The ABCs of Washington state’s government
A Sound Transit attorney told the Washington state Supreme Court on Tuesday that a bill approved by the Legislature in 2015 enabling the transit agency to seek voter approval to increase the car-tab tax rate did not violate the state Constitution.
The measure’s text qualified as a complete act, explained its effect on existing law and never was intended so citizens could use a valuation schedule to calculate what their tax bill would be, said attorney Desmond Brown.
“There’s no fraud or deception here,” Brown told the nine justices. “The Legislature was fully informed about what it did.”
Taxpayers who are plaintiffs in the lawsuit say the 2015 law is unconstitutional because of how it was drafted and that it’s irrelevant what the Legislature knew or didn’t know. A section of the state Constitution says no law shall be revised or amended by mere reference to its title. The revised or amended law must be laid out “at full length,” but that didn’t happen with SB 5987, said Joel Ard, an attorney representing the plaintiffs.
“When the Legislature enacted a 2015 motor vehicle excise tax, it made a valid policy choice regarding the valuation schedule for that tax. But when it made that choice, it amended a pre-existing schedule and did not state it in full, thereby violating” the state Constitution, Ard said.
The case revolves around how how the transit agency uses a schedule that inflates the value of vehicles when it levies a motor vehicle excise tax, pumping more money into its coffers. Vehicle owners in urban parts of Pierce, King and Snohomish counties pay the tax through their annual vehicle registration, known as a car tab.
The plaintiffs are seeking a ruling that the transit agency must return hundreds of millions of dollars collected from taxpayers since Puget Sound area voters approved the car-tab tax rate increase in 2016. Sound Transit also must be prohibited from collecting that tax in the future, unless the Legislature votes again on the matter, they say.
Brown, the Sound Transit attorney, faced sharp questions from Justice Steven Gonzalez when Brown discussed the consequences to light-rail and other projects if Sound Transit loses the case.
“The case is of enormous consequences to Sound Transit. The loss of the (motor vehicle excise tax) revenue would represent a loss of between $15 billion and $18 billion in revenue to the agency that is needed to finish the system. Without that revenue, it means we have to eliminate or substantially delay a number of major projects ...” Brown said.
“Why is the importance relevant to what the law is here?” Gonzalez asked. “Why reference that?”
“I think it relates to the fact that the standard of proof is that you don’t rule statutes unconstitutional unless they are beyond a reasonable doubt,” Brown said.
“Well, we would do that whether it’s $1 or the amount you indicated, right?” Gonzalez said.
Brown replied: “Yes, you would. But this case is of substantial importance in that it would effectively preclude completion of the system or require the taxpayers to pay substantially more to complete it because of the increased borrowing and the increased time.”
In 1996, lawmakers approved a bill allowing Sound Transit to collect a car-tab tax. Voters that year approved a 0.3 percent car-tab tax to help pay for light-rail projects. Sound Transit used the state’s valuation schedule adopted in 1990.
The result: more revenue for transit projects through higher car-tab taxes that vehicle owners pay. The reason: the valuation schedule that Sound Transit has used since it began to collect the tax in 1997 — which was revised in 1999 — inflates the value of a new vehicle over its first 10 years compared to the Kelley Blue Book.
In 2002, voters statewide approved the Tim Eyman-led Initiative 776, which repealed the state law authorizing locally-imposed car-tab taxes, Sound Transit’s car-tab tax and the valuation schedule it used.
Four years later, the Supreme Court ruled that the repeal was unconstitutional as it related to Sound Transit’s car-tab tax because it would damage the transit agency’s contracts to borrow money through bond sales.
Then in 2006, the Legislature approved a bill authorizing local governments to create regional transportation districts to build roads, in part through car-tab taxes. Lawmakers adopted a new valuation schedule that set lower values for nearly all ages of vehicle than the one Sound Transit used. The Legislature said the new schedule applied to any locally imposed car-tab tax.
In 2015, lawmakers approved a bill giving Sound Transit authority for a voter-approved, car-tab tax not to exceed 0.8 percentage points — on top of the 0.3 per cent approved in 1996 — for a total of 1.1 per cent of the vehicle’s value.
That bill did not use the schedule with the lower values for vehicles that lawmakers approved in 2006, which would have meant less revenue for Sound Transit.
Instead, the bill said the higher valuation schedule that Sound Transit had used since it began to collect car-tab taxes in 1997 — which was revised in 1999 to make it more favorable to taxpayers who own two and three-year-old vehicles — temporarily would be in effect until its 30-year bond debt incurred in 1999 for light rail projects is paid off. The transit agency has said that will happen in 2028, when its 0.3 per cent car-tab tax is set to end.
The valuation schedule that the Legislature adopted in 2006 with the lower values for vehicles then would apply to the 0.8 per cent tax that Puget Sound area voters approved in 2016.
Voters approved the 0.8 per cent tax for Sound Transit 3 — the third in a series of transit packages — that consisted of a $54 billion transit expansion. It calls for 62 miles of new light rail, along with new commuter rail and bus lines by 2041. In addition to boosting the car-tab tax, the package included property and sales-tax increases.
What the Legislature did in 2015 violated the state Constitution because of how it was drafted, Ard told the justices.
The Legislature amended a state law but failed to include the text of the statute it changed and also did not explain how it changed the law, said Ard, the attorney representing the plaintiffs. In fact, the 2015 law made the 2006 one with the lower values for vehicles “erroneous,” he said.
“It’s an easy matter to put those (valuation) schedules in the statute, but it’s also a required matter so the resulting code means what it says and says what it means.” he said.
In response to a question from Justice Charles Wiggins, Ard said the tables would not have used up much space in the state’s revised code.
Brown told justices that an examination of state law about property and sales taxes shows that the texts don’t provide information for taxpayers to calculate what they owe. The 2015 law adopted by the Legislature at Sound Transit’s urging is consistent with other tax bills, he added.
“They delegate authority to local jurisdictions, but you don’t know what your property tax is unless you call your assessor and find out what the value is. The purpose of the statute was not to allow taxpayers to calculate their tax. It was to state the law, to delegate authority to Sound Transit to impose the tax,” he said.
Justice Sheryl McCloud told Brown, the Sound Transit attorney, that she tried to find out precisely what the 2015 law said about the transit agency’s taxing authority.
“I could not find it in Westlaw,” she said, referring to the online legal research service for lawyers and legal professionals. “I could not find it cross-referenced. You had to go to the repealed statute books ... is that clear enough?”
Brown said it was.
“I think the statutes are written in varying degrees of complexity, and it takes some effort to read the reference statutes,” he said, referring to bills that refer to other sections of state law or even items like the International Building Code that aren’t spelled out in the state law books.
In an interview after the oral arguments, Sen. Steve O’Ban, the University Place Republican, who filed a legal brief in favor of the plaintiffs, said McCloud’s comments showed how “opaque and confusing this law is.”