5 Healthy Towns Foundation prevails​ in two more cases, Dexter responds

By: Seth Kinker, skinker@thesuntimesnews.com

Last week, The Sun Times received a press release from the 5 Healthy Towns Foundation (5H) regarding two more cases with property tax disputes.

5H and the city of Dexter are currently in dispute, and have been since 2007, about property taxes with the Dexter Wellness Center.

From the city’s point of view, it sees the Wellness Center as a business that should benefit the city’s bottom line by paying proper. From the viewpoint of 5H, the tax-exempt non-profit foundation views it as part of their mission to “cultivate improvements in personal and community wellness.”

Written by Matt Pegouskie

“This month Washtenaw County Circuit Court and the State Tax Commission found in favor of 5 Healthy Towns Foundation (5HF) on two appeals initiated by the City of Dexter. 

Over the five years of this property tax dispute at least 13 cases have been filed. The City of Dexter believes 5HF or their management company should pay property tax and has tried to make their case before various courts and administrative bodies. Each of their attempts has ended in a decision in favor of 5HF. To date ten cases have been decided and all ten have been decided in favor of 5HF. 

5 Healthy Towns Foundation is a charitable organization with a non-profit, 501(c)(3) IRS designation.  The Foundation is also recognized as a charity by the State of Michigan. Property owned by a non-profit charitable institution and used for their charitable mission (in this case, health and wellness) is exempt from ad valorem property taxes in Michigan. 

5 Healthy Towns Foundation employs a management company to manage all four of their wellness centers to assure quality and efficiency. When the courts consistently affirmed 5HF’s property tax exempt status the City of Dexter began attempts to tax the management company as a lesser/user of the property. It is neither.  Seven of the decisions in favor of 5HF were cases the City of Dexter brought against 5HF’s management company. 

According to City records, Dexter has spent more than $500,000 on this tax dispute. 5 Healthy Towns, in defense of the Foundation and their management company, has spent three times that amount. 

In an effort to curtail further wasteful spending, 5HF has communicated to the City of Dexter that they will be left with little choice but to seek sanctions in the form of attorneys’ fees and costs against the City if it continues to pursue repetitive and frivolous lawsuits against them. Other attempts to bring this to an end, such as settlement offers to the City, have been rejected.”

On May 15, Shawn Keough, Mayor of the city of Dexter, responded to the statements made by 5H.

“The City of Dexter must enforce the property tax laws of the State. The City’s interpretation of the tax laws are that there are two separate tax statutes that apply to this property. The initial cases dealt with whether CWF qualified for the property tax exemption.

The PWM cases involve taxation of lessee/users of tax exempt property.  Because of how CWF has chosen to arrange their business relationships with a private for profit entity (Power Wellness Management) running the Dexter Fitness Center, these cases remain unresolved at this time.

Every year Dexter must make a new decision on tax status for the property as it exists on December 31st of each year;  the multitude of cases built up as CWF filed additional lawsuits while the very first case involving tax years 2014 and 2015 was being litigated over several years.

With regard to tax years 2016 and 2017, Dexter recently acknowledged that the Dexter Wellness Center qualified for tax-exempt status for those two tax years and thus Dexter agreed to dismiss that litigation.

Please note that this is contrary to Pegouskie’s statement that the case was found in favor of CWF (5HF). Please recall that Dexter actually won in the initial Tax Tribunal (and that the Tax Tribunal has stated that this is a complicated area of the law with few guideposts) ruling, and it took many months before that decision was ultimately overturned by the Court of Appeals.

Please also recall that the members of the Dexter Fitness Center are not receiving “charity” but rather paying market rate prices, regardless of whether CWF is a non-profit or not.  Dexter applied both tax statutes from the beginning as appropriate; they were not based on whether Dexter won or lost in the Court of Appeals (this in contradiction to Pegouskie’s statement). 

Only one entity can be placed on the tax roll each year, so it only makes sense that 5HF was placed on the rolls multiple years in a row while the initial litigation was making its way through the court system. While CWF has repeatedly requested attorney’s fees, all courts involved and the Tax Tribunal have repeatedly rejected these claims, because Dexter is acting in good faith, making good faith arguments based on the facts and the law, particularly in this evolving area of the law.

We appreciate the opportunity to comment on the 5 Healthy Towns press release. Please understand that the City wishes this process could go faster also, but between the court system and all the back and forth by attorneys on both sides, Dexter is patiently waiting for the courts to provide an answer to the questions involving Power Wellness Management.”

Seth Kinker

Reporter/Digital Media for The Sun Times News

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