‘We are in dire straits’: Even Washington’s wealthiest town can’t make our backward tax system work

Need more proof that Washington’s tax system is as messed up as it gets?

Even the richest town in the state can’t make it work.

News has washed in from the Gold Coast of Lake Washington that the town of Medina, home to the two wealthiest people on the planet and the seventh richest ZIP code in America, is right now having a budget crisis.

“We are in dire straits,” one council member put it in a somber meeting earlier this year as the council weighed the unthinkable.

“It’s a tough thing,” another council member said. “It’s very tough to consider paying additional taxes.”

Welcome to the club, Medina!

The town of 3,200 is discovering what King County, Seattle and countless other municipalities around here have been screaming for nearly two decades: the math doesn’t work anymore.

“You may find it hard to imagine that the City doesn’t have enough income to sustain current service levels, particularly in this economy,” was how the Medina newsletter, sent out this month, gingerly broached the subject of its forecast red ink to its moneyed citizenry.

It’s facing about an 8% budget shortfall next year, and rising. So the Medina council voted to put a sizable property tax levy on the ballot for November. It would raise the rate for the town’s portion of residents’ property tax bills by about 31% — from 64 cents for every thousand dollars of house valuation to 84 cents per $1,000.

If voters say no, even in Medina they’re now threatening cuts to basic stuff like police, fire or parks.

“It’s really just a math question,” Medina’s city manager, Michael Sauerwein, told me, channeling what a gazillion local officials in less tony parts of the state have been saying for years. “The rate of inflation for the cost of core government services is going up faster than revenues.”

And why is that?

If this were an old “Seinfeld” rerun, at this point he would curse under his breath and say “Newman!” Except for our purposes it would be: “Eyman!”

He didn’t say that. He said: “This is the system we’ve had in this state for the past 18 years. There is a 1% cap on property-tax revenue, so we are limited by that unless the voters agree to raise the rates.”

The 1% limit came courtesy of a Tim Eyman initiative back in 2001. It was thrown out by the courts but rashly reinstated by the state Legislature.

The theory is fine, as it puts some restraint on local government spending. But the 1% figure is so unrealistically low it gnaws away even at country clubs like Medina. Inflation is almost never that low, plus with all the new people moving here there are bound to be greater demands on police, fire, courts and the like.

This is why Seattle has been exhausting its generous residents with one levy campaign after another, for roads, parks, housing, you name it.

Medina is home to tech kings like Bezos and Gates, as well as royalty like Simonyi and Myhrvold. Plus there’s plenty of old Seattle money like the Pigotts. Still, it says it can’t keep pace. City staff say the 1% cap has eroded all the town’s reserves.

“We bring in $2.8 million in property tax a year,” Sauerwein said, “and so a 1% increase on top of that is only $28,000 more for next year. Just our fire services alone are projected to go up by $50,000.”

Oh well, you’re probably saying. If anyone can afford it, it’s Medina, so no tears for them. It’s not like Seattle or South King County cities, where there are plenty of working poor to get brutalized by our backward tax code.

But why function like this? Why does a blue state retain such a red-state tax system? Obviously there needs to be some better way to tax wealth or income (which somehow I doubt Medina would favor). But at the very least, why not amend Eyman’s tax cap so it adjusts with inflation, instead of this 1% number from his right-wing dreams?

I hear some really important people live in Medina. Maybe now that it’s their town that’s said to be in “dire straits,” these questions will finally get some traction.