Nine years ago Frank Eisenzimmer bought a cow pasture outside of Portland and built a 100,000-square-foot health club on it.
He installed two swimming pools, racquetball and tennis courts and a large weight room in the two-story, cedar-siding building. In eight years, he estimated that he paid $500,000 in taxes.
So when he heard that the YMCA planned to build a charitable, tax-exempt facility a mile away and another five miles away downtown, Eisenzimmer got angry, fearing for his survival.
He sued, challenging the YMCA's charitable tax exemption. When he won, Multnomah County assessed the local YMCA $1.2 million in back and current property taxes, a decision the Y is appealing.
Now the Eisenzimmer battle may be repeated here. As the new $13-million Stuart M. Ketchum Downtown YMCA moves nearer to its scheduled Oct. 1 opening, a group of California health clubs objecting to the Y's charitable, tax-exempt status threatens to go to court to change it.
"I can think of no reason there will not be a lawsuit," said John McCarthy, executive director of the International Racquet Sports Assn., which is based in Boston.
Michael Talla, president of the newly formed Assn. of Taxpaying Fitness and Sports Clubs, which is based in Los Angeles and is affiliated with IRSA, added that the suit could be filed within 90 days.
And Frank Hathaway, chairman of the board of the downtown Los Angeles Athletic Club, said: "They have a tax exemption for charity and the new Ys don't seem to have much charity in them, or at least we're unsure as to how much they have.
"We think there's some (charity) in some areas. (But) when they spend millions in the center of the biggest and newest high rises, it appears to us that charity is not going to be a big part of the program there, if any."
The health clubs note that the Downtown Y will charge a $150 membership fee and $32.50 per month ($390 a year) and argue that the Y no longer serves the poor but has become a government-subsidized competitor for the fitness dollars of the affluent.
(Talla's Sports Connection Clubs charge $395 for the first year and $168 every year thereafter.)
YMCA Executive Responds
John Ouellet, president and chief executive officer of the YMCA of Metropolitan Los Angeles, contends that the economic climate makes it impossible for the Y to provide low-cost services to all groups as it once did.
He said that an expected $1 million annually drawn from membership and monthly fees will subsidize inexpensive use of the facilities by children, the elderly and others. No other surplus is expected, but if one develops, it will be used to aid 10 YMCAs in economically disadvantaged communities, he said
The new Y will charge seniors $20 per month and children will pay about $3 to $5 per month, the fee still to be decided, he said. "No one will be turned away for lack of ability to pay," he said last week during a tour of the new 100,000-square-foot Y on the rooftop of the Atlantic Richfield Plaza Garage at 401 S. Hope St.
Leaders of the Assn. of Taxpaying Fitness and Sports Clubs maintain informal contact with Eisenzimmer, as do members of similar clubs in Brooklyn, N.Y.; Daytona Beach, Fla., and Southfield, Mich.
These clubs developed following Eisenzimmer's suit. Commercial health club operators also note that the Illinois Department of Revenue put Y health clubs in Moline and Rock Island, Ill., on the property tax rolls without a lawsuit.
Talla, who owns seven Sports Connection Athletic Clubs, complained that the Y, in addition to paying no property or income taxes, has resources that are not available to private operators.
Ouellet said the Y paid for the new downtown building by selling properties worth $4.5 million, raising $4 million in donations, obtaining a $1.5 million federal grant and taking out a $3 million loan at 9.7% interest.
Talla said that YMCA "buildings are three times as big and twice as nice as anything we can afford because we can't get free money from the public.
Biggest to Date
"Their buildings are 100,000 square feet. My biggest to date is 40,000 feet. I'm building a 65,000-foot club in El Segundo, but I have a $70,000-a-month debt service on it.
"That facility will pay in the neighborhood of a half million dollars a year in taxes. My total organization pays more than two million a year in state and federal taxes. The Y doesn't pay any."
McCarthy, the executive director of the IRSA, agreed. "What we want the government to do is to take a look at each YMCA and evaluate it on its merits," he said in a telephone interview.
"If it's charitable, give it the exemption. If not, let them pay taxes. Set up measurable criteria so the Y's doing charitable work continue to get the exemption, but the Y's which have become commercial health centers are taxed just like the health clubs."