The City Of Dexter v. Dexter Wellness Center

A first-timer to the Dexter Forum asked a couple weeks ago, “Where do things stand between the City and the Wellness Center?” He suddenly had everybody’s attention.

What he was referring to was the ongoing issue between the City of Dexter (along with the Dexter Downtown Development Authority) and the Chelsea Health and Wellness Foundation, owners of Dexter Wellness Center (DWC), in regards to the payment of property taxes.

John Hansen wrote it down on the whiteboard as an agenda item labeled “Us v. Us.” That title “might be a facile description” as John put it, but it is accurate nonetheless. And what has become a trademark of the Saturday morning forum; there were knowledgeable people to speak on it.

One of those people was Paul Cousins. “I happened to be square in the middle of all of that because I was chair of the Board of Review for Scio Township,” he explained. He was involved with the conceptual stages of DWC to where it is now located on Baker Road behind Dexter Pharmacy. “It was at that time when we were still a village and therefore it was the Scio Board of Review at the time that determined that process (for DWC approval).”

Dexter Forum

Paul continued, “In the review process, the Board decided the facility would be a taxable entity rather than a non-profit.” This was the agreement between both parties.  “So the facility was built and sold to the Chelsea Wellness Foundation.”

Sometime after that, the Foundation “appealed that (taxable status)” Paul told the group, and then added, “because you have a right to do that as a citizen in this country.”

The Chelsea Health and Wellness Foundation was established in 2008 as a result of the merger of Chelsea Community Hospital with Saint Joseph Mercy Health System. The Foundation was to be used “in promoting health, wellness and fitness education, health care initiatives and other community-based activities” in the designated service area of Chelsea, Manchester, Stockbridge, Grass Lake, and Dexter ( see 5 Healthy Towns).

The Foundation’s articulation of its mission is “[t]o create a culture of wellness and foster sustained improvements in the health of our communities through stewardship of our resources, innovative and collaborative grants, and engagement of our residents in the pursuit of healthy life choices.” In furtherance of its mission, the Foundation focuses on four elements contributing to a healthier life: (1) eating better; (2) moving more; (3) avoiding unhealthy substances; and (4) connecting with others in health ways.

The dispute concerns the taxable status of the property on which the Foundation’s Dexter Wellness Center is located at 2810 Baker Road. The facility is a two-story, 46,000 square-foot building in the Dexter City limits. Amenities within the building include a gymnasium, two swimming pools, a group cycling room, exercise studios, free weights, a running track, circuit training equipment, a cardio area, and locker rooms. It also has a conference room on the first floor that is made available for community group meetings and various educational seminars sponsored by the Foundation. The DWC was certified as a medically-integrated facility in 2015 by the Medical Fitness Association.

The Foundation later appealed the taxable status of the property to the Michigan Tax Tribunal who ruled in favor of the City of Dexter by denying DWC tax-exempt status. DWC would have to pay the property taxes.

Not so fast. The Foundation then appealed the decision to the Michigan Court of Appeals. You can find the Michigan Court of Appeals ruling in Dexter City Council notes from their Oct. 23, 2017 meeting, beginning on page 208.

The Michigan Legislature has established in MCL 211.7o a number of property tax exemptions available to nonprofit or charitable organizations. The Foundation sought exemption under Subsection (1), which states:

“Real or personal property owned and occupied by a nonprofit charitable institution while occupied by that nonprofit charitable institution solely for the purposes for which that nonprofit charitable institution was incorporated is exempt from the collection of taxes under this act.”

Key words here are “nonprofit” and “charitable.” In their ruling, the Court of Appeals noted the Tax Tribunal’s reasoning in their denial of tax-exempt status for the DWC as follows:

“Although the tribunal opined that the Foundation would otherwise qualify for exemption under this subsection, it rejected the Foundation’s claim reasoning that it did not qualify as a charitable institution for purposes of exemption because its scholarship policies caused the Foundation to provide charity on a discriminatory basis, contrary to the third factor identified in Wexford Medical Group v City of Cadillac for determining whether a petitioner is a charitable institution.”

To be tax-exempt, the Foundation has to be non-profit AND provide charitable endeavors in their DWC facility. The nonprofit status of the Foundation wasn’t in question. DWC activities classified as “charitable” were being challenged.

Michigan Hall of Justice

The Foundation argued that it is involved in charitable work in various ways through its operation in the DWC which include programs such as scholarships for qualifying individuals, discounted rehabilitative services (“Next Steps”), and free use of their conference room (for Dexter Forum for example).

The Tax Tribunal recognized these activities but denied them charitable status due to the way in which the Foundation administered these programs, particularly the scholarships. It was the Tribunal’s decision that this prevented the Foundation from being tax-exempt.

DWC would have to pay the property taxes.

Not so fast. The Foundation appealed the decision to the Michigan Court of Appeals.

The Michigan Court of Appeals reasoned that the Tax Tribunal focused too narrowly on the administration of the Foundation’s scholarship program whereas the Foundation’s charitable programs through the DWC, as a whole, did indeed qualify them as charitable organization. Thus, the higher court determined the Foundation’s operation at DWC as non-profit AND charitable.

DWC is exempt from paying property taxes.

Not so fast.

The City of Dexter (along with the Dexter Downtown Development Authority, Scio Township, and the MI Dept of Treasury) has appealed the case to the Michigan Supreme Court where it now waits for a ruling. There is no timeline of when that ruling will be made.

Review:

  • DWC taxable at time of sale.
  • Taxable status upheld by MI Tax Tribunal.
  • Determined tax exempt by MI Court of Appeals.
  • Waiting for a final ruling from the MI Supreme Court.

There is a lot of money at stake, about $300,000 a year that doesn’t just go to the City of Dexter but to other publicly funded entities like the Dexter District Library and the Washtenaw Intermediate School District.

John Hansen put what seems like a local squabble into a much larger perspective when he commented, “A whole lot of people around the state care about this, as they always do in taxable versus charitable cases. It overlaps into churches and other non-profit facilities. Its sort not ‘Us vs. Us’ anymore.  It’s a ‘whole body of people’ against a ‘whole body of municipalities’ determining what is and what isn’t taxable.”

A lot of eyes are on the case as it plays out.

On one side you have “Us”, the citizens of the City of Dexter and the sense of community which that means for all of us living here, a good place we love to call home. On the other side you have “Us”, the members of Dexter Wellness Center and the impact this organization has on our community’s health and wellness, making us feel better, and have become such an important part in so many lives.

A lot of us are in the common area of those two intersecting circles, and we love ’em both.

We like … “Us”.

“Us v. Us” is hard.

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