TAX NEWS - JUNE 2010

Washington Tax: Lynnwood's new taxing tool

The city could collect higher sales taxes or vehicle registration fees to fund transportation projects.

by Oscar Halpert, 01 June 2010, LYNNWOOD — The city may soon have a new way to boost funding for transportation-related projects.

That's because the City Council last week agreed to form a new taxing district that by next year might collect additional sales taxes or vehicle registration fees to pay for transportation projects.

The state Legislature in 1987 authorized cities and counties to form a Transportation Benefit District. In 2007, the state amended the rules to allow local governments to collect sales taxes or vehicle registrations to pay for transportation projects.

The city of Edmonds began collecting a $20 car tab fee in September 2009 after forming a benefit district.

"The Legislature has robbed cities of their gas tax monies to help fill out their budget but gave us an opportunity to impose taxes through the license fee or (create) an additional sales tax," City Council President Ted Hikel said.

Sometime within the next couple of months, the newly created district board — comprised of all council members — will hold a public hearing and may decide how much of a fee to charge.

So far, city officials have not decided whether to collect a fee or impose the additional sales tax, Hikel said.

By law, the council can then approve a car tab fee of up to $20 a year. Fees of more than $20 must be approved by voters. If the council approves the fee set by the district, the city would likely begin collecting the money next year, said David Mach of the city's Public Works Department.

Lynnwood officials estimate a $20 annual car tab fee would bring $420,000 to the city each year.