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Transportation Benefit Districts

This page provides a general overview of transportation benefit districts (TBDs) in Washington State, including formation procedures, assumption of powers, revenue sources, reporting requirements, and sample documents.

Initiative 976: I-976, which would restrict vehicle license fee (car tab) fees statewide and eliminate the ability of TBDs to impose any car tab fees, has passed. An injunction has been issued while several jurisdictions challenge the initiative's constitutionality, and revenues continue to be collected for the time being. We will provide more information as it becomes available.

For more detailed information on I-976, refer to the Association of Washington Cities (AWC) resources and the state Office of Financial Management (OFM) fiscal impact statement.


Overview

Chapter 36.73 RCW authorizes cities (see also RCW 35.21.225) and counties to form transportation benefit districts (TBDs), quasi-municipal corporations and independent taxing districts that can raise revenue for specific transportation projects, usually through vehicle license fees or sales taxes.

Transportation benefit district revenue may be used for transportation improvements included in a local, regional, or state transportation plan (RCW 36.73.015(6)). Improvements can range from roads and transit service to sidewalks and transportation demand management. Construction, maintenance, and operation costs are eligible.


List of TBDs

MRSC is currently aware of more than 100 TBDs throughout Washington State, and more are being created every year. For details, including an interactive map, see our List of Transportation Benefit Districts.


Formation

Any city or county may form a TBD by ordinance, following a public hearing, if it finds that the action is in the public interest (RCW 36.73.050). The establishing ordinance must specify the boundaries of the district - which may include all or part of the city or county establishing the TBD - and the transportation improvements that will be funded. The boundaries and functions of the TBD may not be changed without further public hearings.

A transportation benefit district may include all or part of the territory in another jurisdiction (city, county, port district, county transportation authority, or public transportation benefit area) through interlocal agreement (RCW 36.73.020(2)).


Governance

Almost all TBDs share the same boundaries as their establishing jurisdiction, in which case they must be governed by the members of that jurisdiction's legislative body, acting as a separate legal entity, unless the jurisdiction assumes the TBD's powers (see below). Even though they comprise the same members, the legislative body and the governing board are separate and distinct bodies and must hold separate and distinct meetings.

If a TBD includes territory in multiple jurisdictions, it must be governed under an interlocal agreement pursuant to chapter 39.34 RCW. The governing board must consist of at least five members, including at least one elected official from each participating jurisdiction, or - if the TBD has the same boundaries as the metropolitan planning organization (MPO) - it may be governed by the MPO governing body (RCW 36.73.020(3)).


Assumption of Powers

Effective July 2015, any city or county that forms a TBD with the same boundaries as the city or county may absorb the TBD and assume all of its "rights, powers, functions, and obligations," with the result that the TBD would cease to exist as a separate entity (chapter 36.74 RCW).

The city or county legislative authority must first hold a public hearing according to the requirements of RCW 36.74.020-.030. If, after the hearing, the legislative authority determines that “public interest or welfare would be satisfied” by the assumption of the TBD, it passes an ordinance or resolution that abolishes the TBD governing body and vests the city or county legislative authority with all the rights, powers, functions, and obligations that the TBD governing body possessed.

As of December 2018, about three-quarters of the TBDs in the state have been assumed by their cities or towns. (See MRSC's List of Transportation Benefit Districts for details.)

Note: A section has been added to the BARS Manual discussing the requirements for jurisdictions that assume the powers of their TBDs. In particular, a jurisdiction assuming a TBD must (1) still file an annual financial report for the year in which the TBD was assumed and (2) submit a New Entity Creation or Dissolution Notification form. For more details, see the BARS Manual, Section 3.11.1.120 (see Cash Basis Manual and GAAP Manual).

For more details on accounting and reporting requirements related to TBD assumption, see our blog post: Assuming the Powers of Your Transportation Benefit District?


Funding Sources

If I-976 is upheld in court, vehicle license fees will no longer be an option for transportation benefit districts, leaving sales taxes as the primary revenue source. We will provide more information as it becomes available.

Transportation benefit districts are primarily funded through vehicle license fees and/or sales taxes. There are several other funding options available such as border area fuel taxes, bonds, and impact fees, but these are seldom or never used.

Vehicle License Fees

The most common TBD funding source is a vehicle license fee (RCW 82.80.140, RCW 36.73.040(3)(b)). TBDs may impose councilmanic vehicle license fees up to $50 without voter approval, subject to the conditions below, or may impose fees up to $100 with voter approval.

Until 2015, vehicle license fees of $20 or less could be imposed without voter approval, but 2ESSB 5987 increased the allowable nonvoted vehicle license fee up to a $50 maximum. However, a TBD may only impose a nonvoted vehicle license fee above $20 as follows:

  • Up to $40, but only if a $20 fee has been in effect for at least 24 months.
  • Up to $50, but only if a $40 fee has been in effect for at least 24 months. Any nonvoted fee higher than $40 is subject to potential referendum, as provided in RCW 36.73.065(6).

Any license fees over these amounts, up to $100, must be approved by a simple majority of voters. However, most jurisdictions have opted for the councilmanic (nonvoted) fees. The only TBD to successfully pass a voted vehicle license fee is the Seattle TBD, where voters approved a $60 fee increase in 2014 after rejecting a similar increase in 2011. A handful of other jurisdictions have attempted voted TBD license fees without success, including Bremerton, Burien, and Edmonds (all in 2009) and King County (in 2014).

If two or more TBDs with the authority to impose a nonvoted fee overlap, credits must be issued so that the combined nonvoted fees do not exceed $50 total.

If a countywide TBD wishes to impose a vehicle license fee, it must distribute the revenues to each city in the county by interlocal agreement, which must be approved by 60% of the cities representing 75% of the city population (RCW 82.80.140(2)(a)). If this threshold cannot be met, a district that includes the unincorporated areas only may impose the nonvoted license fees discussed above (RCW 36.73.065(5)).

For a list of current TBD vehicle license fees, see the Department of Licensing’s page on local transportation benefit district fees.

Sales and Use Taxes

Another common TBD funding source is a sales and use tax of up to 0.2% (RCW 82.14.0455, RCW 36.73.040(3)(a)), which must be approved by a simple majority of voters. This taxing option is limited to 10 years, with the ability to place this same sales tax option back before the voters for one additional 10-year period. The exception to this time limitation is for the repayment of debt; if the TBD sales tax is to be used to repay debt, the ballot measure should state the intended use and duration of the debt service.

In recent years, voters have approved the vast majority of all proposed TBD sales and use taxes. At least four jurisdictions - Seattle, Tacoma, Enumclaw, and Moses Lake - have imposed a sales tax on top of an existing vehicle license fee. For individual results, see MRSC’s Local Ballot Measure Database (select "Filter by Ballot Categories," select the "Funding Type/Statutory Authority" drop-down menu, and look for the TBD sales tax and TBD vehicle license fee options).

Other Funding Sources

Other potential funding sources include:

  • General obligation bonds (RCW 36.73.070) - MRSC is only aware of one TBD that has attempted to pass a bond measure, and it failed with 50% of the vote (Auburn TBD, 2012).
  • Border area fuel tax, only available to TBDs that include a Canadian border crossing (RCW 82.47.020). MRSC is aware of one TBD - Point Roberts - that uses this funding mechanism.
  • Impact fees on commercial and industrial development in accordance with chapter 39.92 RCW (RCW 36.73.040(3)(c) and RCW 36.73.120).
  • Vehicle tolls (RCW 36.73.040(3)(d)).
  • Excess property taxes (RCW 36.73.060).
  • Local improvement districts (RCW 36.73.080).

Material Change Policies

TBDs must adopt a material change policy that addresses significant changes to the transportation improvement finance plan that affect project delivery or the ability to finance the plan (RCW 36.73.160(1)). The policy must at least address material changes to cost, scope, and schedule, the level of change that will require governing body involvement, and how the governing body will address those changes. At a minimum, the policy must require the governing body to hold a public hearing if the revised cost exceeds the original estimate by more than 20%.


Budgeting

State law does not clearly require TBDs to adopt an appropriations budget. However, adopting a budget would be considered a best practice, and a number of TBDs have done so, setting up the budget process to coincide with the annual/biennial process used by the establishing jurisdiction. It is up to the TBD governing board to develop and adopt a budget policy.

Under RCW 36.73.020(4), the treasurer of the establishing city or county must serve, in an independent and ex officio capacity, as the TBD treasurer.


Required Annual Reporting

Transportation benefit districts must submit annual financial reports to the State Auditor’s Office using the BARS reporting templates (RCW 43.09.230).

For information on the specific TBD accounting requirements, see the BARS Manual, Section 3.11.1 (see Cash Basis Manual and GAAP Manual). For assistance developing financial reports, see MRSC’s Annual Financial Reporting Checklists page.

In addition to the annual financial report, RCW 36.73.160(2) requires TBDs to issue a separate annual transportation improvement report detailing the district revenues, expenditures and the status of all projects, including cost and construction schedules. The report must be distributed to the public and newspapers of record in the district.


Dissolution

A transportation benefit district must end its day-to-day operations within 30 days after the specified transportation improvements are completed, although the district may continue to collect revenue and service any remaining debt or financing. A TBD must be completely dissolved within 30 days after the financing or debt service is paid off (RCW 36.73.170).


Examples of TBD Documents

Establishing Ordinances

Assumption Ordinances

Vehicle License Fee Resolutions

Sales and Use Tax Resolutions - Initial Imposition

Sales and Use Tax Resolutions - Renewals

  • Sequim Resolution No. R-2018-03 (2018) - Ballot proposition for a 10-year, 0.2% sales tax renewal following assumption by city. Includes list of specific projects and cost estimates.

Material Change Policies

TBD Budgets

Annual Transportation Improvement Reports

Dissolution Ordinances


Recommended Resources


Last Modified: December 06, 2019