Category Archives: Taxes

Massive Thurston County tax increase proposed for $300 million new courthouse scheme

Thurston County Commissioner and former Thurston County Sheriff Gary Edwards was the lone vote against the massive tax increase

Last week, at the Thurston County Commissioner meeting held at Rochester Middle School, the Thurston County Commissioners, by a vote of two to one approved a massive 39.5% property tax increase to be placed on the April, 2020 ballot for Thurston County (see Board Agenda here – Item 6a). In theory, this tax increase is for a new courthouse project that has been pushed for many years by Thurston County staff, Thurston County judges, and various other special interests. However, in the rush to build a new $300 million (or more) courthouse in the City of Olympia, a lot of questionable steps have been taken, special interests are lining up for their payoffs, and the taxpayers of Thurston County are put far last on the priority list. If you didn’t know this – don’t worry, you are not alone– neither does 64% of the rest of Thurston County according to a recent taxpayer funded survey (see summarized report here, supporting docs here and here).
Independant Commissioner John Hutching’s vote to support the major tax increase was a disappointment to most of his supporters

Independent Commissioner Gary Edwards made an impassioned and well-reasoned speech against the proposal last week. Unfortunately, he was the lone dissenting vote against staff’s proposal. Most observers predicted that recently elected Democrat Commissioner Tye “the High Tax Guy” Menser would support the tax increase because he supports most tax increases. Menser has repeatedly admitted he is a protégé of former Commissioners Sandra Romero and Valenzuela who were also part of the max tax crew in Thurston County. However, it was Independant Commissioner John Hutchings vote to support the tax proposal which disappointed most people, particularly those who voted him into office. It now seems likely that this vote (along with a few notable others) have doomed his reelection chances in 2020. His political career is now in clear jeopardy. Few supporters of Hutchings voted for him so he could ramp up their property taxes for more unnecessary building fiascos in Thurston County.
Tye “The High Tax Guy” Menser was narrowly elected Thurston County Commissioner in 2018, and has been pushing for bloating government at every opportunity – regardless of the cost
Democrat Thurston County Commissioner Tye Menser
A massive tax increase and no guarantees

Several disturbing details surrounding this recent proposed tax increase have come to light. These should concern all who live, pay taxes, and vote in Thurston County. For example:
Thurston County Manager Ramiro Chavez at Commissioner meeting April 30, 2019 in Rochester, Washington

Normally, capital projects like buildings and new facilities are financed through a tax mechanism called “Revenue Backed Bonds.” Read more about these funding mechanisms in state law at RCW 39.46.150 & RCW 39.46.160. These are a predictable method of ensuring that the funding exists for the life of the bonded debt, and it dedicates the funds so that they can’t be diverted to other uses. However, under Washington State’s constitution, this type of debt requires a 60% voter approval. This is due to the fact that future generations are burdened by this decision to increase debt and this higher threshold was chosen to ensure that the projects being proposed are widely supported by the community. Thurston County Manager Ramiro Chavez admitted this would be the normal path to financing a massive building project like this, but staff had determined that 60% of the voters of Thurston County would never support this size of a tax increase. Therefore, staff wanted to push a financing method without this risky 60% voter approval hurdle. Instead, staff wanted to push “General Obligation Bonds” which only have a 50% voter approval threshold (See RCW 84 for state law on property taxes)

Secondly, supporters of this proposed new courthouse admitted, repeatedly during the April 23, 2019 public hearing, that the vote for the proposed tax increase should be held on any special election date EXCEPT during the November 5, 2019 general election date so that fewer voters would participate. Supporters of the tax were demanding this explicitly because they admitted the majority of voters in Thurston County probably wouldn’t support this tax increase. These comments were largely directed at this author’s earlier comments at the same hearing that if the Commissioners were going to put this tax increase on the ballot they should give the largest number of voters the chance to vote on it in November. Supporters of this tax increase are terrified that a large number of voters would vote to reject this proposal. I can’t blame tax supporters for wanting to hide from the voters because they probably would lose at the ballot box if the voters of Thurston County realize what this boondoggle really is. (From a policy standpoint, this is why I’ve always recommended eliminating the special election dates in Washington state law, and instead put all proposed tax increase votes on the November ballot. Making this policy change would reduce the special interest gaming of the current special election system).
This seems to be Thurston County’s staff approach to decision making

Which gets to the most disturbing aspect of this proposed tax increase. The tax increase itself legally has nothing to do with building anything at all. While it is being sold as a funding mechanism for some undefined courthouse project (nobody yet knows the true cost – $250 million? $300 million?), the actual legal language of the tax increase doesn’t require Thurston County to build anything with these funds. At first staff contested this fact, but when confronted by citizen Jon Petit with the actual language of the very proposal staff was pushing on the county commissioners, Thurston County Manager Ramiro Chavez was forced to admit Mr. Petit was correct. There is no obligation that Thurston County build anything. The only legal guarantee is if the voters are suckered into approving this scheme, they will be paying much higher property taxes.
Thurston County staff want to increase the burden on local taxpayers

Another policy impact of this tax proposal, if passed by the voters, is the fact that General Obligation Bonds take funds from the general budget of Thurston County. While this tax proposal is an increase of 39.5% over the existing rate of general obligation funds, it also means that if the staff of Thurston County start down the project path to build this building and they go over budget (a common occurrence in Thurston County), those increased tax dollars will be extracted and diverted from services like the sheriff’s office. It is a near certainty that taxpayers in Thurston County would be blackmailed into even higher tax increases in the near future to pay for the mistakes and the predictable budget fiasco of this undefined “new courthouse” project.
City of Olympia Mayor Cheryl Shelby (D)

Finally, most disturbingly, based on the testimony of the Mayor of Olympia, Cheryl Shelby at the April 23rd public hearing, some type of “partnership” arrangement has been hatched for the undefined courthouse boondoggle (and the taxpayers already have paid $200,000 for this “partnership” according to minutes from the August 14, 2018 commissioner meeting minutes (linked here see item 5a. Note Item 5b was the $300,000 cost of this draft feasibility report linked here) This is terrifying to anyone who has bothered to pay attention to local government in Thurston County. The only Thurston County local government with a worse track record and has demonstrated even more incompetence in building projects and financial mismanagement than Thurston County itself is the City of Olympia. Their bloated, overbudget City Hall (true cost of $52 million) was just the most glaring example, but they also like to give away multi-million dollar buildings for free (to organizations where councilmember spouses work), spend $350,000 on one-stall restrooms, and generally waste taxpayer funds on homeless camps and other fiascos.
The City of Olympia’s investment in Homeless Drug Addict Camps has helped add local flavor to the downtown city experience near the proposed courthouse location

Conveniently, the theoretical location of this “new courthouse” in downtown Olympia will also help the City of Olympia attempt to escape the consequences of their impactful planning policies which have managed to chase businesses away from downtown as fast as business leases expire. Local political “leaders” believe this Thurston County courthouse project might help mask the urban decay and postpone any local political reckoning for the failures of the past and current Olympia City Council. Thurston County voters have every reason to be concerned. In the recent survey – Thurston County voters were almost five times more concerned about the proposed courthouse costs and taxes than they were about any other issue related to this proposed scheme.
Thurston County – A history of building fiascos
Thurston County legal counsel Elizabeth Petrich at the hearing April 30, 2019. Her legal advice has helped Thurston County lose many lawsuits including the record setting $12 million jury verdict against Thurston County in the Maytown case.

Thurston County has a long and colorful history of incompetence, failure, and waste when it comes to building government facilities of any kind. Some have attributed these repeated failures to the planning department, which is often plagued with scandal and questionable leadership. A general government staff infection seems to exist in Thurston County upper management. Some of these failures have also been due to poor political leadership which has afflicted the county on a frequent basis over the years. Another theory involves concerns over the undue influence of special interests who always profit from these decisions like the architecture company and other vendors who stand to profit greatly from the mistakes of Thurston County staff. These special interests also appear to have great influence over the decision making at the staff level and tend to control and direct staff to do their bidding. Conveniently, this bidding always results in hefty sums of taxpayer cash which always end up with these special interests. Regardless of the theory, the result has often been the same –

Let’s look at just a few of the more recent examples:
Former Thurston County Commisioners Romero, Wolfe and Valenzula deserve to be recognized for all they achieved.
Don Krupp, former Thurston County Manager (now county manager in Clackamas County, Oregon)

Thurston County’s jail fiasco made state-wide news for half a decade as the brand new $61 million jail that was rejected by the voters, built by Commissioners Romero, Valenzuela, and Wolfe anyway (under the direction of former Thurston County Manager Don Krupp), and then sat empty for five years because nobody bothered to plan a budget to operate the facility. We’ve written about this fiasco over the years (see here, here, and here). Like most failures of Thurston County “planning,” this one began as an effort to circumvent the voters. A failed effort to build a $102 million jail/justice center was soundly rejected by Thurston County voters in 2004 (see election results here – 61% opposed). An effort to impose a different excise tax was also rejected later. As is frequently the case, Thurston County planning staff was certain they knew best and they colluded with the old Commission, put the debt on future generations by taking out more general obligation bonds without a vote of the people and then built the jail anyway.
While it was empty 5 years, it is finally being used.

Of course, they didn’t call it a “jail,” but instead used the Orwellian term “Accountability and Restitution Center” or “ARC” for short. Once the jail was completed, it sat empty for five years, costing the county $250,000 or more in annual maintenance costs while the county struggled to find some money to run the facility. It wasn’t until the failed Democrat incumbents Valenzuela, Romero and Wolfe were replaced by Independent Commissioners Blake, Edwards, and Hutchings that the empty jail was finally put to use.
3400 building in Thurston County – Thurston County spent $8 million and 18 years to reduce the value of this empty building from $4 million to $2 million

Another classic example of Thurston County’s planning incompetence was the sad saga of the 3400 building (read more written at the time here). This embarrassment existed for many years as another monument to local government incompetence and failure in Thurston County. Originally a commercial fish cannery purchased by Thurston County in 1998 for $3.4 million with the expectation it could be turned into a jail. Those expectations were dashed by reality (nobody at the time bothered to verify whether it could be converted to this use), and Thurston County gradually squandered over $8 million on this empty building. After 18 years during which time the 3400 building sat mostly unused and empty, the brilliant staff of Thurston County found ways to destroy the value even further by giving away the parking lot for a homeless camp project called Camp Quixote, and then finally dumping the failed money pit for a fraction of the purchase cost 18 years earlier.
The last time the Thurston County Courthouse was located in downtown Olympia, it was in this building which was vacated by Thurston County in 1978. (Wikipedia Commons)
Thurston County always seems to need a new courthouse.
Thurston County Treasurer Jeff Gadman bragged at the public hearing on April 23, 2019 about how much the current courthouse facility has been allowed to degrade with staff’s lack of maintenance.

The current Thurston County Courthouse was built in 1978. A casual review of newspaper articles from that era along with a review of archives demonstrates that the promises made to taxpayers back then remain identical to the promises made today for the “new” courthouse in downtown Olympia. The Thurston County Commissioners and planning staff in the 1970s promised that the new courthouse would be energy efficient, have plenty of parking, be sustainable long term, and have the ability and room to expand to accommodate future needs. Staff promised to maintain the facility. Many of those promises went unfilled – particularly the parking plans and building maintenance. However, the need to escape the problems of downtown Olympia like traffic, parking, and other related issues were real to the citizens of the community at the time.

In my next article on this subject, I plan to discuss better alternatives than this proposed fiasco. The biased process used to get this pre-determined outcome also merits more attention. Additionally, the special interests pushing this boondoggle for their own selfish ends, regardless of the harm inflicted on the community should be closely examined and studied.

Based on a 1975 Environmental Impact Statement, which this author found in the state archives, the Thurston County Commissioners at that time were defensive about the public criticism of the high costs for “marble palaces” and they were moving forward with the project regardless. It is worth noting, every Thurston County Commissioner who voted for the proposed courthouse project at the time were removed from office by the voters at the next election. History has a tendency to repeat itself and both Commissioner Tye “the big tax guy” Menser, and Commissioner Hutchings should take note.

Unfortunately, if this massive tax increase is approved, nobody will remember today’s politicians who hurt us, but the taxpayers, including tens of thousands yet unborn will still be paying for it.

The Most Valuable Tax “Loophole” Available Today

By Brett Eversole, analyst, True Wealth Systems
Friday, February 13, 2015

The government seems to spend its time finding ways to increase taxes…

In 2013, income taxes for America’s top earners increased. And in last month’s State of the Union address, President Obama proposed capital gains tax increases among other changes.

The only things certain in life are death and taxes, as the saying goes. But if you haven’t already, you can still take advantage of one of the most powerful tax loopholes available… your home.

For most individuals, buying a home is a powerful tax shelter. In fact, I can’t think of an asset that has more government incentives than the home you live in.

Let me show you what I mean…

First, you can deduct the interest on your mortgage off your taxes. You can also deduct certain other expenses, like insurance and property taxes. Depending on your income tax bracket, this could lead to tax savings of a few hundred dollars a month.

But that’s the small stuff. The major tax advantage comes when you sell your home…

This is probably the best tax loophole available today… The government allows you to keep up to $500,000 in capital gains, tax-free. (Depending on your filing status.)

That’s not a typo. If you’re married, you can keep up to half a million dollars in profit on your home sale without having to pay any capital gains taxes. And that benefit could have a massive positive effect on your net worth.

For example, say John buys a $250,000 home and Jill buys $250,000 in stocks and bonds. After 20 years, both have increased in value to $750,000 – a $500,000 increase.

When John sells his home, he pays no taxes. He walks away with the full $750,000. Jill, on the other hand, has to pay capital gains taxes on the $500,000 she gained. Today, that would leave her owing 20% to the government – or $100,000.

Jill would walk away with just $650,000… 13% less than John.

This is truly the most valuable tax loophole available today. And all you need to do to take advantage of it is own a home.

Importantly, buying a home is still a good investment decision today. Housing is still incredibly affordable… and that means higher prices are likely from here.

We’ve written about housing affordability many times in DailyWealth. It’s a simple idea…

Housing affordability compares three things… income, home prices, and mortgage rates. These three factors tell us if typical incomes can pay for typical mortgage payments.

Today, affordability sits well above its historical average. Home prices would need to rise around 30% for affordability to move back to normal.

This tells us that there is still upside in U.S. housing. And that the most valuable tax loophole available is still a prime opportunity.

If you don’t already own a home, it’s a tax loophole you should consider today.

Good investing,

Brett Eversole