STBD Renewal

Background

Seattle's Special Transportation District (aka Seattle Transit Measure) is one way that the city can raise funds to spend on transportation, in addition to spending from the General Fund, and from the Transportation Levy. In the past much of the STBD revenue has been used to fund public transit, but legally it can used for any transportation-related purpose. STBD comes up for renewal in 2026, and how much money is raised, and how the money is budgeted will have major impacts on how Seattle gets around.

I would like to get a comparison of spending on transit in 2019 to spending on transit in 2024, adjusted for inflation. I haven't found the data online for doing this yet.

Avenues to Explore

At the State level, changing any of the following would be a big improvement:

• Change the Special Transportation District revenue rules to allow more overall revenue to be raised. Right now, the State caps many of the possible taxes that can be applied.

• Change the Special Transportation District revenue rules to allow more flexibility in raising revenue. We need revenue sources that are progressive and relatively stable if we are going to use them for staffed positions.

• Change the State Transportation Budget to include more funding for local transit as grants, so that localities only have to fund operational costs, not all the infrastructure as well. This could be funded by the CCA, if not repealed.

• As part of voter-approved renewal, we could increase car tabs fee. Currently the fee is $50, it could go higher and in fact in 2019 it was $60(?). Each $10 increment results in about $4.6M in revenue.

Spending

I haven't found public records on how the money has been spent. It looks like these are categories of spending as planned in 2020:

• Increased service hours. My understanding is that this has been trimmed back because they were unable to use it.

• Focus on areas of need/Increased service in West Seattle while the bridge was out – no longer happening?

• Student Orca cards. Youth ride free now paid for by CCA.

• Subsidized fares for low-income riders

• Transit spot improvements

Need to find out how the money is currently being spent.

Revenue Alternatives

Unlike most other states, Washington does not fund local public transit directly, but rather expects localities to raise their own revenue for transit. The City is not free to raise whatever taxes it wants for the STBD, but is constrained by what the State allows.

Here's what's allowed:

• Sales tax up to .2%, requires voter approval. This is the most used funding source, but is regressive, and tends to be volatile

• Business and Occupation Tax. No limits, but does require voter approval.

• Household Excise Tax. Limited to $1 per housing unit per month and requires voter approval.

• Employer Excise Tax. Limited to $2 per month per employee and requires voter approval.

• Property tax must be approved annually by voters

• Vehicle license fees. There is a schedule for how much vehicle license fees may be levied each year without voter approval, starting with $20, two years later up to $40, two years later up to $50. Higher vehicle license fees may be levied if voter approved. This was voted out under I-976, but allowed back in when I-976 was declared unconstitutional.

• Developer impact fees. Can raise money this way, but it is not a stable form of revenue.

Here are some brainstorming ideas for the future, many of them would have to be legalized by the State for localities to use them (some of these ideas drawn from this Transit Rider Union white paper):

• Employer Tax for Transit. Both New York City and TriMet in Oregon receive operating revenue from payroll-based taxes on employers. The NYC tax rate is graduated based on total payroll, while the TriMet tax is currently set at 0.7737% for all employers and self-employed individuals, and accounts for 60% of TriMet revenues. Both taxes are paid by employers, not employees. In addition, Oregon recently passed a smaller statewide transit payroll tax that is withheld from employee wages. 

• Parking Stall Tax. This tax could be based on square-footage or number of stalls and is targeted at large business or property owners that dedicate substantive amounts of land to non-residential free and unlimited parking for customers. Intended to disincentivize sprawl and auto-centric land use and revenue generated could support multimodal options. Seattle already has a commercial parking tax, which brings in considerable revenue & is spent on other transportation items, but this would apply to businesses which have parking areas which they do not charge for, e.g., malls, grocery stores, etc.

• Air Quality Surcharge. A one-time charge on the sale or lease of new vehicles, as well as a one-time charge on the remaining life of vehicles being retitled/registered in Washington for the first time (preventing recent out-of-state purchases for the purpose of evading the charge). The charge would vary based on a vehicle’s estimated lifetime greenhouse gas pollution determined from a vehicle’s fuel economy (MPGe) rating from the EPA. It would create an immediate incentive to purchase more efficient, less polluting vehicles, cutting Washington’s greenhouse gas emissions and contributing to air quality. Since new vehicles are primarily purchased by more affluent people, this would be a relatively progressive charge. This wouldn't be a local funding option, but could help the State provide grants. 

• Capital Gains Tax. City staff estimated $25-$30 million annually for a 1 percent tax on capital gains over $250,000, modeled on the new state capital gains tax. It would be very progressive, but the amount collected would likely be quite variable depending on the stock market.

• Income Tax. I think this would need to a flat 1% income tax would be legal and could raise up to $670+ per year. Possibly the lack of progressivity could be mitigated by applying tax credits, e.g. for families with children.

• Estate Tax. Tax applied to estates of Seattle residents who die. City staff estimate that a 10% “surcharge” on the current state estate tax applied to Seattle estates would generate between $5 million and $10 million annually. This would be relatively progressive.

• Inheritance Tax. Presumably applied to Seattle residents who are inheriting from an estate, could be anywhere in the world. Hard to estimate what it would raise, but city suggests perhaps $45M/year.

• Real Estate Capital Gains Tax. When a property is sold, tax is applied to the profit from the sale, so to the difference between the amount it sold for, and the amount it was acquired for originally. 

• Wealth Tax. I'm not sure how this would work, but I think the concept is a tax that is applied to sum total of a person's assets.

• Payroll Tax. Similar to our current JumpStart tax, a tax on businesses on money they pay to employees, usually selected for highly paid employees.

• CEO Pay Ratio. A payroll tax levied against businesses based on the ratio of pay between their highest and lowest paid workers. Portland and San Francisco have versions of this; Portland collected $5.2 million in 2019, while San Francisco’s tax is expected to generate between $60 million and $140 million per year.

• Professional Services Excise Tax

• Digital Advertising Tax

• Luxury Tax. e.g., tax on yachts?

• Hotel Tax. We have that already for paying for the convention center.

• Square Footage Tax. Tax on businesses by square footage, e.g. warehouses. Bellevue, Auburn and Kent all have forms of this.

• Tax on Rental Income.

• Vacancy Tax. Vancouver BC has one of these, most useful in areas where people use real estate as investment assets.

• Congestion Pricing. Charge people for driving downtown.

• Package Delivery Fees. City staff speculatively estimate that a fee of $1 per package could raise $32 - $43 million annually, based on a range of 45 to 60 packages per person per year in Seattle.

• Traffic Fines Based on Income

• Land Value Tax

• High Value Real Estate Tax with Rebate

• Real Estate Excise Tax. Tweak the REET we currently have to be mor progressive. Note that income is likely to be very variable.

Revenues

Seattle is currently imposing a .15% sales tax, and $50 in car tab fees. There are about 460,000 registered vehicles (as of 2021), so just the car tab fees brings in $23M in revenue.  In 2023, car tabs were lower, and revenues were $53.1M from sales tax, $16.5M from car tabs (ref, p.. 13) . So, this looks like STBD total revenue in 2023 was  $69.6M, but is listed as approx $50M/year. Need to adjust for inflation to compare to pre-2019 numbers.

STBD renewal in 2020 passed with 82% of the votes in favor.

Previous to the I-976, the STBD was .1% sales tax and $60 car tabs, which funded a budget of about $50M/year for transit access and service.