Here's the answer, according to the archivists of the Secretary of State's office:
From the 1850s throught the 1920s, city after city fought for the title. Such mighty metropolises as Steilacoom, Pasco, Port Townsend, Vancouver and Yakima all vied for the chance to be Washington's seat of government.
Olympia, however, had been named the territorial capital in 1853, simply because it was the only town with a newspaper. And for seven decades, scrappy Oly managed to hang on to the state-capital title like a starving man with the last salami.
The feuds were finally put to rest in 1927, when a multi-million-dollar domed capitol building in Olympia was finished, sealing the deal.