by Bradley Parsons
Staff Writer
It might be fun to stay at the YMCA, but private gym owners say the non-profit’s tax-exempt fitness centers are no fun to compete against.
They say tax breaks allow the Young Men’s Christian Association to provide top-of-the line exercise facilities at discounted prices. It’s a tough combination for private gyms to match, particularly after taxes, said David Bailey, owner of Bailey’s Powerhouse Gyms.
“It kills us,” said Bailey of YMCA’s non-profit status. “There’s no question we have to keep our costs lower to compete price-wise.”
Bailey co-owns with brothers Don and Darryl 10 Powerhouse Gyms in Northeast Florida. He said he feels increasingly squeezed by rising operating costs and price competition from the YMCA of Florida’s First Coast’s 17 area facilities.
Like many in his industry, Bailey laments that his taxes help subsidize his competition. He also questions whether the YMCA’s emphasis on fitness centers goes beyond its original mission.
But the YMCA has always promoted an active lifestyle. The organization began in 1844 as a means to boost quality of life for factory workers in Industrial Revolution-era London.
YMCA officials have told the U.S. General Accounting Office that the fitness centers simply represent the evolution of that mission. The lucrative centers also help pay for fitness scholarship programs, cheap lodging and other programs that benefit the poor.
Area spokesperson John Ream said the fitness centers play a key role in the YMCA’s initiative to combat youth obesity.
City Council member Art Graham thought of Bailey, his constituent, when he first reviewed a bill that would issue $5.1 million in City bonds to the local YMCA to pay for capital improvements to seven facilities in Duval, Clay, Baker, Nassau and St. Johns counties. That bill will appear tonight before the City Council after unanimously passing through the Council’s committee process.
Graham recalled Bailey’s displeasure with earlier YMCA legislation and questioned local YMCA representatives about their role in the local fitness industry. Graham said he came away satisfied that the YMCA was spending the money properly.
“The YMCA doesn’t like to look at it this way, but when you look at it these bonds are saving them hundreds of thousands of dollars in interest. That’s an incentive. And we have to look at it hard if we’re going to incentivize competition for taxpayers that have been here and contribute to our tax base,” he said.
But Graham said the bond issue will pay off for the City in a number of ways. Memberships are available to people who can’t pay for private gyms. The YMCA paid out $2.5 million in scholarships last year. Improved facilities at YMCA centers will generate cash to pay for after-school and summer programs, said Graham.
“Especially when you look at the amount of money we’ve cut back on similar programs, I look at anything that keeps these kids busy and keeps them out of trouble as a good investment,” he said. “This is their funding mechanism to provide services for the community.”
But a good investment for the City still represents a lousy deal for private gym owners, according to the International Health, Racquet and Sports club Association. Tax-exempt competition is one of the advocacy group’s pet issues. Its Web site lists dozens of clubs that went out of business after YMCAs opened nearby.
The IHRSA has helped convince some municipalities to prohibit tax-exempt organizations from competing in the private market. Billings, Mont. passed a no-compete law and similar legislation is pending in Massachusetts.
If non-profits stay in the fitness market, the IHRSA wants them charged taxes on the resultant revenue.
In its 2001 report, the IHRSA found that the $34 national average monthly membership cost for a tax-paying club exceeded the non-profit cost by more than $3. Bailey charges $44 a month to join Powerhouse, $8 a month cheaper than the YMCA. But Bailey said he’s forced to hold prices down to stay competitive.
One law of competition the IHRSA has apparently learned: if you can’t beat them join them. The organization’s Web site lists nine legislative initiatives in different states. Six of them are aimed at securing tax breaks.