No quick rebound seen for car-tab tax

A new car-tab tax to fund the Green Line monorail is bringing in much less money than proponents expected — and new figures show that the problem is not likely to go away anytime soon.

The Seattle Monorail Project collected about $2.2 million in July, according to totals provided yesterday by the state Department of Licensing (DOL). That is one-third below what the monorail's long-term financial plan said and barely half the monthly cash flow in this year's 2003 monorail budget.

And the state's upcoming car-tab tax bills, which have been sent to motorists through October, show taxes will remain below projections.

Monorail leaders have known for at least three months they should expect prolonged shortfalls, but they recently downplayed the significance of a lower-than-expected June total, saying people couldn't draw conclusions based on the first month of the tax.

Yesterday, Executive Director Joel Horn acknowledged the tax base within Seattle is 11 to 33 percent less than previously believed, and he will report that publicly to the agency's finance committee on Thursday.

Sue Secker, a new board member who chairs the finance committee, said the agency needs a better handle on its revenue projections.

But she said there is no need for panic.

Secker, a vice president for planning at Seattle University, said she spent about 30 hours studying what she considers an exceedingly complicated tax situation.

"This is not all that surprising to me. I think it's pretty typical when you're setting up an agency. I think it's premature to be anything like alarmed," she said. "I have to tell you, I'm very impressed with the quality of the agency and the quality of analysis they have in place to get us the information we need. There are too many variables for it to be a major concern at this stage of the project."

Peter Sherwin, who co-wrote pro-monorail initiatives in 2000 and 2002, has been circulating e-mail that raises the possibility of a public revote in the event low tax proceeds undermine the project.

"It's a serious problem," he said last night. "It's really too bad. I want to know what happened and find out what we can offer the people from here on out."

Horn said he can still build the entire $1.75 billion Green Line linking West Seattle, downtown and Ballard and gave his reasons for optimism:

• The conceptual budget includes $199 million to cover inflation, but inflation is low, he said.

• Growth in motor-vehicle excise-tax revenues was 6.8 percent a year over the past three decades due to rising populations and car values. That rate of growth would put the monorail back into surplus, he said. The financial plan assumed 4.8 percent annual growth.

• There may be ways to reduce tax evasion by Seattle residents who register their vehicles outside the city.

• Because construction contracts will not be awarded until next year, there is room to negotiate with bidding teams about the scope of work or the financing.

• In the short term, the agency already has saved $6 million because of a relatively small staff and affordable contracts signed with architects and engineers, he said.

The car-tab revenues are the monorail's sole source of money.

Chronic shortfalls in tax proceeds would not necessarily keep the agency from selling bonds to investors, said Rudi Bertschi, an economist and former chairman of Energy Northwest, who publicly opposed the monorail agency's former plan to issue $750 million in bonds this year.

"All other things being equal, it makes the project less creditworthy. Bondholders' only concern is do we get our interest and principal back? The greater the security for their revenue sources, the more comfortable they feel."

There are broader issues at stake, Bertschi said. "If the monorail wants to build a second line, will they exhaust the credibility with the public, in much the way Sound Transit did with its rising costs?"

Horn said the problem dates back to DOL databases from early 2002 that significantly overstated the number of cars in Seattle. Licensing spokeswoman Gigi Zenk, however, said her agency made a mistake on Nov. 25 and fixed the glitch within a few days.

The monorail finance director, Daniel Malarkey, raised his tax projections in April — to $4.2 million a month — while presenting this year's temporary budget. That figure was based on what Horn said was state data showing the total value of taxable cars in the city at $6 billion. In reality, the value is between $3 billion and $4 billion.

The current tax rate is $85 per $10,000 of vehicle value, except on new cars during the first year. The rate is expected to rise to $140 in June 2004, as pending bond sales and a construction start require more cash flow.

Next year's increase does not solve the shortfall; the monorail plan voters approved last year called for a $140 tax rate for 20 to 25 years, and this year's $85 level was later set as an introductory rate. A lower citywide tax base affects all years.

Monorail officials said they discovered the problem in May.

"When we first saw that, all of us said this makes no sense, we don't understand it, let's try to understand it," Horn said. "We said to ourselves, basically we need to study this until we see the collections." He said that Malarkey found the gap in May, once the real tax bills were mailed out.

The situation was exposed last month by Joel Paston, a skeptic of the monorail who saw the surprisingly low June numbers on the DOL's public Web site and then posted a cautiously worded update at his site.

Tax evasion probably played a minor role, but neither the state nor monorail officials can track evasion rates.

Though residents are legally obligated to pay the tax, there is no enforcement system to penalize Seattleites who register their cars outside city limits.

However, the state agency is considering an administrative-rule change that would require motorists to provide a home or business address on car-tab renewals, as they do for driver licenses, Zenk said.

That would make it more difficult to avoid monorail tax, as well as the smaller car-tab tax for Sound Transit or a future regional tax for urban highways and transit.

Mike Lindblom: 206-515-5631 or

Monorail tax lags

So far, the state Department of Licensing (DOL) has mailed car-tab tax bills to motorists for renewals through October, so the DOL already knows proceeds from the new Seattle monorail tax will come in more than $1 million under what the Seattle Monorail Project announced in April.

What the monorail agency projected last year: $3.2 million a month.

What the monorail agency projected in April for the short-term 2003 budget: $4.3 million a month.

Dollar figures reported by DOL:

May: $371,575 (early payments for June or July tabs).

June: $2,197,110 (actual dollars collected).

July: $2,172,522 (actual dollars collected).

August: $2,611,002 (expected revenue based on car-tab bills mailed in June).

September: $2,432,723 (expected revenue based on car-tab bills mailed in July).

October: $2,387,444 (expected revenue based on car-tab bills mailed in August).