Seattle-Area Voters OK Transit Tax Hike

Published February 1, 2009

In spite of rising unemployment, a workers’ strike at Boeing, the collapse of savings bank Washington Mutual, and a stock market dive, voters in urban areas of Washington state’s King, Pierce, and Snohomish counties have approved a sales tax hike to back a multibillion-dollar package of transit projects.

The November 4 vote represented a huge victory for Sound Transit, the popular name for Washington state’s Central Puget Sound Regional Transit Authority. Nevertheless, debate continues about the real costs of the light rail expansion measure.

About the only thing proponents and opponents agree on is that voters approved an increase of 0.5 percent on sales taxes levied—a nickel for every $10, and about $125 a year for the typical family, according to transit officials. The money will finance construction of 34 more miles of light rail and expanded bus and commuter rail services.

Numbers in Dispute

Sound Transit officials say the projects will cost $22.8 billion, including $17.8 billion in construction expenses, inflation, and all debt repayment costs, which are expected to continue through at least 2036.

Critics say the agency’s figure is too low. Transportation planner and Sound Transit critic Jim MacIsaac estimates the projects will cost $55.8 billion, with a typical household paying $284 a year. The differing figures are the result of disagreements over how long the tax will be imposed and dissimilar methods used to calculate the effects of the tax over time.

Sound Transit contends MacIsaac’s total includes current tax collections, which are financing construction of the initial segment of the light rail system, as well as the bus system and other operations.

According to the voter-approved measure, once a new expansion is completed “the board will initiate steps to roll back the rate of sales tax collected by Sound Transit.” It also states the agency will “initiate an accelerated payoff schedule for any outstanding bonds whose retirement will not otherwise impair the ability to collect tax revenue and complete [the expansion] or [the initial part of the system, approved in 1996] or impair contractual obligations and bond covenants.”

No Time Limit

The measure mentions no time limit, leading to fears the tax will continue after the expansion is completed. Opponents also note a promised tax rollback on the expansion project could vanish, depending on what happens during the expansion. They point to Sound Transit’s failure to complete the first 21 miles of its light rail system two years ago as promised.

“There is no legal obligation for Sound Transit to roll back the tax rate,” said Michael Ennis, director of the Center for Transportation at the Washington Policy Center. “Sound Transit officials made the same promises on phase one taxes, but as we now know, they will continue indefinitely. This means, at the present time, tax rates for both phases never expire.”

Funding Ambiguities

Sound Transit assumed a $64,405 annual median household income—midway between the highest and lowest figures—to arrive at the $125 per year sales tax bill. The agency used a 2005 state study to arrive at an annual per-household sales tax bill, factoring in inflation since then.

MacIsaac assumed 92 percent of all the sales taxes would be paid by households, including taxes paid by businesses and passed on to their customers. MacIsaac said he used Sound Transit’s tax estimates through 2040 for the initial part of its system and for the expansion through 2037, applying agency inflation rates to estimate costs after those years.

Sound Transit accepts a state estimate of 38 percent of sales taxes being passed on to customers, but did not attempt to figure out how much of the expansion cost would be paid by sales taxes passed on to consumers. Sound Transit also divided the tax bill by more households, including portions outside its urban-area district.

Despite the ambiguities about the funding, voters made a huge commitment to the expansion of light rail in central Puget Sound, and to the accompanying tax bite.

‘Dismal Failures’

“Sound Transit has a track record of dismal failures when it comes to light rail. The 2007 performance audit of the first light rail project conclusively showed that the agency has been unable to control project costs or timelines,” warned Amber Gunn, director of the Economic Policy Center at the Evergreen Freedom Foundation.

“When voters approved the first light rail project in 1996, they got less than they bargained for at a higher cost in double the timeframe,” Gunn continued. “Clearly, Sound Transit’s cost and timeline estimates cannot be relied upon for accuracy.”

Project proponents disagree.

“It’s a great step forward,” said Seattle Mayor Greg Nickels, chairman of the Sound Transit board. “We’ve been talking about creating a mass transit system for 40 years. With the passage of Prop 1, we will be able to build the mass transit system.”

Skeptics say it remains to be seen whether the measure will ease traffic congestion in a meaningful way, fearing it will cost too much and do too little.

Brett Davis ([email protected]) is an analyst for the Economic Policy Center of the Evergreen Freedom Foundation in Olympia, Washington.