When even wealthy towns like Clyde Hill are going broke

The average home in Clyde Hill, population 3,100, is worth $4.3 million. The typical lot is at least 20,000 square feet. It's not exactly a hardscrabble kind of place.

Yet this Gold Coast town in the richest part of the Eastside is … going bankrupt?

"I call it ‘school bus going over a cliff,' " Wayne Burns, a business executive who served on a fiscal committee for Clyde Hill, told the City Council last week. "The city is going to run out of cash sometime between 2029 and 2030. The city would go bankrupt."

I learned of Clyde Hill's financial distress in The Urbanist, which has been covering growth and budget issues on the Eastside. It didn't surprise me, as one by one, every city and county in the state reaches this point eventually. Even the wealthiest ones are struggling to make the math work.

It's by design, believe it or not. We've built a local tax system that virtually guarantees existential crises.

Clyde Hill leaders say that absent an enormous new property tax levy, the city will likely cease to exist.

"It's been here incorporated for 73 years," said City Administrator Heather Thomas-Murphy. "That's really the question: Can we remain a viable city?"

It's become a tiresome, repetitive saga for local taxpayers. Last year, Edmonds announced it was so far in the red it might have to sell off City Hall to developers. They put a big property tax on the ballot instead, which failed. Rounds of cuts to services ensued.

Thurston County is currently in the same pickle. So is the Gold Coast town of Yarrow Point. Medina of all places went through this. It doesn't really matter how big or rich your property base is - the vise tightens eventually.

Thomas-Murphy said Clyde Hill's calculus is pretty simple.

"It's not a result of overspending," she said. "It's a structural imbalance with how property tax revenue works. The 1% cap is the reason."

A five-member citizen commission spent nearly two years sifting through Clyde Hill's books, and concluded, unanimously, that same thing.

"We looked for fat and didn't find much," was how one put it.

The 1% cap means cities and counties can raise their overall property tax revenues only by 1% each year. They can also add on tax revenue from new construction, which helps in high-growth cities like Seattle but not much in relatively static towns like Clyde Hill.

Bottom line: Clyde Hill brought in $1.37 million in property taxes last year. So this year, they can increase that by roughly 1%, or a grand total of $13,700. That typically wouldn't even cover wage increases for the 11-person Police Department.

"We've got insurance increases, salaries, contracts and so on," Thomas-Murphy said. "We're no different than any city. No one can keep up at 1%."

The 1% cap was passed by voters in 2001 in an initiative from anti-tax gadfly Tim Eyman, which later got thrown out by the courts. The state Legislature then reenshrined it. For a time, it forced efficiencies, which was good. But then it began degrading government services in a grinding fashion.

The cap has limited local property tax revenues to about 28% total growth since 2001. But inflation has gone up 101% - nearly four times faster.

As Seattle voters are aware, there's a way to try to keep up - cities can ask voters for a levy lift. This is why Seattle now ritualistically petitions voters to raise taxes for stuff that used to be funded in the regular budget. Seattle has special recurring levies now for low-income housing, families and education programs, roads maintenance and transportation, libraries and parks.

Clyde Hill is planning to ask for a huge tax increase in November to basically save the city from going under. The city's portion of the rate would shoot up 72% in a single year, and then increase annually by 3% after that - three times the rate of the 1% cap.

That owner of the average $4.3 million home would see the local portion of their taxes go up by nearly $1,000.

"It's a very big ask, for our residents to vote for this," one council member said.

Don't cry for Clyde Hill. Part of the reason they're in this predicament is they dithered for years at the thought of asking their residents for more money. Even if they pass this increase, they'll still have lower rates than Seattle or even Bellevue.

But if the wealthiest places are in some measure of crisis, poorer places are in a world of hurt. They don't have $4.3 million houses to tap into.

So what should be done?

Higher property taxes for everyone isn't the answer. But the state, which has rapidly growing revenue streams, ought to bail out struggling cities and counties. Legislators could have used some proceeds from the new millionaires income tax to help prop up cities all over the state. They chose not to. They haven't used the income tax to compel any larger tax or budgeting reforms.

Clyde Hill will be fine; they could also just dissolve and join Medina, which is even richer! But it's a sign of something very off in the ecosystem when even the most affluent places are also the ones going broke.

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This story was originally published July 9, 2026 at 6:40 AM.