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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.

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

As of July 2022, MRSC is aware of more than 110 cities and towns in Washington that have established TBDs, many of which are funded by sales taxes or vehicle license fees as described below.

MRSC is only aware of five counties that have established a TBD. One of those (a partial-county TBD serving the Point Roberts peninsula) relies on the border area fuel tax, while the rest are unfunded.

For the complete list of TBDs that MRSC is aware of, download the following file:

  • List of transportation benefit districts (Excel) – Includes funding information for each TBD, as well as when it was formed and whether its powers have been assumed. Information can be sorted and filtered.

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. 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.

However, if the jurisdiction that established the TBD votes to "assume" its powers as described below – which most jurisdictions have – the TBD ceases to be a separate legal entity and no longer requires separate meetings.

If a TBD includes territory in multiple jurisdictions, it must be governed under an interlocal agreement pursuant to chapter 39.34 RCW, with the governing board conforming to the requirements of RCW 36.73.020(3).

Assumption of Powers

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 ceases to exist as a separate legal 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 July 2022, about 85% of the cities and towns that have established TBDs have also assumed their powers. (See the "List of TBDs" section above 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

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

Sales and Use Taxes

The most common TBD funding source is a sales and use tax of up to 0.3% (RCW 82.14.0455, RCW 36.73.040(3)(a)).

Effective July 1, 2022, 0.1% of this sales tax may (optionally) be imposed councilmanically (by a majority vote of the governing board), as long as the TBD includes all of the territory within the jurisdiction(s) forming the TBD. Otherwise, the sales tax must be approved by a simple majority of voters.

These sales tax may generally not exceed 10 years, but they may be renewed for additional 10-year periods with voter approval or a vote of the governing board, as appropriate. The TBD sales tax may only exceed 10 years for the repayment of debt, in which case 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. 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).

Vehicle License Fees

Another common TBD funding source is a vehicle license fee (RCW 82.80.140, RCW 36.73.040(3)(b)). Initiative 976, approved by voters in 2019, would have eliminated the ability to impose any TBD vehicle license fees. However, this initiative was ruled unconstitutional by the state Supreme Court in 2020 (Garfield County Transp. Auth. et al. v. State et al.).

TBDs may impose councilmanic vehicle license fees up to $50 without voter approval, subject to the following conditions, or may impose fees up to $100 with voter approval.

A TBD may impose a nonvoted vehicle license fee up to $20 at any time, but 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 a maximum of $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.

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.

Annual Reporting

Transportation benefit districts must submit annual financial reports to the State Auditor’s Office (SAO) 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 page on Annual Financial Reporting.

If the city has assumed its TBD, it must still prepare a separate annual financial report for the final (full or partial) year of the TBD's existence, and the city must submit a New Entity Creation or Dissolution Notification form as noted earlier. For all future years after this final report is completed, the TBD's activities will be incorporated into the city's regular annual financial report.

In addition to the SAO 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. MRSC's conclusion is that this requirement continues even after a city assumes its TBD.

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

Voted TBD Sales Taxes

Councilmanic (Non-Voted) TBD Sales Taxes

  • Battle Ground Ordinance No. 22-05 (2022) – Imposing a councilmanic 0.1% TBD sales tax up to 10 years and stating intent to place a ballot measure before the voters for an additional 0.2% in November 2024. (City did not have a TBD sales tax previously.)
  • Poulsbo Ordinance No. 2023-01 (2023) – Imposing councilmanic 0.1% TBD sales tax
  • Vancouver Ordinance Nos. M-4383 and M-4384 (2022) – First ordinance makes minor updates to city code to reflect new councilmanic authority; second imposes councilmanic 0.1% sales tax

Vehicle License Fee Resolutions

Bond Measures

  • Auburn TBD Resolution No. 2012-2 (2012) – Seeking voter approval for $59 million in general obligation bonds for transportation improvements; failed with 50% approval.

Material Change Policies

TBD Budgets

Annual Transportation Improvement Reports

Dissolution Ordinances

Recommended Resources


Last Modified: March 30, 2023