Plateau cities are preparing for the November general election results to take a bite out of their annual budgets.
Although the results haven’t been officially tabulated, state voters clearly supported lowering car tab fees and doing away with transportation-focused taxes through the passage of Initiative 976.
Enumclaw, Buckley, and Black Diamond each have some form of a Transportation Benefit Fund (TBF) or a Transportation Benefit District (TBD), controlled by their respective city governments, that collects tax revenue through a car tab fee or sales tax for the sole purpose of funding street projects.
King County is currently suing to find I-976 unlawful, but if the county doesn’t secure an injunction against implementing I-976 or succeed in court, those local tax dollars will be no more, meaning these cities will have to find other means to fund road repairs and other projects.
Enumclaw’s Transportation Benefit Fund has two revenue sources; a $20 car tab fee that was estimated to bring in $248,000 next year, and a one-tenth of a percent sales tax, which was calculated to bring in roughly $394,000 next year.
However, all that revenue is earmarked for specific projects.
“The only thing we use that [money] for is for maintaining existing pavement,” Searcy said. “That’s not paying for street lights, it’s not paying for street sweeping, or replacing signs, or fixing sidewalks. So the other things we do in our street fund for won’t be affected by it, but it really affects our ability to do overlays and reconstruct streets, and use it for a match for grant programs.”
If I-976 is successfully implemented, the car tab fee will be eliminated, but the sales tax will remain, which does give Enumclaw a little relief.
But the city recently borrowed $2.75 million to do some street repairs upfront, to be paid back by 2031 through TBF revenue, Searcy said.
And that’s not all — the city’s ability to collect that sales tax expires in 2027.
“So now we have a five-year gap of no guaranteed [TBF] revenue, but we know we have debt payments to make,” Searcy said, adding that the city planned to pay about $220,000 each year until 2031 to fully pay off its debt, a figure that was calculated based on the belief the car tab fees were a more stable revenue source than the sales tax.
There are other ways to pay off that debt, Searcy continued: the city can re-calculate its budget, but that would mean pulling money away from its general fund; it can also ask its residents to approve another tenth of a percent sales tax, bringing the total sales tax to two-tenths of a percent until 2027.
But in the meanwhile, projects that are currently being planned are expected to be completed.
“What you see in our city budget for 2020 will get accomplished, and there will probably be a very meager amount of money left for 2021 and beyond,” Searcy said. “We haven’t decided yet how we would approach that.”
One project that will be directly affected by the sudden reduction in TBF funds is Warner Avenue repairs, between state Route 410 and Berninger Street.
“The pavement is really crumbling,” Searcy added. “It needs more than just an overlay — it needs some subsurface work, and it’s going to be an expensive project.”
Buckley is in even more of a tight spot than Enumclaw.
Since the city only has a $20 car tab fee funding its TBD, “50 percent of our entire street operations budget,” will be eliminated, said City Administrator Dave Schmidt; the fee was estimated to bring in $105,000 next year.
And the city’s fixed costs — like street and parking lot lights — already cost the city about $60,000 a year, further cutting into money available for street repairs or new projects.
Like Enumclaw, street projects in 2020 and 2021 already have money set aside so they can be completed, but any projects further out in the future may get the ax, Schmidt continued, which includes applying for grants.
Fortunately, the city is collecting street impact fees from developers, but that money can only be used for projects specifically outlined in Buckley’s Comprehensive Plan, which means these funds can’t be used for any sort of emergency repairs.
Buckley also collects money through a real estate excise tax (REET), but it’s not a stable form of revenue, since it’s a one-time tax levied when a home is sold.
Hit hardest by I-976 is Black Diamond.
Like Buckley, the city has a TBD which collects taxes through a $20 car tab fee, generating roughly $100,000 a year, according to Finance Director May Miller.
In a perfect world, that money would be used for street operations, maintenance, and future capital projects, but “we pretty much use all of it for maintenance and operation… that $100,000 isn’t keeping up with the cost of our maintenance in Black Diamond,” Miller said. “We’re not keeping pace — we’re having to subsidize the street fund just do snow removal and get the trees out of the way that fall over.”
Miller said the city uses their own REET revenue to fortify their street fund, which pulls money away from capital projects and improvements.
“If you’re short in maintenance, that capital project is going to have to wait,” May continued. “We’ve got to do the maintenance first.”
She added that the city is waiting to see how the lawsuit against the initiative goes before stating to look into alternative ways to keep the street lights on.
A LACK OF UNDERSTANDING?
Searcy, Schmidt, and Miller all expressed at least a little frustration with the fact that a state-wide measure could take away local tax revenue, especially since their cities are outside the Sound Transit 3 (ST3) taxing area, which was the impetus behind I-976.
ST3 was approved by Washington voters in the November 2016 election, allowing Sound Transit to tax some voters to build a light rail through Tacoma, Federal Way, Everett, Issaquah, and Seattle.
One of the biggest issues with ST3 was a new motor vehicle excise tax (MVET), which was levied on voters when they renew their car tabs. Unfortunately, the MVET used an outdated formula that determined the value of a car and how much people would pay when they renewed their tabs, which led to surprisingly high fees and public outcry.
To remedy this, I-976 proposed limiting MVET fees to just $30, which voters clearly agreed with. Additionally, any future voter-approved MVET measures will now have to use the Kelley Bluebook valuation formula for determining how much cars are worth and how much people are taxed.
But since Enumclaw, Buckley, and Black Diamond residents don’t pay that MVET tax, all I-976 does for their residents is eliminating Transportation Benefit Districts and Transportation Benefit Funds.
Searcy said he’s looked at all of Enumclaw’s voting precincts and saw Enumclaw overwhelmingly supported the initiative.
“To have the local money go away by a vote of the state was frustrating,” he continued. “I would love to hear from a lot of voters that voted [for] it, what their logic was.”
Both Miller and Schmidt appear to believe local voters saw the initiative from a bird’s eye view.
“I don’t think everybody understood the impact to small governments,” Miller said. “They were looking more at the metro — the bigger pieces there, and how in those areas they were looking at the fee when you bought a new car.”
Schmidt said he believes the Legislature needs to shoulder some of the blame for why I-976 passed, since voters saw supporting the initiative as a protest vote. .
“I know there was a lot of animosity toward how the [ST3 project] was being conducted and how they were collecting the fees, and I know the whole Kelly Bluebook valuation issue has been a sore spot for a long time,” Schmidt said. But “I think small communities are going to be hurt by it.”