That 10-year tax on gas? It'll be more like 35 years - Politicians fueled confusion, but deny misleading residents

Richard Roesler
The Spokesman-Review Staff writer

5/27/03

Local projects funded by Washington's nickel gas-tax increase: Interstate 90: Add a lane in each direction from Argonne Road to Sullivan Road, boosting the highway to six lanes. Costs $32 million and starts in July. North Spokane Corridor: Eventually will link U.S. Highway 395 and I-90. Phase one: Two lanes of the corridor between Farwell Road and Francis Avenue. Cost: $189 million over 10 years, starting in December. I-90: Install 2.4 miles of concrete barriers from Geiger Road to U.S. Highway 2. Cost: $700,000, starting next year. I-90: Seven miles of cable median barrier from Sullivan Road to the Idaho border. Cost: $900,000, starting next year. Moscow-Pullman Road: Add a lane in each direction to state Highway 270 between Pullman and the Idaho state line. Also includes divided median. Cost: $28.5 million, starting early 2005.

OLYMPIA, WA-- Gov. Gary Locke and lawmakers recently celebrated a new 10-year funding package for transportation projects, mostly paid for by a 5-cent hike in the gas tax.

One by one last week, lawmakers said how pleased they were with the temporary tax.

"When the bonds on those projects are paid off, that nickel goes away," said Sen. Jim Horn, R-Mercer Island.

Don't hold your breath.

Despite politicians repeatedly calling the $4.2 billion gas-tax package a "10-year" plan, taxpayers are actually scheduled to be paying that tax for 35 more years. Horn, 72, will have to live to be 107 to see that nickel go away.

Even some of the state's top transportation officials were startled Thursday when they learned how long taxpayers will be paying. Amy Arnis, financial planning manager for the state Department of Transportation, was midway through a routine report on the tax package when a couple of the state's transportation commissioners began asking her about how long it will take to pay off the projects.

‘‘That's a question that's been coming up," Arnis responded. She said that although all the money will be spent over a decade, paying off that debt will take up to 35 years.

‘‘But the perception that the public has is when the projects are built, that 5 cents is going to go away," said

commissioner Elmira Forner, according to a recording of the meeting. ‘‘And that's not true."

Correct, said Arnis. The tax will go away only when the debt is paid off, she said. ‘‘And this is explicit in the legislation," she said. ‘‘I mean it's very explicit."

It's not hard to see why people might think the tax package is a 10-year plan. Lawmakers and the governor's office have been calling it that for months.

The governor's office, for example, describes it as ‘‘the 10-year plan," a ‘‘New 10-year Funding Package" and ‘‘the 10-year transportation plan" in an official explanation of the proposal.

Senate Democrats described it as ‘‘a decade-long plan to raise $4.2 billion" and a ‘‘10-year investment." Senate Republicans called it a ‘‘10-year state transportation improvement package." And House Democrats called it a ‘‘10-year transportation revenue plan."

‘‘I've heard people on the radio say that it (the tax) is going to be on for 10 years," said Carl Gipson, a transportation analyst with the conservative Evergreen Freedom Foundation in Olympia. ‘‘But it's going to be on for 35 years. Our kids are going to have to pay off these projects that have been done for 10 or 15 years."

The reason the debt will last so long is that the state typically pays for big construction projects the same way most people buy houses: they take out a loan and gradually pay it off. Homeowners go to the bank and apply for a mortgage; the state sells bonds.

As the construction work begins

over the next decade, Arnis said, the state will periodically sell batches of 25-year bonds. The first such offering is in July, for $80 million.

The money will immediately pay for earthmovers and crews and concrete and engineers. Then the state will gradually pay off the bonds, with interest.

‘‘It's like a 25-year mortgage," said Arnis. She said that since the bond sales will be staggered over a decade, it may be possible to get everything paid off in somewhat less than 35 years, perhaps one to 5 years less.

Some of the key backers of the plan said Friday that the lawmakers who voted for the plan always knew the tax would last for decades.

‘‘We always said the taxes were in effect until the projects were paid for," said Horn. ‘‘I think we have always been very, very specific that we were talking about a 10-year construction plan."

‘‘I don't think they (voters) were mislead," said Rep. Ed Murray, D-Seattle. He said that it makes good financial sense to borrow the money at today's low interest rates, build the projects quickly, then gradually pay off that debt.

‘‘We're speeding up the projects," he said, ‘‘and we're doing it for a very good price."