Genesis Health Clubs, advocate of reform, delinquent on $349,000 in property taxes
TOPEKA — The Kansas Legislature sent Gov. Laura Kelly a bill bundling elements from more than a dozen bills, including a property tax exemption for fitness, restaurant and child care businesses able to demonstrate they were in direct competition with operations of state or local government.
The Senate approved the package Thursday on a vote of 26-13 despite bipartisan complaints Senate Bill 8 was decorated like a holiday tree with special-interest tax policy. The deal previously passed by the House 76-43 contained 18 distinct policy changes. It now goes to Gov. Laura Kelly, and could be added to the Democratic governor’s list of vetoed bills.
Sen. Tim Shallenburger, a Baxter Springs Republican and former speaker of the Kansas House, said he was disturbed the tax measure was packed with changes in tax code his constituents weren’t demanding of the Legislature. He said House and Senate members ought to be devoted to salvaging important reform vetoed by Kelly, including provisions lowering the state sales tax on groceries and adoption of a flat-rate state income tax.
“This bill is not going to make it through the process,” said Shallenburger, who did vote with his GOP colleagues for the bundled bill. “I’m confident that if the governor vetoed a much better bill than this, that had real provisions that Kansans want, she will surely veto this one.”
The list of tax benefits in the latest bill forwarded to Kelly included $14 million for a sales tax break on equipment and machinery purchases by telecommunications companies, $10.6 million for tax credits related to adoption expenses and $10 million in tax credits for pregnancy resource centers dedicated to reducing abortion. Property tax relief also would be provided for businesses engaged in agricultural tourism, such as farm wineries.
Fear of government
Sen. Caryn Tyson, the Parker Republican and the Senate’s top negotiator on tax policy, said the bill was designed to restrain state, city, county, township, university, school district and community college investment in facilities or services that could be provided by private businesses. She said child care, restaurant and fitness businesses shouldn’t pay taxes to government entities using that money to establish functions the free market could handle.
“I think this is a good bill,” Tyson said. “We should not be in fear of government competition. This is legislation that directly takes on the issue of government competing with private industry.”
The lone proponent for this tax exemption was the Kansas Chamber, but Tyson said supportive business owners were afraid to testify at the Capitol because of potential “retaliation” by local government officials.
The effort to provide tax breaks to specific sectors of the economy had been championed for years by owners of Genesis Health Clubs, which reportedly operated at least 58 fitness gyms in Kansas, Colorado, Nebraska, Missouri, Oklahoma and Iowa. Genesis, which has invested heavily in lobbying for sales and property tax breaks at the statehouse, laid claim to being the largest privately owned health club organization in the United States.
In 2021, Genesis owner Rodney Steven pursued a property tax exemption for his clubs while delinquent on at least $549,000 in property taxes owed in Shawnee, Johnson and Douglas counties. His objective was to insert into a tax transparency bill a clause delivering Genesis an estimated $2.5 million annually in property tax reductions.
A search of property tax records showed the Wichita-based company was currently delinquent on $349,000 in property taxes in Johnson, Douglas and Shawnee counties. Genesis is apparently current on property tax obligations in Sedgwick County, where the company is headquartered.
Residential property tax
Sen. Tom Holland, a Baldwin City Democrat who voted against the tax bill, said the Legislature’s selection of three types of businesses to benefit from targeted tax reform was “extremely problematic.”
He said government taxing entities undercut by the bill, if signed into law by the governor or made law through a veto override by the Legislature, would likely be forced to make up lost property tax revenue from businesses by raising residential property taxes.
“This is really more that we’re trying to figure out a clever way to somehow subsidize a business model that just won’t work,” Holland said.
Under the bill, the property tax benefit would be available to businesses located in a city or within five miles of the government-initiated competition. The tax exemption would target business offering substantially the same goods or services as government. The preferential tax treatment wouldn’t be retroactive to past taxing years, advocates of the bill said, and would be restricted to companies with taxes paid in full.
Provisions of the bill would apply to the 2024 tax year. The property tax exemption, however, wouldn’t be open to businesses started after July 1, 2023, if the rival government operation had already been put in place.
In the future, ballot propositions for government financing of operations related to fitness, child care and restaurant facilities would be required to include language indicating a private business could later claim an exemption from property taxes.
Sen. Mike Thompson, a Republican from Shawnee who supported Senate Bill 8, said motivation for the reform emerged from philosophical ideas about limited government. He said it was time the Legislature pushed back against public investments best left to private businesses.
“The reason property taxes are out of control is that government has overstepped its role in spending and trying to develop (services) and trying to be part of the free market,” Thompson said.
Kansas Reflector is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Kansas Reflector maintains editorial independence. Contact Editor Sherman Smith for questions: info@kansasreflector.com. Follow Kansas Reflector on Facebook and Twitter.
