State to court: curb vehicle tax

The state Attorney General's Office, under new leadership, has switched sides in part of the long-running court battle over voter-approved Initiative 776.

Last year, under Democrat Christine Gregoire, the state's lawyers argued that, although the initiative repealed Sound Transit's motor-vehicle excise tax in 2002, the agency could continue to collect the tax until 2028.

A King County Superior Court judge agreed. The judge's ruling was appealed.

This week, in a brief filed with the state Supreme Court, the Attorney General's Office — now led by Republican Rob McKenna — argued the justices should in effect order Sound Transit to end the tax years earlier.

If that happens, it could save car and truck owners in King, Snohomish and Pierce counties more than $1 billion and lead to cuts in Sound Transit's bus and rail programs. The motor-vehicle tax accounts for 20 percent of Sound Transit's revenue.

The sponsor of I-776, Tim Eyman, said he was "giddy" about the state's new stance: "There's a new sheriff in town," he said of McKenna.

The new attorney general, elected last November, was a harsh critic of Sound Transit's Seattle light-rail project when he served on the agency's board from 1996 through 2001, and was frequently at odds with a majority of the board.

McKenna said in a prepared statement yesterday that he's obligated to defend state laws, including voter-approved initiatives. "Sound Transit has decided to frustrate the voters' expressed desire," he said.

Pierce County Executive John Ladenburg, who also is Sound Transit's board chairman, said he was both surprised and disappointed by the new brief. "It's a political statement, frankly, by the attorney general, and that's inappropriate," he said. "The attorney general is supposed to give unbiased legal advice, not political advice."

But Jim Pharris, senior assistant attorney general and chief author of the brief, said McKenna's history with Sound Transit played no part in shaping the state's new argument.

The office wanted to ask for an early end to the tax in Superior Court, he said, but didn't because there is no case law supporting it. State lawyers decided to include it in their argument before the Supreme Court because that court can establish new precedents, he added.

Lawyers discussed the brief with McKenna, Pharris said, and "to the extent we could make this point, he wanted us to do it."

Initiative 776 aimed to limit car-tab taxes to $30 a year by repealing not only Sound Transit's 0.3 percent excise tax but also four counties' $15 annual vehicle-license fees and statewide weight fees on light trucks. While the state Supreme Court upheld the initiative's constitutionality two years ago, its application to Sound Transit remained in legal limbo.

The reason? Sound Transit had sold $350 million in bonds in 1999, pledged the vehicle-tax revenues as collateral, and agreed to keep collecting that tax until the bonds are paid off in 2028.

To end the tax before then would unconstitutionally interfere with Sound Transit's contractual obligation to bondholders, the agency argued.

Last November King County Superior Court Judge Mary Yu agreed. It made no difference, she wrote, that the tax is expected to generate much more money — more than $2.4 billion, according to the agency's latest financial plan — than Sound Transit needs to pay off the bonds.

In the brief it filed last year with Yu, the Attorney General's Office said that, while the Legislature could pass a law to address such a "disconnect," the judiciary couldn't address it.

In their new brief to the Supreme Court, however, the state's lawyers say the justices should require Sound Transit to use the vehicle-tax money only to repay the 1999 bonds.

"Sound Transit has no legal authority to collect the tax in question, except for the limited purpose of meeting its contract obligations," they write.

In his statement, McKenna ripped Sound Transit for insisting on "spending that tax money on whatever it pleases."

Sound Transit spokesman Geoff Patrick said yesterday the agency didn't know yet how quickly the bonds could be paid off if all vehicle-tax revenue is earmarked for that purpose, or what impact it would have on programs. An analysis should be done next week, he said.

While briefs have been filed, the state Supreme Court hasn't yet decided whether to hear the I-776 appeal itself, or send it to the Court of Appeals first.

Eric Pryne: 206-464-2231 or epryne@seattletimes.com