Wide-ranging Kansas tax exemption proposal would benefit fitness club magnate

Bill allows tax benefits for all businesses thought to compete with government entities

TOPEKA — Though he hadn’t actually read the legislation in question, Senate President Ty Masterson spoke in support of wide-ranging tax exemptions for businesses thought to be in competition with government entities.

The property and sales tax exemption plan has been kicked around for years, starting when Kansas fitness club magnate Rodney Steven began a campaign to persuade the Kansas Legislature to exempt his business, Genesis Health Clubs, from property taxes. 

Steven, who owns more than 50 Genesis facilities in six Midwest states, has been an advocate of property tax breaks for fitness businesses like his since Gov. Sam Brownback was in office. He has been delinquent on hundreds of thousands of dollars in pre-COVID 19 property taxes owed to Shawnee, Johnson and Douglas counties. 

During a Senate Assessment and Taxation Committee hearing on Tuesday, Masterson said businesses such as Genesis were suffering due to unfair government competition. 

“I think everybody likes to talk about the health club thing, right?” Masterson said. “So that’s an example. If you have a private business that has that situation, and then you use those resources from that business to create competition, right next door, that’s unfair, and explicitly against the Republican platform. So we’re looking for a solution.” 

The discussed bill, Senate Bill 252, would exempt ambulance services, child care centers, businesses dealing with entertainment, exercise and recreation, and restaurants, from paying property taxes if there is at least one governmental facility competing with the business in the county. Certain entities would also be exempt from sales taxes, among other bill provisions. 

Several lawmakers at the meeting questioned whether businesses actually need the tax cuts and criticized the broad scope of the bill. Sen. Ethan Corson, a Prairie Village Democrat, said passing the tax exemptions would just burden property owners, especially in areas like Johnson County. 

“Johnson County is basically a county full of restaurants and fitness centers,” Corson said. “So if all of them stopped paying property taxes, all of that burden is just going to go back on residential property owners. I just worry that that’s really going to backtrack a lot of the good work that the committee’s done, because I don’t see where there’s fat in the budget to cut millions and millions of dollars from basic services.”

The legislation’s fiscal note hasn’t been released, but the financial impact on the state would most likely be significant. 

Other lawmakers brought up a Kansas Legislature audit conducted about tax advantages or disadvantages to a variety of child care, mental health and health centers. The audit results were inconclusive on whether or not nonprofits, for-profits and governmental entities competed with each other.

Mike Taylor, who spoke on behalf of the Kansas County Commissioners Association, said the bill wasn’t well-defined. 

“If you look back at the history of this bill, it has been around for five or six years,” Taylor said. “It started out because the Steven family in Wichita owns the Genesis Health Clubs and they didn’t think it was fair they had to pay taxes and the YMCA didn’t. The bill has taken a lot of variations over the years, and now it’s grown so broadly that I don’t know how you would decide what businesses are tax exempt or not.”

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.

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