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Y All the Fuss?

A challenge to the YMCA's tax-exempt status offers lessons for Treasure Valley businesses and nonprofits

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Normally, Ada County Commission meetings attract a handful of attendees. But at the July 3 meeting, the crowd swelled to around 220. Attendees included people from all walks of life, from the severely disabled and those living with illness or disease, to business professionals and athletic instructors.

The majority was there to show support for the Treasure Valley YMCA. In May, Ada County commissioners voted unanimously to reduce the West Boise YMCA's tax exemption rate from 100 percent to 19 percent. The change came on the heels of Axiom Fitness and Idaho Athletic Club both alleging the West Y's usage had dramatically changed to include more CrossFit and yoga facilities. But after hearing testimony from YMCA Chief Executive Director Jim Everett and beneficiaries of the Y's charitable services, commissioners reversed their earlier decision in a 3-0 vote July 2, reinstating the Y's 100 percent tax-exempt status.

The reversal was a win for the Y, but it was also a teaching moment for local nonprofits. The news that the West Y's tax-exemption rate had been drastically lowered in an earlier session, illustrated the danger of absenteeism at commission hearings; and for businesses interested in challenging a nonprofit's tax-exempt status, it also demonstrated the risk in challenging a formidable nonprofit. In fact, many supporters took to social media to organize mass support for the Y, and later, to wag a collective finger at Axiom and IAC.

"I just hope more people ... take note and cancel memberships. We need to take back control from corporations that only are for making money and not giving back socially," Rachel Hugens wrote on BW's Facebook page.

Hugens' sentiment was echoed by Idaho Civic Engagement Project Executive Director Emily Walton, who hosted a Facebook event, "The Treasure Valley YMCA Needs Your Support," to rally Y supporters. Like Hugens, Walton pulled back her support of Axiom Fitness, and even asked her husband to cancel his membership there.

"I'm seeing people saying, 'I'll pay more and go to the Y. I don't want to support people who would do this.' Boise's a place where we support our nonprofits," Walton said.

From a branding perspective, challenging the YMCA dealt Axiom and IAC a blow. "From a corporate brand standpoint, really recognizing that there are no gatekeepers per se anymore--it's something that brands have to be aware of," said Red Sky PR CEO Jessica Flynn. "It seems like every other day from a national perspective a brand goes in one direction and the public goes in another. With social media, we don't have a lot of context. That's the beauty and the danger of it."

Walton said the reversal was a "watershed moment." While public support for the Y at the July 2 hearing was overwhelming, the hearing also illuminated tension between service organizations and for-profit businesses.

"It's this ideology that says if you can't make money at the expense of a nonprofit, you can just take down that nonprofit," she said.

For Everett, the challenge to the Y's status was a threat to all nonprofits.

"If this went down the path these guys wanted ... you couldn't buy a sandwich in Life's Kitchen because you're competing with Berryhill and Cottonwood Grill," he said. "You couldn't go to nonprofit hospitals. You couldn't buy produce from Create Common Good. It becomes, I think, pretty absurd to think that's how the system ought to work."

But not everyone thinks there's an underlying significance to the event. For Idaho Nonprofit Center Executive Director Janice Fulkerson, the fitness-center flap was an anomalous disruption to the otherwise tranquil relationship between private and nonprofit business sectors. And the Ada County Commission did its job by addressing concerns that a nonprofit had overstepped its bounds.

"There will always be challenges. We see it with health clubs. You see it with veterinarians' associations. But there's a process everyone can follow for people to ask questions and get their answers," Fulkerson said.

The Treasure Valley YMCA is an $18 million organization that annually gives $6 million in scholarships, discounted admission, free services and more; and when it comes to the West Y, the factors contributing to that facility's tax-exempt status are palpable. At an 81 percent property tax rate, it would cost the organization about $200,000 per year. If ceded back to the city, its pool, which rests on city-owned land, would increase the city's property tax burden by $448,000 per year.

"We think we more than cover our tax exempt status in tangible ways," Everett said.

At the July 2 hearing, Everett and YMCA counsel showed that commercial use of the West Y hovers around 1 percent of its square footage--the federally allotted maximum is 3 percent. But how the commission calculated the original 19 percent property tax exemption rate was unorthodox: Since YMCA officials failed to attend a public meeting at which the challenge to the organization's tax-exempt status could be addressed, the commission asked Everett what percentage of the West Y's users were using YMCA services and facilities at a subsidized rate. His response: 19 percent. According to Ada County Commissioner Jim Tibbs, it was a sure-fire way of getting the YMCA to make its case.

"There was a question that the use of the space had changed. Is it being used in such a way as to potentially not allow an exemption? That's why [the YMCA] needed to be present," Tibbs said. "That's where the 19 percent came from. ... How many people attend, and what's the percentage of people who are there on subsidized or charitable payments? We knew that if we went ahead and made the decision to give 19 percent, [the YMCA] would disagree with that, and they'd appeal it, and we'd get to the right decision," he said.

For Tibbs, there is a lesson to be learned in all of this."There was not good communication between the board and the YMCA. Had there been good communication, this might never have happened," he said.