Joseph Krist

Publisher

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SOUND TRANSIT FUNDING CHALLENGE

The Washington State Supreme Court will hear arguments on a challenge to the formula used to calculate the value of automobiles for the purpose of calculating the tax due to Sound Transit, the public transit agency in and around Seattle. Taxpayers who are plaintiffs in the lawsuit contend that the transit agency uses a formula that inflates the value of vehicles when it levies a motor vehicle excise tax. That value is used to establish the amount of what is known as the car tab.

Vehicle owners in urban parts of Pierce, King and Snohomish counties pay the tax through their annual vehicle registration, known as a car tab. The suit relies on an interpretation of procedural aspects of how a law is enacted. One provision says no law shall be revised or amended by mere reference to its title. The revised or amended law must be laid out “at full length.” The plaintiffs contend that this did not occur.

They seek the return of hundreds of millions of dollars collected from taxpayers since Puget Sound area voters approved the car-tab tax rate increase in 2016. Sound Transit also must be prohibited from collecting that tax in the future, unless the Legislature votes again on the matter. The car tab dates back to 1990, when the Legislature approved a new valuation schedule for the statewide car-tab tax that had been levied for decades. It overvalued the worth of a vehicle to raise more revenue for transportation projects.

Six years later, the Legislature enacted a law which authorized Sound Transit to collect a car-tab tax. Voters that year approved a 0.3 % car-tab tax to help pay for light-rail projects. Sound Transit used the state’s valuation schedule adopted in 1990. Opposition continued and in 2002, voters statewide approved Initiative 776, which repealed the state law authorizing locally imposed car-tab taxes, Sound Transit’s car-tab tax and the valuation schedule it used.

That initiative was overturned in the Washington Supreme Court in 2006. The Legislature then the Legislature approved a bill authorizing local governments to create regional transportation districts to build roads, in part through car-tab taxes. Four years ago, a bill passed giving Sound Transit authority for a voter-approved car-tab tax not to exceed 0.8 % — on top of the 0.3 % approved in 1996 — for a total of 1.1 % of the vehicle’s value. That bill did not use the schedule with the lower values for vehicles that lawmakers approved in 2006. That formula would have meant less revenue for Sound Transit.

The bill said the higher valuation schedule that Sound Transit had used since it began to collect car-tab taxes in 1997 temporarily would be in effect until its 30-year bond debt incurred in 1999 for light-rail projects is retired. The transit agency has said that will happen in 2028, when its 0.3 per cent car-tab tax is set to end. Voters will already get a chance to vote on transit funding. Initiative 976 would cap car-tab taxes at $30 and also would reduce several other transportation taxes. It has the same sponsor as did the previous failed initiatives to defund public transit.

NYC SPENDING

Two recent reports from New York’s Citizens Budget Commission shed light on spending practices by NYC under Mayor Bill DeBlasio. One highlights the City’s use of leasing to acquire much of its office space. CBC estimates that New York City government leases 22 million square feet (of an estimated 37 million square foot real estate portfolio) from private owners.1 Most leased space houses agency offices (13.5 million square feet), but the City also leases space for public services ranging from schools and day care centers to warehouses, tow pounds, and courts.

In fiscal year 2018 New York City spent more than $1.1 billion to lease space for public facilities and offices—an amount that has grown 40 percent since fiscal year 2014, far greater than the 20 % increase in the City budget, the 12 % increase in asking rents for office space, and the 10 % increase in the number of full-time City employees.  The City Charter requires the Department of Citywide Administrative Services (DCAS) to maintain a list of leased and owned space; however, DCAS does not publish lease-level data on how much space the City leases, how much each lease costs, or how efficiently agencies use their space. 

Leasing has been on the increase since 2009 under the Bloomberg administration but it accelerated at the start of the de Blasio administration. The City does not publish a complete record of leases and space use that includes each lease’s costs, square footage, and occupancy. DCAS only publishes data on the locations of buildings where the City leases space and the agencies located at each property.

At least some effort was made in the prior administration to address the concern over long term leasing by the City. The Bloomberg Administration launched the Office Space Reduction program to reduce the size of the City’s office portfolio by 1.2 million square feet. Through fiscal year 2012 the program reduced occupied office space by 400,000 square feet and saved $15 million in annual rent expenses and $4 million in energy costs.9 The average square footage occupied per employee declined 8.6 percent from a high of 280 square feet in fiscal year 2012 to 256 by 2016. The program was not renewed for fiscal 2017.

The real estate management issue joins several others as sources of opacity and a lack of accountability. The City can’t provide data on the efficacy of its tax incentive plans, it can’t (or won’t) account for spending under the billion dollar Thrive NY mental health program (run by the Mayor’s wife), and current real estate management initiatives did not set reduction targets and did not report metrics, such as square footage per employee, to track progress.

ALASKANS PAYING FOR THIS YEAR’S BUDGET

A new governor has undertaken an aggressive ideologically based approach to the management of the State’s finances. The most prominent example is the gutting of the University of Alaska’s budget which is resulting in the elimination of tenured faculty under financial exigency rules. That was not necessarily something that people explicitly voted for.

Now one of the main cogs in the State’s transportation system has been shown to be a target of the cuts. The Alaska Marine Highway System, (AMHS), released its winter schedule with fewer sailings and a new pricing system. The changes also include the use of dynamic pricing. This is a much loathed system of raising and lowering ticket prices based on perceived demand. The most visible examples are its use by airlines and sports teams.

The State Transportation Department has said “we had to reduce our service by one-third because we just don’t have, we don’t have funding.” The cut was just over $43 million. It means that some communities will lose ferry service for six months. Passenger fares could climb by as much as 30% while vehicle and cabin rates could rise as much as 50% on heavily booked sailings.

We are not talking about minimal expenses for passengers. A passenger going from Haines to Bellingham, Washington can expect a base fare of about $500. But that could increase to nearly $650 if the ship fills up. Fees will increase for changes or cancellations close to travel dates while fares will increase 10% for the days preceding and after special events. 

There are communities which rely on the ferries for access to the mainland and at least one of them will lose service altogether. It is hard to see how this helps the Alaska economy, all in the name of raising the oil dividend. Except the dividend was not raised and remains at $1600. Putting political views aside what the math says is that if you live in one of the communities which is losing its winter ferry service, you lose access to the outside economy and other opportunities, your life gets much more inconvenient and expensive, and you do get $1400 to help you out even all of the cuts were supposed to get you the $1400. It makes no sense.

SCHOOL BUILDING COSTS IN THE AGE OF GUNS

The opening of the school year has been the occasion for several school facilities to be opened and publicized in an effort by both administrators and industrial interests to show off the latest in school building technology. It is hard in the current environment to criticize any effort to promote the safety of school children. I write this as a parent of a public school graduate and the spouse of an inner city teacher in both public and private schools.

Whenever new the technology has an opportunity to be introduced and profited from it will occur. In the wake of the Sandy Hook and Parkland incidents, significant efforts have been made on the part of vendors to have their ;products employed in an effort to provide security in schools. Whether it be surveillance equipment, reinforced materials, designers, or other technology vendors. As the chair of the Partner Alliance for Safer Schools, or PASS has said, “When you have an active shooter situation, I guarantee in the first couple days your inbox is going to have solutions from companies trying to market their technology.”

One school in western New York state is even employing facial recognition technology in spite of the global controversy over its uses and technological shortcomings. The trend of school districts being overwhelmed by vendors is reminiscent of the introduction of computers into classrooms.  A whole industry has grown up around products including biometric screening, outdoor lighting optimized for video surveillance, and audio analytics .

The real capital expense comes with school renovation and construction. A discrete approach to architectural design for schools has developed. In Fruitport, Michigan, a newly renovated high school will be “the safest, most secure building in the state of Michigan,” according to a district superintendant. It reflects a current trend with limited sightlines, wing-wall protrusions for students to hide behind, and an all-seeing reception desk the architect calls an “educational entry panopticon.”  The school features bulletproof glass and other reinforcements. It also costs $48 million.

In Indiana, one school is fitted out with  strobes and horns are installed throughout the hallways and in every classroom for instant alert.  Teachers wear “panic buttons” which can activate the system. each classroom features a hardened door system that will withstand an attack by pistol, rifle, shot gun and followed with using the butt of the shotgun to attempt to knock the vision window out.  This door automatically locks when closed. If it sounds like a modern prison, that maybe because the design firm also designs prisons.

No one is saying that students and teachers shouldn’t be safe at school. The question is are these large expenditures being undertaken because they are effective or has what’s been effective is the marketing by the security industrial complex.

PREPA RESTRUCTURING MOVES CLOSER

The president of the fiscal control board overseeing Puerto Rico’s attempts to restructure its debt announced an agreement with the bond insurers Syncora Guarantee, Inc. and National Public Finance Guarantee Corp. to join the Restructuring Agreement (RSA), which was achieved earlier this year with several holders of PREPA and Assured Guaranty Corp. The agreement now accounts for 90 percent of the uninsured bondholders and all PREPA bond insurers.

Holdouts remain and they stand in the way of a conclusion to the deal. It remains however, an important step in that one less institutional block is an obstacle.

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