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Rift Widens Between For-Profit Clubs and Non-Profit Rec Centers

The Rift Widens Between For-Profit Clubs and Non-Profit Rec Centers

The U.S. had its Civil War, and now the recreation community has its own, a fierce struggle that could cause untold damage to the landscape of recreation. A two-pronged battle waged at the grass-roots level (and increasingly aided by grants from the International Health, Racquet and Sportsclub Association), the fight pits for-profit clubs against nonprofit, charity-based institutions (YMCAs, JCCs and hospitals) on the one hand, and government agencies (municipal, county and even some state university recreation departments) on the other.

To health club owners, IHRSA - an organization charged with promoting the interests of its 3,000 clubs - is just doing its job. "I think our members would like to see us be more involved, especially financially," says Helen Durkin, IHRSA's director of public policy. "At times, they've asked us for SWAT teams to come in and take care of a local election, but we don't do that."

What IHRSA does do, however, rankles nonprofit-rec administrators. While long lobbying in Washington against what it calls "unfair competition" posed by nonprofit fitness centers and bankrolling battles with (as Durkin says) "national and statewide implications," IHRSA in the last year began to send matching funds of up to $2,500 to local clubs to help defray the costs of defeating public recreation center referendums. At the same time, the association has upped the ante against YMCAs (its traditional foes) by actively calling on United Way executives to withhold financial support from "YMCA health clubs" [sic] when they "are not focused on the truly needy in our society, and therefore do not deserve United Way support."

IHRSA's shift in tactics on the government-rec side in particular has appeared to catch recreation officials flat-footed, in spite of the fact that these efforts hardly qualify as a sneak attack. The association has been warring against YMCAs since the mid-1980s, and began taking up arms against municipal rec centers in the mid-'90s. However, the for-profits never won this many battles before. Since the middle of 1998, for-profit clubs in markets large and small have defeated bond referendums, blocked construction and stripped property tax exemptions from a variety of proposed and existing fitness centers. IHRSA has also convinced legislators in five states to pass or seriously consider "fair competition" statutes. Employing a broad definition of "victory" that counts successful challenges to a nonprofit's initial plans, IHRSA and its member clubs can count about 20 battles won - most of which have occurred in the past two years. (See map on p. 54.)

Durkin takes issue with the notion of keeping score, particularly at a time when passions are inflamed on both sides. Her organization, she says, views peaceful discussion and mutually beneficial agreements as the ultimate victories.

"When a club goes and talks to a Y or park and rec, and they decide to do something different because of that, that's really a victory because it doesn't cost all this time and money," she says. "But the clubs feel better than ever because in the last two years we've had the most hardcore victories since we started the battle."

As this issue of AB went to press, IHRSA and the National Recreation & Park Association were preparing for a Sept. 6 meeting where, it was hoped, some sort of treaty could be struck. Beforehand, IHRSA brass reiterated its belief in the logic of private-public partnerships. As Durkin put it, "I'd hate a burgeoning animosity to get in the way of more partnerships, and with the park and recs there's a real opening still - whereas the Ys and the clubs have such a bitter history that it's very difficult to get beyond the distrust on both sides. So, what we're hoping for when we meet with NRPA is that we can talk about ways to defuse the situation."

One thing that might make the situation difficult to defuse is IHRSA's anti-nonprofit rhetoric, in which municipal rec departments are prominently mentioned as legitimate targets. Callers to IHRSA's Boston headquarters who are put on hold hear a plug for the association's Fair Competition University (a step-by-step primer on its Web site that explains how to derail nonprofit building projects). Meanwhile, all attendees at IHRSA's San Francisco convention in March were given a 100-page notepad, each page emblazoned with the heading, "Winning the War: 100 Ways to Beat Tax-Exempt Competitors" and a different broadside adapted from Fair Competition University (and authored by executive director John McCarthy). In them, the "avaricious" YMCA has "lost its soul" and is "defrauding the public"; club owners are advised to "know your enemy"; and one Ohio public recreation department is charged with selling "a bill of goods" to the public.

"They're going as far as saying that there shouldn't be any public recreation, that that's not the government's role, and yet the public agencies have been doing it for years, long before the health craze of the '70s when the health clubs came around," notes Tim Leiwig, executive director of the Greene County (Ohio) Recreation, Parks & Cultural Arts Department. "So to say we're wrong for continuing to do things we were doing before they went into business is not really correct."

IHRSA's primary complaint regarding YMCAs, JCCs and hospital wellness centers - which an increasing number of city administrators, tax assessors and legislators believe has some validity - is that in building a fitness component, they enter into direct competition with taxpaying, for-profit clubs, at about a 30 percent advantage. As Durkin says, "If there's a market that can sustain a taxpaying industry, then we think the basic philosophy of this country is that paying taxes is what we encourage in a free-market society."

Enduring criticism is old hat to Dan Maier, director of association advancement for YMCA of the USA. On the other hand, it doesn't really soothe Maier's temper when he hears IHRSA couch its criticisms with plaudits that note most YMCAs continue to do good work serving the needs of (specifically) less-affluent communities.

"We take every aspect of their campaign as a personal affront, of course, because what it says is that our mission is faulty," Maier says. "That, we take great exception to. We have found their tactics to be duplicitous, disingenuous and, frankly, dumbfounding, particularly since they feel they can say out of one side of their mouth that the Y is doing great work, and at the same time write a letter to the United Way saying Ys don't deserve funding."

IHRSA's United Way campaign (and its separate but related movement to form a partnership with Boys and Girls Clubs of America) is emblematic of the way its tactics have changed over the years. Its first forays questioned the right of YMCAs to build upscale fitness centers at all, but Durkin says that focus groups IHRSA conducted found that YMCAs retained a "halo" that made them a poor target from a public relations perspective.

"People went on and on how they didn't trust charities," Durkin recalls, "but when the Y was introduced, people said, 'Oh, well, they're different.' People's first reaction to the Y is generally very positive."

In that case, she is asked, is such a reaction deserved?

"It's such a complicated answer," Durkin says. "I think that in many ways it is absolutely deserved. If you look at their whole mission, I think the fitness center is such a small part, and you can't complain about most of the other stuff they do. Unfortunately, it's not a small part from a dollars perspective. These Y health clubs make so much money.

"The other stuff that the Ys do is great, and that's why we say the fitness center part should be taxed," Durkin says, neatly delineating the new focus of IHRSA's attention. "The Y always comes back with, 'We're so much more than a health club,' but we believe there is a kernel that is a health club."

Such talk annoys YMCA administrators like Doug Linder, president and CEO of the St. Petersburg (Fla.) Family YMCA. "There is no reason to believe that making a community healthier is not part of the charitable mission of a nonprofit organization," Linder says. "The YMCA has been doing that nearly since its inception. That charitable part of our fitness mission is as alive and accepted as ever, and that's one of the things that IHRSA and others are trying to attack. Well, they're just plain wrong."

As a prime example of a Y that has gone astray, Durkin cites the National Capital YMCA in downtown Washington, D.C. Durkin charges that YMCA of Metropolitan Washington, the association that oversees Washington area Ys, has gone to "a conscious policy to divest itself from inner-city D.C." She and McCarthy took a tour of the National Capital Y, she says, and found not children but wealthy politicos working out on their lunch hours. What's more, she claims, when she inquired about low income memberships, she was told they were "sold out."

What irks IHRSA most about YMCA of Metropolitan Washington is its 65,000square-foot, $10 million state-of-the-art facility in Reston, Va., which opened in September. This "satellite in the richer suburbs," Durkin says, is not in line with the Y's mission.

"They're not putting their nice health clubs out in Virginia because they expect all economic classes to go there," Durkin says.

No, counters Judy Ballangee, vice president of communications for the Washington Ys, but more than 40,000 Reston schoolchildren live within six miles of the new center, which includes a 10,000-square-foot teen center built for and run by Fairfax County, a science and technology center, a day-care center and an outdoor playground. Yes, she notes, it does have a fitness center, a gymnasium, an indoor track and an aquatic center, but the proceeds from them will fund kids' programs not just in the Reston facility but in the Washington Y's 17 other locations - only six of which include fitness components. (Previously, the newest Washington Y dated from 1978.)

The Reston Y's fitness center "is not small physically; it's a real nice, big, full-fledged fitness center," Ballangee says. It has to be, she adds, to help pay the bills at other Ys within the association, such as the one in Arlington that runs at a $100,000 deficit every year. IHRSA, Ballangee says, demonstrates a "lack of understanding about how Ys operate, especially in an urban setting. IHRSA focuses on the fitness, but the fact is they've skewed the message to say that we've abandoned child care in order to do fitness, and that simply isn't true. In many cases, the people who belong to the fitness center are delighted to know that any profit the Y makes from them underwrites programs for kids. The Y fitness centers are kind of fitness centers with a conscience."

While Ballangee is quick to rattle off a list of the Y's many child-care programs, computer classes, after-school care and day camps, Maier says the fitness centers themselves are their own justification. Asked whether new Ys are havens for rich yuppies looking for an inexpensive workout, Maier doesn't skip a beat. "By law, they must be allowed to use our facilities," he says. "That's the inherent genius of the Y - bringing together all aspects of the community. You will see people who have great means and people who have no means, right next to each other on the treadmills. To say that some people in the community should not be in there working out goes against the very heart of our mission."

IHRSA, Maier suggests, should focus on its own advantages rather than harp on the YMCA's.

"Raising funds in the community is the advantage of a nonprofit," Maier says. "The advantage of a for-profit is they receive the profits. We want an even playing field, too. If they would be willing to forgo any profits and plow them back into the community, we'd be delighted."

IHRSA's complaint regarding municipal recreation centers has several layers. Public recreation centers are built and operated with public monies, which would include some portion of the taxes paid by for-profit clubs. When in direct competition with taxpaying, for-profit clubs, these centers have both a tax advantage and an overhead advantage - their bills are paid by the city or county.

One big difference in IHRSA's approach is that while the for-profits find it comparatively easy to portray the YMCA as a large, shadowy organization stockpiling millions of dollars to fund its bureaucrat-administrators, public recreation centers are built by city councilors and residents who see the need for recreational services - not a very savory target from a public-relations standpoint. Public rec centers also often find eager assistance from powerful community members, such as elected officials and businesspeople (with the possible exception of health-club entrepreneurs), who view recreation centers as a prime development tool, a signature space that can be used to sell the community to relocating residents and businesses.

And, of course, the voters get a chance to speak, which leads Durkin to place public rec centers on a plane above Ys. "A park and rec to me is much cleaner than a Y, because people do vote on it," she says. "Maybe they vote sometimes without enough information, or maybe they don't even go to the polls to vote, but that's their choice."

That's a fairly conciliatory view not shared by Joe Moore, an owner of a dozen clubs in southwestern Ohio who has become one of the most vocal critics of (and successful activists against) nonprofit fitness centers. Moore won IHRSA's President's Award (for contributions to the health-club industry) in 2000, in recognition of the $5 million lawsuit filed by Moore's Fitness that blocked construction of a wellness center at the Springfield Community Hospital; Moore's persistent struggle to get health clubs removed from an eight-year-old "sin tax" that inexplicably lumps health club memberships in with alcohol and tobacco sales; his success in helping to defeat a public-rec-center referendum in Miamisburg; and his very vocal threats to derail the proposed Greene County recreation center project. (See "Greene Revolution," p. 40.)

"If a park and rec competes against taxpaying businesses, it's a problem," Moore says simply. "If you use that as a standard, a community could say, 'We want to go into the pizza or auto repair business' and use public funds to start a pizza parlor or auto repair shop. I think government should stay with things it does well: roads, policing, the courts, things that citizens cannot do for themselves. Why would a community tax health clubs, then raise taxes to build a center that competes with them? There's something inherently wrong with that, and it should be illegal."

(Other recreational amenities, Moore says, such as swimming pools and ballfields - those that don't compete with his clubs, in other words - are fine. "If the voters vote for them, I don't necessarily see a big problem," he says. "I've never suggested that cities stop building Little League diamonds.")

Moore believes that community members seldom come up with the idea of a rec center on their own; rather, rec centers are foisted on the public by public officials "to further political careers and, in the case of park and rec employees, to elevate the status of the people running the rec department," Moore says. "The politicians go out on these junkets to Florida [the Athletic Business Conference] and Colorado [the Recreation Facilities Design & Management School] to learn not just how to build these centers, but to learn the formula to get the public stirred up to support it." And even when such a project comes to a vote, Moore insists, many residents don't know what they're voting for. "Usually they are constructed by consent of the city council, so the citizens never know their tax dollars are going to build these monstrosities," he says. "Rec centers are much more likely to get built if citizens are ignorant of the fact that tax dollars are going to it."

Michelle Park, executive director of the Ohio Parks & Recreation Association, scoffs at this suggestion.

"It would be a real slap to the voters to say that they're voting for something and don't know what it is," she says. "Most rec centers are community driven - I cannot recall in the last four years where a rec center has been constructed in Ohio without voter support. And yes, local officials are supportive in most instances, because they see the benefit to residents and to economic development."

Park, whose organization has taken the lead in dealing with the question of fair competition from a park and rec perspective, concedes there's something to the argument that public rec centers should not duplicate services already provided by the for-profit industry. But, she notes, forprofit clubs don't provide the unlimited access that public rec centers do.

"Joe's is a very valid argument if his clubs make fitness and wellness opportunities available to everybody - which is the governmental focus," Park says.

Park says citizen input is sought by public officials at the earliest stage of the process, when rec departments attempt to gauge consumer demand. Moore, though, says feasibility studies are a farce. "They've paid a consulting and architectural firm to come up with a study to decide whether there is need or not," says Moore. "The problem is, I've never seen a study that didn't show a need. My belief is there's never been one. I also see it as a complete conflict of interest when the same architectural firm that does the study bids on the project and later gets a percentage of the total amount spent. It's in their best interest to see that a center is built."

The charges and countercharges building up over the past couple of years may make it tough for NRPA and IHRSA to find common ground. IHRSA's McCarthy has made it clear in public and private statements that the last thing IHRSA wants is another Y-type fight on its hands. "We have a great deal of respect for the NRPA," McCarthy says. "Though we may disagree on some specific issues, we go into our meeting with them very hopeful that we're going to reach some constructive agreements." NRPA President Robert Hall, whose May 3 letter of complaint to IHRSA President Gale Landers led the two organizations to open a dialogue, declined all comment on the issue until after the meeting.

Most park and recreation professionals, meanwhile, still cling to the notion that actual partnerships can occur between for-profit clubs and nonprofits. Park says, "I could give you a dozen examples of really positive partnerships. The situation in Ohio has grown adversarial, but partnerships are very much the way of the future."

"I don't believe that this is an opportunity to bash one side or the other," Leiwig says of the NRPA-IHRSA summit. "It's an opportunity to get the facts out. When push comes to shove, I think people will realize that everyone can coexist as they have for years. We serve different markets, and there are opportunities for both to be very successful, maybe even as partners to some extent."

Now it's Moore's turn to scoff.

"Partnerships are part of the common spiel that we hear when these projects are talked about," he says. "They act as if the rec center is a starting point for people to get involved with fitness, and that it creates a feeder system into health clubs and swim clubs and karate studios. I don't believe that's true; I see no feeder system from the park and recs into my health club. If the park and rec builds a full fitness center it will do more damage to the taxpaying fitness centers than it could possibly do good."

Lingering resentment is a fair description of the mood in the trenches these days. One gets a sense of this when nonprofits who have run afoul of Moore complain about his habit of bringing troops of 10 or so supporters to public meetings - even though this is precisely why the public-input process exists. On the other side, club owners grouse bitterly that they are made out to be nothing but profiteers by nonprofit administrators who aren't about to cede the moral high ground in this argument.

There are bad feelings all around in Stow, Ohio, where voters defeated a proposed recreation center in March. The Consortium of Facilities Already Serving Stow, funded primarily by a club not in Stow but in nearby Hudson, as well as a grant from IHRSA, whipped citizens into an anti-tax frenzy, charging unfair competition and intimating in a slew of advertisements and flyers that the project was just another government boondoggle.

On the other side, Citizens for the Stow Community and Recreation Center engaged in the most blatant form of provincialism. As that group's ads urged residents, "Don't be misled by negative publicity which is originating mainly from a private health club OUTSIDE of Stow...Don't let out-of-towners tell you what's best for our city." (Emphasis theirs.) For his part, Joe Moore is still stewing over the hospital wellness center he's managed to stop dead in its tracks.

Through his lawsuit's discovery process, he acquired a hospital-conducted market-share survey that concedes the new center would draw members from Moore's Fitness, as well as an internal memo regarding the facility's proposed climbing wall - which was included in an ostensibly medically based facility because, as the memo states, "We need something that will make us stand out from the Y or any of the Moore's [sic] programs."

"Right in their documentation it says the reason they were adding it was to give them a competitive advantage, not to 'meet some community need,' " Moore points out.

John Greene, the founder and a current board member of the Evanston, Ill. based Medical Fitness Association, can't help but be annoyed after witnessing Springfield Community Hospital spend $2.5 million to begin construction only to see the project shelved. Add to that the interminable delay of a proposed wellness center project into which Palos Community Hospital has already poured $1 million - in the MFA's backyard, no less - and Greene can hardly contain himself.

"Who is the clientele that the medical fitness industry serves? Older people, over 50, most of whom have low-active to sedentary backgrounds, who do not go to commercial clubs and will never go to commercial clubs," he says, though IHRSA disputes this claim. "Medical fitness centers expand the marketplace. But the commercial industry believes basically that because they're simply there, they've been given a franchise to have this whole universe."

Dan Maier seconds this comment by pointing out that IHRSA's own 1998 survey, "Why They Quit," failed to note the existence of competitive fitness centers as a reason for declining membership. That survey found that just 29 percent of former health club members said they would "probably join another facility during the coming year; in all but one case, these ex-members cited a club-related issue as the main reason for their departure from their former club." Additionally, IHRSA's public relations arm churns out press releases proudly proclaiming its industry dominance, with the number of for-profit clubs and club members at an all-time high. "That sounds more like Microsoft to me than a competition problem," Maier says. "I watched three health clubs go out of business in Northwest Chicago in the last two years that were right on top of each other. These clubs are coming out of the woodwork, and some survive and some don't. I would suggest there's probably a lot more internecine competition, but IHRSA can't admit that, because it defeats their membership purposes."

Durkin says that's all just an attempt to cloud the issue. "Is what a facility is doing appropriate in the context of the law?" she asks. "When we look at many of the nonprofits we say, 'Sure, but pay taxes.' "

There is one person who thinks the issue is even simpler than that: Wayne Westcott, the fitness research director of the South Shore YMCA in Quincy, Mass. Westcott is singled out in IHRSA's "Winning the War" notepad as "the YMCA's ultimate fitness professional" - "brilliant," "innovative," "gracious to a fault" - but "working for the wrong side."

They're certainly right about the gracious part. Westcott responds, "I have the highest respect for the IHRSA clubs and for their director, who I know fairly well. I'm just a fitness person; however, I know that every fitness survey shows that less than 10 percent of all Americans are doing enough physical activity to receive any measurable fitness benefit. So my take on this issue is that there are plenty of pieces of pie for everybody - health clubs, Ys, colleges, hospitals and community centers."

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