Price of vehicle tabs might go up $20 in '09

Olympia residents would pay an extra $20 for vehicle registrations starting sometime next year under a proposal the City Council is considering to maintain city streets.

Finance Director Jane Kirkemo said the council's finance committee recommends using the fee to maintain pavement, a task that costs $1.2 million a year. There is no money left for pavement maintenance after 2009. Even if the fee is instituted, the $650,000 a year that it would raise would be a little more than half of what's needed, she said.

"We have many other transportation needs that are going unmet," she said.

The fee increase would bring the cost of vehicle renewals in Olympia to $63.75 a year for small cars.

The city can charge the $20 fee without asking voters for approval by creating what's known as a Transportation Benefit District. The Legislature allowed local governments to form such districts in 1987 to fund transportation improvements, according to a fact sheet distributed by the city. But last year, the Legislature changed the law to allow local governments to charge $20 a year to be used for all local transportation needs — not just improvements. Olympia became eligible to seek the funding after Thurston County declined to enact the fee countywide.

Residents could petition for a public vote to repeal the $20 charge because the law is subject to referendum, Kirkemo said.

Olympia could be the first city in the state to enact the $20 fee since the Legislature authorized it last year. Lake Forest Park in suburban King County also is pursuing the fee but hasn't passed it, Kirkemo said.

A Transportation Benefit District would be a separate entity from the City Council and would hold its own meetings, but the board of directors would be City Council members.

The district would have to hold a public hearing stating what the money would be used for.

After the district's formation, it could take the state up to six months to process the fee increase, which would go into effect afterward, said Councilman Joe Hyer, chairman of the council's finance committee.

Source of controversy

The cost of vehicle tabs has been a controversial issue since at least the late 1990s, when voters approved Initiative 695, eliminating the vehicle excise tax and setting a flat $30 fee for tag renewals. Before that, drivers paid a 2.2 percent tax on the depreciated value of their cars, which could be hundreds of dollars a year.

Initiative 695 came from frequent initiative sponsor Tim Eyman, whose goal for years has been to drop the fee to $30. His measure also required public votes on all tax and fee increases.

A King County Superior Court Judge struck down the initiative as unconstitutional in 2000, but then-Gov. Gary Locke signed a bill passed by the Legislature reinstating the $30 car tab fee a month later.

Voters also said in a 2002 initiative, also from Eyman, that they wanted the fee to be $30.

But the cost of the tabs has never been $30. There is a $3 county charge and a 75-cent service fee, and in 2005 the state added a $10, $20 or $30 yearly fee based on the weight of a vehicle. Then, last year, the state gave cities and counties the option of adding $20.

"This is absolutely contrary to what the voters said they wanted," Eyman said. "The voters twice voted for $30 tabs."

Hyer, the Finance Committee chairman, countered that reduced money to fix roads has created the need for the fee.

"Did the voters know that their roads were going to be falling apart because of it? Tim Eyman doesn't want to talk about that part," he said.

Money from the tabs once funded a variety of state programs, not just transportation, said Brad Benfield, spokesman for the state Department of Licensing.

In the 1997-to-1999 biennium, the state collected $1.9 billion through car tabs. Nearly $400 million went to transportation and $180 million to ferries. The rest went to other things — including $735 million for the general fund, $147 million for criminal justice programs, $46 million to county health programs, $70 million to cities statewide and $23 million to counties statewide.

Now, money collected through the tabs is focused on transportation, Benfield said.

"Beyond, you know, the state impacts, there were also a lot of local impacts," he said.

Budget crunch

Olympia has a long list of transportation projects it can't get to because of a lack of money. It's strapped for cash this year because of double-digit declines in sales-tax revenue, and it is facing the prospect of major budget cuts next year. It likely will eliminate 22 positions. But Kirkemo said she thinks the city would consider the fee increase even in better times, "mainly because our transportation needs are so great."

Boulevard Road is an example. City planners have proposed improving the road for 12 years, but the council hasn't found enough funding to get started. Planners propose building roundabouts where Boulevard intersects with Log Cabin Road, 22nd Avenue and Morse Merryman Road. Pedestrian crossing islands and left-turn lanes also have been proposed throughout the Boulevard Road corridor.

Unlike impact fees, which must be spent in six years, fees from the vehicle tabs could be accumulated indefinitely, Kirkemo said. They could be saved up to pay for a project or could be used to pay off a bond of up to 10 years to do a project.

But Hyer said he'd like to see the money go for the city's pavement-management program, in which the city monitors cracks on roads and seals them before the road's condition deteriorates to the point at which it needs repaving. Hyer said the system saves taxpayers millions because full repavings are more expensive.

The city typically sets aside about $1.2 million out of unspent money each year for the program, but the council hasn't found money for 2010.

Kirkemo said the law that would allow the fee collection is so new that the city risks a legal challenge if it pursues the fee.

Eyman said the economy is bad for everybody, and it's a bad time for a fee increase.

"I'm just scratching my head just going, 'this doesn't make any sense,' " he said. "How out of touch can you possibly be?"

Kirkemo noted that the city could increase car-tab fees up to $100, but any increase more than $20 would require a public vote. Hyer said the city isn't pursuing a bigger tab fee.

Eyman said he would show up at Tuesday's public hearing about the district and criticized the council for holding a public hearing on it two days before Thanksgiving.

"This clandestine attempt to raise car tab fees unilaterally, there's a reason they're timing this two days before Thanksgiving," he said.

Hyer scoffed, citing a high-profile budget discussion going on and saying fewer people attend meetings during the summer.

"If we want to slip something through, June (or) July is the time to do it, not November/December," he said. "That's just amusing that Tim doesn't understand local government to that level."