“The Dexter Wellness Center is a tremendous facility,” says Dexter’s mayor, Shawn Keough.

That’s the one thing everyone agrees on in the dispute between Dexter’s Downtown Development Authority and the wellness center’s parent, the 5 Healthy Towns Foundation (formerly the Chelsea Wellness Foundation).

What the two sides disagree on is the exact nature of the facility. The DDA sees it as a business that should benefit the city’s bottom line by paying property taxes. The tax-exempt 5 Healthy Towns Foundation sees it as part of their nonprofit mission to improve community health. Barring a settlement, the case will be heard by the Michigan Tax Tribunal in January.

The dispute dates to February 2007, when BST Investments bought a brownfield site whose most recent occupant was craft company Colorbok. County records show that BST paid a total of $2.6 million for two neighboring properties on Baker Rd. The company’s redevelopment plan aimed to clean up the site and split it into three parcels, one of which became the wellness center.

“The facility was going to be owned by [BST], and they were going to lease it out to a company to operate as a recreation facility,” Keough recalls over coffee at the Foggy Bottom Cafe in late September. “That was how the project was sold.” The Dexter council approved it in 2011, and the DDA put in $100,000 for infrastructure improvements.

Local builder Steve Brouwer is a partner with BST; he’s also a member of the DDA. “Steve Brouwer is and has been the chair of the Dexter DDA,” explains the mayor, but “he has recused himself from every vote, every discussion, every topic, every time this has been on the DDA agenda. The DDA made those decisions without him.” (Brouwer declined to speak with the Community Observer.)

As the building was going up, Keough says, “We became aware that the group that was going to operate the facility was the foundation.” The Dexter Wellness Center opened in June 2013, and less than ninety days later, the mayor got a call from foundation CEO Amy Heydlauff. She told the mayor the foundation planned to buy the center outright. During that conversation, they discussed the fact that the foundation would not have to pay property taxes because it is a nontaxable entity.

There’s the rub for Dexter. “I said, ‘Amy, our Downtown Development Authority helped redevelop that property for the sole purpose of increasing the taxable value to reinvest in the community. If you buy it, you’re going to take those dollars out of the community.'”

Nevertheless, the sale went through. In December 2013, the foundation purchased its facility from BST for $12.7 million.

Dexter was a village at the time, so Scio Township, not Dexter, was responsible for tax assessment. “Scio’s assessor determined they should be nontaxable and took them off the rolls,” says Keough. “When the board of review met, I went and told this story, and they reversed the recommendation and placed the Dexter Wellness Center on the tax roll for $5.1 million in taxable value, which yields about $110,000 [annually] for the DDA.”

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Heydlauff appealed to the Michigan Tax Tribunal. Via email, Heydlauff explains their tax-exempt status. “It is a charitable foundation established in 2009 when Chelsea Community Hospital merged with the St. Joseph Mercy Health System. Our purpose is to bring about sustainable improvements in the health and wellness of individuals and the communities in the old CCH service area, which includes Dexter.”

Keough acknowledges the center “offers rehabilitation for patients who use the facility” but “the vast majority [of users] are paying members. Their foundation was set up to promote health and wellness in the community, but their mission isn’t charity. It’s just like other businesses. Just because a nonprofit owns a building, should it automatically qualify for tax exemption?”

Heydlauff disputes Keough’s characterization. “While Dexter and its DDA have attempted to mislabel the Dexter Wellness Center as a ‘recreational facility,’ we are no more a ‘recreational facility’ than a church is a movie theater. It is not the physical equipment which defines the nature of the activities.”

“We are neither a gym nor a fitness center,” she writes. “We operate on a non-profit charitable basis.”

In a follow-up telephone conversation, Heydlauff explains that the Dexter Wellness Center is a “medically integrated wellness center,” one of only three such certified facilities in Michigan. She says the DWC has roughly 2,700 members, twenty-four of whom receive means-tested scholarships. The center provides free programs, workshops, and community meeting space, and cooperates with other nonprofits like the National Kidney Foundation. It charges no enrollment fee, and its monthly dues are about 30 percent lower than a for-profit fitness center in neighboring Scio Township.

“The Dexter Wellness Center is operating at an annual deficit of over $900,000,” Heydlauff points out. “A for-profit gym or fitness facility won’t survive unless it makes money.” She says the foundation “doesn’t ever expect to make money on our four wellness centers [the others are in Manchester, Stockbridge, and Chelsea]. Only a not-for-profit willing to spend money for a return of community health and wellness, not profit, is likely to take it on.”

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“Losing the tax money and the DDA’s cut would be rough,” Keough says. “There’s only so much developable land in Dexter, so the DDA district is only so big. If we were to lose that forever, it’d be a huge blow to the DDA’s mission. The DDA’s total [annual tax] capture is about $300,000. It would have given us a huge boost [to $410,000].”

Heydlauff believes there are other benefits, including economic ones. “The [center’s] impact on Dexter’s ability to bring in new residents and businesses because it is a thriving, energetic community invested in the health and wellness of its residents can’t be measured directly, but those new businesses and residents would all pay taxes, so I suspect it would be a positive equation for the city.”

Since Dexter became a city, Scio Township no longer has skin in the game, but “the Dexter DDA filed a motion as an intervening party,” Keough says, “and the state filed [when the treasury department] realized that there was over $5 million in taxable value and this was potentially precedent-setting.” The mayor cites others who’d gain if the wellness center were taxed: the intermediate school district, the county, and the library.

Heydlauff writes that “none of the other communities [where the foundation has centers] have indicated that they will follow Dexter’s lead” and points out that “none of the other ten or eleven similar wellness centers in the state” are taxed. If the Dexter DDA and the state prevail, “Our board of directors [would] have to make hard decisions: whether the programming we provide for free and below cost will be eliminated; will we defund our scholarship program; will we have to turn away other charitable organizations from using the DWC for free.”

“We’re not trying to destroy them,” Keough says. “We want them to operate like any other business that chooses to be in Dexter–and to pay their fair portion of the taxes.”

Whatever happens, Heydlauff says, “We hope to be in Dexter for a long, long time. We want to be integrated members of the community.”