A couple of weeks ago I interviewed Rodney Steven II, the owner of Genesis Health Club, concerning Senate Bill 72 in Kansas. If you missed the article you probably didn’t see that Steven had contributed $45,000 to political campaigns in hopes of passing Bill 72.
Bill 72 has been designed to potentially level the playing field of privately-owned fitness clubs and the nonprofit sector (YMCA, JCC, etc.). If the bill was passed, privately-owned fitness clubs would be exempt from property tax, just like nonprofit clubs.
A lot of contention over the bill suggests that the description of the type of facility that would receive the exemptions is not great enough. The fear of some citywide politicians throughout Kansas is that the bill would make more than just fitness clubs exempt from paying property tax.
Although leveling the playing field should be a must, I’m not completely sold that Bill 72 would be beneficial to the financial security of small, medium and large government. Bill 72 defines a “health club” as a “corporation, partnership, unincorporated association or other business enterprise whose primary purpose is to offer facilities that contain cardio, weight training or strength and conditioning equipment, or both, for the preservation, maintenance encouragement or development of physical fitness in return for the payment of a fee which entitles the buyer to the use of such facilities.”
The bill continues to describe what a health club may, or may not, include in its facility. However, in the excerpt above, what scares most legislators is that it narrowly describes what a health club might be. For example, one city politician in a news article I read feared that the language used could potentially skew the perception of a “health club” and allow companies, more than fitness clubs, opt out of paying property tax.
In my mind the fear is just. The language used isn’t quite strong enough for the purpose, and I’m not sure it levels the playing field in the proper method. My opinion is in accordance with another article I’ve read recently that suggested that the opposite steps be taken — make nonprofit fitness facilities pay property tax.
Steven’s problem with the nonprofit clubs is that they build clubs on large tracks of land, in residential markets for the purpose to sell memberships. His belief is that nonprofit fitness facilities are in the same business as for-profit fitness clubs, but they avoid taxes that other business owners would have to burden.
A bill that would eliminate property tax exemptions from nonprofit fitness facilities would be controlled easier, than defining a health club. For example, you can do a quick Google search and find the YMCA facilities in your town. However, if you do a Google search for fitness facilities, you might be hard pressed to define what actually represents a fitness facility.
Would you include a CrossFit or bootcamp studio in the legislature? What if you run a boot camp out of your home? Would you be able to claim the property as a health club and become exempt from paying property tax?
These questions should scare local government. Not only would it create a multitude of headaches for courthouse filings, but it could also potentially cost city governments thousands of dollars.
The downside to passing Bill 72 seems too great in my mind. However, I’m not siding with nonprofit facilities, I simply believe to allow any private business to potentially avoid paying property tax is the wrong direction. If we are to level the playing field, the change should come on nonprofit fitness facilities paying property tax, and not change the health club landscape as it is currently established.
Tyler Montgomery is the editor of Club Solutions Magazine. Contact him at tyler@clubsolutionsmagazine.com.
