$420 million car tab lawsuit against Sound Transit headed to the court of appeals
Back in 2015, Sound Transit approached the legislature for authority to increase the Motor Vehicle Excise Tax (MVET) as part of the Sound Transit 3 tax package. The request came in the form of Senate Bill 5987 which, once approved by the legislature, went to the ballot in November 2016. It passed and the rest, as they say, is history.
This, however, is where the history begins to get a little murky and the cherry picking begins.
The vehicle valuation schedule referenced by SB 5987 was passed by the legislature in 1996. It was subsequently overturned by a citizen initiative and eventually replaced with a new schedule in 2006. This, however, didn’t stop Sound Transit from using the older 1996 valuation schedule in SB 5987. The older schedule uses a higher, more favorable vehicle valuation methodology increasing the amount Sound Transit can collect in taxes.
Think of it this way; it would be as if the Department of Revenue chose to use a higher tax rate from 1990 to calculate your taxes, instead of using a lower rate from 2019.
The question on your mind must be - since the original valuation schedule was no longer state law, how is this even legal?
This is the crux of the argument detailed in Taylor Black vs Sound Transit (#52664-6-II). The plaintiff argues that when SB 5987 referred to a valuation schedule that no longer existed, it thereby amended the actual, existing valuation schedule. But it did not recite that schedule and detail the changes. Therefore, it ran afoul of the Washington State Constitution (Article II Section 37).
This constitutional provision prohibits revisions to state law “by mere reference to its title,” instead requiring the act to be “set forth at full length” to prevent exactly this situation. The Supreme Court has evaluated potential violations with a two-pronged test. First, is the new act “complete?” Second, does the new act amend or alter the existing law?
During arguments in front of the trial court, Sound Transit claimed the new act was “complete” because it was allowed to refer to things outside the existing Code – even repealed laws. It also claimed that the amendment that resulted from reference to the old schedule was merely incidental, or in layman’s speak – an accident. Well, accidents don’t necessarily mean there isn’t a consequence. In this case, it certainly helped to raise more MVET taxes in favor of Sound Transit.
It also claimed that the second half of the test – whether an amendment actually occurred – was essentially meaningless if the first test was satisfied.
Despite what apparently is a clear constitutional issue, the lower trial court judge said the legal arguments and policy issues presented were above her “pay grade.” She then promptly sided with Sound Transit and against taxpayers. Joel Ard, the lead attorney in the lawsuit, filed an appeal on behalf of the taxpayers by the January 18th deadline. Sound Transit and the state’s response is due to the court in the coming weeks. Within three months, the court will be fully briefed and the case will be presented to Division 2 of the State Court of Appeals.
The recent charter school case (El Centro de la Raza) should give the court some precedent to rely on that leans in favor of taxpayers. In their ruling, the court held that a reference provision in the charter school legislation limiting the collective bargaining rights of a charter school was invalid. The reference in the legislation changed the underlying statute without “setting forth the change at full length,” violating Article II Section 37 of the Washington State Constitution. In El Centro de La Raza, the Supreme Court made explicit that even a statute that passes the first prong has to be evaluated under the second prong – contrary to the very argument Sound Transit made in support of the law.
This two-pronged test should apply to the motor vehicle excise tax authorized by the legislature and imposed by Sound Transit as well. As noted in the appeal brief, “An act that complies with Art. II Sec. 37 plainly shows the proposed legislation’s ‘specific impact on existing laws in order to avoid fraud and deception.’” Further, Article II Section 37 isn’t just “a recommendation of ‘best practices’ in legislative drafting. It is mandatory.” Even if lawmakers knew what they were voting on, the appeal argues, “it would not save a statute that did not comply with Art. II Sec. 37, which as much protects the people from the legislature as it protects the legislators themselves.”
Hopefully, the court of appeals will feel it has the authority to hold Sound Transit accountable and that doing so is not outside of their capability or responsibility to the public.