkan called the ballot measure “dangerous” and “irresponsible” earlier this week. “The cuts required by this initiative would be potentially catastrophic for Seattle and our region, at a time when we need to invest in more transit, not less,” she said.

City Attorney Pete Holmes did not outline the city’s entire legal strategy in detail, but charged that the ballot measure was unconstitutional in several respects. He also said that, “it completely misled the voters.”

The measure was championed by local anti-tax crusader Tim Eyman, who this week touted the vote margins for the initiative in areas outside of Seattle. “Everybody in the state should be able to get the policy they voted for, even if Seattle doesn’t want it,” he said.

“It seems to me that it’s not too much to ask that your representatives represent you and not turn around and sue you just because they don’t like the outcome of an election,” he added.

If the measure prevails, it would reduce state transportation revenues by about $1.9 billion over a six-year period ending in fiscal year 2025, according to estimates prepared by Washington’s Office of Financial Management. About $1.4 billion of that total would be drained from an account that helps pay for transit, rail and pedestrian projects.

Gov. Jay Inslee, a Democrat, said that he'd directed the Washington State Department of Transportation to postpone projects not yet underway, and asked other state agencies that receive transportation funding to defer non-essential spending while officials review the potential ramifications of I-976.

“It is clear that the majority of voters objected to current car tab levels," Inslee said in a statement. "It is also clear that this vote means there will be adverse impacts on our state transportation system."

Local governments would also take a hit. “Transportation benefit districts” in 62 municipalities across Washington rely on vehicle fees. In fiscal 2018, the districts collected about $58 million to help pay for road and transit projects, according to OFM. This revenue would be chopped if the measure becomes effective.

The state's estimates indicate that the revenue loss for localities during the six-year time frame would be about $2.3 billion. 

Seattle voters in 2014 approved a ballot proposition to fund bus service and other transit programs with a $60 vehicle license fee and sales tax increase. This funding measure was set to last six years, through 2020, while generating about $50 million annually.

In addition, there’s a $20 license fee that generates about $8 million each year for the city. The city’s transportation director Sam Zimbabwe said the passage of I-976 would mean the loss of about $32 million each year, including $24 million for transit programs.

The initiative also targets revenue collected by Sound Transit, an agency that operates a light rail line that runs through Seattle, as well as commuter rail and express bus service.

Sound Transit projects it would lose about $7 billion of tax revenue under the measure during the two decades between 2021 to 2041, and that it would also face $13 billion in added costs over that time due to higher borrowing expenses.

Redmond Mayor John Marchione, who is the board chairman of Sound Transit, said agency officials would “begin the process of responding to I-976” at a board meeting on Nov. 21. 

Sound Transit has plans for a substantial expansion in the coming years. Voters in the Puget Sound region about three years ago approved a plan to spend $54 billion to expand the system through 2041, agreeing to pay for the buildout with a mix of added licensing fees, as well as property and sales tax hikes.

A spokesman for the agency said by email on Friday that if significant tax revenue reductions were to go into effect, Sound Transit’s board would be required to delay or defer projects, with a focus on setting aside projects that are not already under contract.

I-976 would cap annual licensing fees, or “car-tabs,” at $30 for vehicles weighing under 10,000 pounds. Currently, the base fees is $30 for most cars and other passenger vehicles, with an additional fee added to that based on vehicle weight that ranges from $25 to $72. 

Local governments would also lose the authority to impose vehicle fees through transportation benefit districts under the initiative. 

And the measure would curtail a “motor vehicle excise tax” levied on residents in a three-county area inside a special district where Sound Transit has the power to collect taxes. 

This excise tax is charged upon the purchase or annual registration renewal of a new or used car, and is a source of funding the transit agency is planning to depend on as it expands.

I-976 contains provisions aimed at winding down the tax, and directs Sound Transit to pay off bond debt that the tax goes toward covering, if there's an option for early repayment or refinancing.

Any squeeze on transportation funding in Washington would come at a time when state officials are facing high costs to replace hundreds of culverts around the state in order to comply with a federal court ruling the U.S. Supreme Court affirmed last year. 

These pipes allow water to flow under roads and other areas, but can block migrating salmon. The court case had to do with whether the culverts were damaging habitat in a way that harmed the fishing rights of Native American tribes.

Washington's transportation department has estimated that the cost of fully complying with the court order could be about $3.7 billion.