Lawsuit puts Monorail funding by bonds in doubt

The Seattle Monorail Project (SMP) is facing another financial obstacle: a lawsuit that could hinder the agency's plans to sell $1.7 billion in construction bonds.

The suit, filed by eight Seattle residents, contends the monorail's annual car-tab tax is illegal because the tax bills are based on an old state chart that assigns most used vehicles a higher value than the actual market price.

Controversy about the tax is nothing new. And it didn't dissuade voters from backing the proposed 14-mile-long Ballard to West Seattle line last fall when they overwhelmingly rejected "Monorail Recall" Initiative 83, which would have stopped the project.

Monorail officials are worried that the suit, which goes to a preliminary hearing next week in King County Superior Court, could harm the project's credit rating.

"Any delay in the resolution of this lawsuit will likely disrupt, if not delay, the financing and construction of the Monorail Green Line," SMP Finance Director Jonathan Buchter stated in an affidavit in January.

By causing uncertainty in the credit markets, the lawsuit would force SMP to pay higher interest rates or spend more on bond insurance, he predicted.

"Moreover, as long as this litigation remains pending, financing or construction may be unable to commence," Buchter said.

The monorail and Sound Transit prevailed in a separate legal challenge to car-tab taxes last year. Buchter believes SMP is on solid legal ground, but he said bond markets dislike any unsettled litigation.

"This is a harassment," Buchter said last week of the case.

The SMP is considering selling bonds before a construction contract is signed, in hopes of beating an expected rise in interest rates, Buchter said.

Henry Aronson, who led an anti-monorail campaign in 2002, is a leader of the legal team for the plaintiffs. He said undoing the tax — not disrupting a bond sale — is the goal of the lawsuit.

"We think taxpayers have a right to a refund for money that is unlawfully taken from them," he said yesterday.

Among other arguments, the suit alleges SMP lacks constitutional authority to levy a tax because its nine-member board is mostly unelected. Two members are elected; the rest are appointed by the mayor, the Seattle City Council or the monorail board itself.

While the tax rate was presented to voters as 1.4 percent of vehicle value, the eight plaintiffs say their payments amounted to 1.6 to 3.7 percent of the actual market price.

Appeals expected

"My guess is that the matter would not be resolved by the [state] Supreme Court in less than a year, and most probably 16 to 18 months," Aronson said.

Bill Reinhardt, editor of the newsletter Public Works Financing, said Buchter "is not just blowing smoke" about the possibility of litigation affecting bond sales.

Monorail-construction bidders declined comment. SMP's bond advisers did not return phone calls, and the agency declined to release detailed information about potential bond sales.

David Luberoff, a Harvard professor and co-author of the book "Mega-Projects," said opponents of projects usually rely on environmental and permitting issues to stall groundbreaking. But he said it's understandable that the Seattle disputes would focus on the car-tab tax, because it's so conspicuous.

"Folks who are opposed to a particular project will often try to figure out what the weak link is in a project, even if that's not their major issue," Luberoff said.

"If there's 20 lawsuits against the project, it's not enough to win 19 of them. This is like the NCAA tournament: You have to win all your games to win."

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

A related story and a copy of Buchter's court declaration can be found at www.seattletimes.com