Sides dueling over legality of vehicle-tax initiative

King County Executive Ron Sims says Sound Transit funding for light rail and other projects will likely emerge untouched if voters in November approve Tim Eyman's latest initiative, I-776.

A co-sponsor of the initiative, Eyman has made Sound Transit a principal target of his group's anti-tax ballot measure, calling it a "reckless rogue agency."

I-776 is intended to repeal taxes on vehicle registration above the $30 fee called for by I-695, an initiative sponsored by Eyman in 1999.

The new initiative would eliminate a motor-vehicle excise tax that brings in about $57 million annually for Sound Transit, roughly 20 percent of the agency's income. Such a cut would jeopardize its light-rail project and cut funds for other transit programs, officials have said.

But a preliminary review by Sound Transit and King County attorneys indicates the initiative is flawed, said Sims, who also is chairman of the Sound Transit board. "It's generally held among lawyers that it is not applicable to Sound Transit," he said.

According to Sims, the review indicates I-776 is in conflict with constitutional provisions dealing with the sale of bonds by government agencies. He expects a final report from attorneys in a couple of weeks.

"The U.S. Constitution and the Washington state constitution basically prohibit the government, when it's entered into a contract, from taking action that impairs that contract," said Jeff Richard, a deputy prosecuting attorney for King County. "It's illegal for us to issue bonds pledging a particular tax, and then get rid of the tax."

Sound Transit has $350 million in outstanding bonds. The agency pledged its car-tab revenue to help pay off the debt.

Eyman yesterday disagreed with Sims' legal staff.

"You have to question the credibility of lawyers hired by Sound Transit," he said. "They have a vested interest in not giving an objective analysis of things."

The initiative was carefully drafted to make sure it doesn't run into trouble, he said.

Monte Benham, a spokesman for the initiative campaign, said nothing prevents Sound Transit from calling back its bonds and paying them off. In fact, Sound Transit doesn't even have to retire the bonds, he said. The agency could simply go back to voters and ask them to use a different tax to replace the revenue from car tabs.

Richard disagreed. Once a tax is pledged to pay off debt, he said, it can't be switched.

"They can say whatever they want," Sims said. "Their rhetoric does not change the rule of law in this country."

Although Sound Transit might not be affected if I-776 passes, other state and local government agencies could lose millions of dollars in tax revenue.

The initiative would eliminate an optional $15 vehicle registration surcharge collected by King, Pierce, Snohomish and Douglas counties. The state Department of Transportation (DOT) estimates that, as a result, the counties could lose $66 million in funding for local roads during the next two fiscal years.

I-776 also would reduce state licensing fees for light trucks. State analysts estimate that could cost the DOT and the State Patrol, combined, more than $36 million during the next two years.

The initiative, backers say, is designed to fulfill the promise of I-695, which called for $30 car tabs. I-695 was struck down by the courts as unconstitutional, but the Legislature eliminated the state motor-vehicle-excise tax and set motor-vehicle-registration fees at $30.

However, lawmakers did not repeal either the $15 surcharge or the law that allows Sound Transit to collect its tax.

I-776 finishes the job, its sponsors say.

Gwendolyn Klein, a Seattle attorney who represented several cities that opposed I-695 in court, said she sees a number of problems with the I-776 that could result in a court overturning it. The initiative, she said, is too complicated and tries to do too much.

Benham said that's not true. Referendum 51, which if passed would raise $7.8 billion in taxes for transportation, "is much more complicated than I-776," he said. Referendum 51 was put on the November ballot by the state Legislature.

Richard said it's too early to predict whether the initiative would run into constitutional issues, other than those related to Sound Transit.

At this point, he said, "we just don't know."

Andrew Garber: 360-943-9882 or agarber@seattletimes.com.