Monorail tax evasion estimated at 7.5 percent

By Mike Lindblom
Seattle Times staff reporter

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Monorail finance-committee members vented frustration yesterday that some people are saddling their neighbors with the costs of the proposed 14-mile Green Line — and that there hasn't been greater cooperation from the state to close the loophole.

A monorail line from Ballard to West Seattle, approved by voters last fall, is being financed with revenue from an annual, city-only, car-tab tax of $85 per $10,000 of vehicle value that increases to $140 per $10,000 next June. New cars are exempt the first year.

Monorail officials have asked both the state Department of Licensing and state lawmakers to help them enforce the tax. The licensing department could make a rule change to require vehicle owners to use their true address when renewing car tabs, said Anne Levinson, monorail director of strategic planning. A new state law would be needed to establish penalties and an enforcement system.

"We all need to raise our voices to help elected officials raise the issue of collecting the tax. It's an obligation of a collective society," said monorail-board member Steve Williamson.

An audit shows that a 7.5 percent evasion rate means the monorail would lose $3.4 million a year at the full, 1.4 percent tax rate, and would wind up with $52 million less for a project estimated to cost $1.5 billion in 2002 dollars, agency finance director Daniel Malarkey said. Some motorists consider the tax unfair because the state's valuation schedule, which the monorail uses, overstates the value of used cars, driving tax bills higher than they expected. Others say they are fed up with rising taxes for rail systems they don't expect to use.

The monorail is losing an additional 2 to 5 percent of its potential revenue because the state licensing department has determined vehicles owned by people who move to Seattle from other states shouldn't be taxed the first year. That translates to a loss of up to $2.2 million a year, or $34 million for the project overall.

The monorail authority has asked the state agency to change its interpretation. Overall, the monorail is collecting about one-third less tax revenue than officials had anticipated, with faulty revenue projections responsible for the largest share of the shortfall.

But an independent investigation released yesterday concludes that Malarkey — then a monorail consultant — made a praiseworthy effort last year to determine how much money the car-tab tax would bring in. The study, done for the monorail finance committee by Cambridge Systematics of Oakland, Calif., attributes the mistakes mainly to flawed information monorail planners received from Sound Transit and the state licensing department. Among the key findings:

• Malarkey made a reasonable effort considering that his initial contract with the Elevated Transportation Co., last year's monorail planning agency, was for only 20 hours of work.

• Malarkey contacted Sound Transit budget officials in mid-2002 to double-check how much Sound Transit collected in Seattle from its own regional car-tab tax and was assured the numbers he had were accurate. For years, however, Sound Transit had incorrectly counted South End suburban cars as Seattle cars.

Sound Transit accountants had failed to notify senior Sound Transit budget staff of the error, a communication gap Malarkey could not have foreseen, said Christopher Wornum of Cambridge.

Sound Transit's finance director, Hugh Simpson, replied yesterday that monorail planners "never told us how their tax base was derived. They never told us they would rely on our information. They're big kids, and they could be doing their own forecast."

• In internal discussions, Malarkey questioned whether a 1.4 percent tax would produce enough revenue to build the project, and advocated a 1.7 percent tax. But board members held firm at the 1.4 percent rate, which they considered workable, and Malarkey vouched for the lower rate in public.

• Ideally, monorail planners could have obtained and studied state vehicle value data itself, rather than relying on Sound Transit reports, but that would have added many hours of work. On the other hand, Wornum said, "when you only have one source of revenue, it's important to do it right."

Williamson asked him to examine whether there were other ways monorail planners could have forecast revenue more accurately. Monorail board finance chair Sue Secker said the Cambridge report "certainly exonerates, very clearly, the professionalism of Daniel Malarkey. For me, I was very happy to hear that."

Cambridge's most damaging finding involves revenue estimates for the short-term 2003 budget. Malarkey used a confusing state licensing-department database, which he did not understand, that estimated the value of all vehicles subject to the tax inaccurately.

Even so, Malarkey had enough doubts that he suggested levying a 1.4 percent tax this year, but Wornum said monorail officials wanted to believe a lower initial tax rate would produce enough revenue. The board voted to cut the tax to 0.85 percent for the first 12 months.

Monorail officials "were very happy about a much larger base and were happy to look a gift horse in the mouth," Wornum said.

Mike Lindblom: 206-515-5631 or mlindblom@seattletimes.com

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