Motor vehicle excise tax resurrected to fund localized transportation projects

By Kylee Zabel
WNPA Olympia News Bureau

More taxes to sustain existing benefits are the financial crutch being considered by the Legislature to support public transportation entities in two Western Washington counties: King and Snohomish.

The House Transportation Committee on Monday heard testimony on two bills that would allow county and/or city officials to increase the Motor Vehicle Excise Tax (MVET) by either 1 percent or 1.5 percent, with conditions, to support specific transportation services.

Both bills have companions in the Senate where public hearings conducted by the Senate Transportation Committee attracted similar reactions as the House bills received at their hearings.

Neither HB 1953 nor HB 1959 had been scheduled for final committee consideration as of Feb. 27. With fiscal bill cut-off looming March 1, if these bills are not passed out of committee by then, their survival this legislative session is doubtful. The same fate appears likely for the Senate versions as well.

Under HB 1959, counties with populations of more than one million would be able to impose up to a 1.5 percent MVET by either voter approval or a majority vote of the county council. Sixty percent of the MVET-proceeds would be dedicated to maintenance, operations and other local capital projects regarding public transportation systems. The remaining 40 percent would be used for local roads.

King County would be the only county affected by the legislation, according to population estimates from the state’s Office of Financial Management (OFM) in April 2012.

The second bill, HB 1953, would allow a Public Transportation Benefit Area (PTBA) within a county to impose an MVET of up to 1 percent. A PTBA is a special-purpose district, formed within a county, which provides public transportation services in that county. These include services such as public transit and passenger-only ferries. However, the only entity that would be affected by this legislation is Community Transit in Snohomish County.

According to Joyce Eleanor, CEO of Community Transit, even after increasing fares by 63 percent since 2008 and employing other cost-reduction measures, Community Transit was forced to cut 37 percent of its services, including Sunday bus services. This resulted in a loss of 206 of 700 jobs.

If a 1 percent tax were approved, approximately $37.8 million would be acquired for public transit service uses in Snohomish County.

Vehicle sales could be impacted

Scott Hazelgrove of the Washington Auto Dealers Association claimed that car sales are the largest contributor to sales tax revenue in Washington and making it more expensive to purchase an automobile by increasing the MVET would hurt vehicle sales. As a result of a decline in sales, Washington’s economic recovery could stall and the Legislature would be unable to adequately fund its other priorities, such as K-12 education, he predicted.

The MVET is a tax paid to the Department of Licensing (DOL) based on the value of a motor vehicle. The value is defined as 85 percent of the manufacturer’s suggested retail price (MSRP) of a vehicle when it was first placed on the market. So, if you purchase a car for $20,000, the estimated value to which the tax is applied is $17,000.

For subsequent years after the purchase of the vehicle, the 85-percent value is multiplied by the applicable percentage on the depreciation schedule. Thus, the total annual tax-amount owed decreases each year.

Multiple past and present projects have been funded by MVET monies, including ferry vessel construction and operations, mass transit and highway maintenance.

Currently, local authorities may impose a maximum 0.8 percent MVET for high-capacity transportation systems. Washington had a statewide-enforced MVET from 1937 to 2000, until the passage of Initiative 695, which repealed the tax. The withdrawal of that tax resource in 2000 cut transportation revenues by $750 million annually, ferries and local transit largely taking the hit.

Now those two transportation elements are funded with a share of sales tax revenues, an income source that also suffered as a result of the 2008-11 recession.

Speaking about a number of local-option tax and fee bills before the committee, proponents of the two MVET measures urged lawmakers to pass the proposals citing the increase in public- transit ridership since 2008.

Bruce Wishart of the Sierra Club said that ridership increased in the central Puget Sound region by 23 percent from 2005 to 2008. Not addressing this funding concern is a detriment to commuters, especially to the elderly who heavily rely on public transit, he stated.

But there are doubts that an MVET-increase is the best solution to the public transportation funding shortfalls considering the state’s slow economic recovery. Some are concerned that the MVET may make it even more difficult for low-income commuters, who already struggle to pay transit fares, to have access to jobs, medical facilities and family members.

“So (elderly persons) who choose to drive their car, to get their groceries, to go to church, these types of things, you’re saying to me that an increase in taxes when they’re hardly able to make ends meet now is going to help them,” asked Rep. Brad Klippert (R-8th District, Kennewick) of Wishart.

Though he understands that more money being paid in taxes means less money being spent elsewhere, Wishart said that many elderly simply don’t have many options other than public transit, due to disabilities or other impediments caused by aging.

Eyman: Raising taxes, adding fees is insulting

Tim Eyman, a Mukilteo resident and initiative-instigator when it comes to taxing issues in the state, charged that this incremental approach to tackle funding issues by subtly raising taxes and adding fees is insulting to the majority of Washingtonians who have periodically approved ballot measures that restrict the government’s ability – state and local – to raise taxes, including his most recent Initiative 1185 to require a two-thirds legislative approval to raise taxes.

“Unilaterally imposing an increase in a local-option MVET at any time would seem a bit questionable but especially problematic right now following the overwhelming passage last fall of the two-thirds tax vote requirement initiative,” Eyman said. “Their votes should be adequate in order for you (lawmakers) to get that message.”

While HB 1953 requires voters’ approval before enacting a tax increase, HB 1959 allows either a local ballot measure or a simple-majority vote of a county council to raise the MVET rate.

Some believe that the Legislature should take a more holistic approach to seeking revenue sources. According to Dave Overstreet of AAA of Washington, because many benefit from public-transit services, the cost should not fall squarely on the backs of just motorists.

“Public-transit facilities potentially benefit all users,” he said, “including those without other transportation options, visitors and tourists, among others. Therefore, motorists shouldn’t be the only segment of the population expected to pay for them.”

Overstreet also suggested alternative revenue sources such as siphoning a portion of the lodging tax for public transit, increasing fare-box rates or creating a household tax based on recent census data. While Overstreet was not specific on his idea of a household tax, the amount would be based on the number of individuals residing in a given home.

Others contended that the MVET benefits everyone, including motorists who don’t rely on transit. According to Harold Taniguchi, Director of the King County Department of Transportation, King County Metro is responsible for getting 175,000 vehicle trips off roadways each weekday as a result of transit ridership. And Seattle City Councilmember Tom Rasmussen said that if the MVET encourages more people to take transit than drive their cars, then so be it.

“There’s a difference between luring people out of their cars and passing fees that add up to hundreds of dollars every year,” said Sen. Curtis King (R-Yakima), co-chair of the Senate Transportation Committee. “That’s forcing people out of their cars.”

These two MVET proposals are in conjunction with the Connecting Washington Transportation Revenue Package (HB 1954) introduced Feb. 20 by House Democrats and stakeholders. It would establish, among other revenue sources a statewide MVET of 0.7 percent.

If this package and HB 1959 were to pass this legislative session, King County residents would be required to pay about 2.5 percent in local and state MVETs combined, according to Overstreet, which equates to a $20,000 vehicle with a taxable value of $17,000 costing its owner $425.

This transportation revenue package is estimated to raise $10 billion over the next 10 years to fund new projects and maintenance tasks by, among revenue sources, raising the gas tax, implementing more tolls, the MVET, hazardous substance tax and a bicycle sales fee. $3.4 billion of the $10 billion is to go to local governments for road maintenance, transit funding and other commissions.

Proponents recognize, during what they characterize as challenging economic times, the difficulty to pay more in taxes. Rep. Dean Takko (D-19th District, Longview) questioned how the Legislature should balance the apparent need for more public transit funds and the unwillingness of people to pay taxes to accumulate those funds.

“Voters aren’t as dumb as you guys make them to be,” Eyman said. “(They are)constantly weighing benefits versus costs.”