Tax plan falls, another emerges after flap over tax breaks for Genesis Health Clubs

A failed attempt by the politically-connected owner of Genesis Health Clubs to secure for fitness centers a permanent exemption from property taxes pushed the Kansas Legislature’s final day past 2 a.m. Saturday and torpedoed a plan to limit property taxes on senior citizens and disabled veterans.

The business relief plan that emerged from the scrum is Senate Bill 273, formerly known as Senate Bill 286, but renumbered for parliamentary reasons. It requires the state to set aside 25% and counties and cities 35% of their federal COVID aid for a fund to pay damages to businesses that claim they were harmed by public health orders, including business closures, limits on occupancy and limits on hours of operation.

It also would define mask mandates as a restriction requiring compensation to businesses, if they’re continued after the end of this month.

How much money businesses could get would be determined by a three-member panel — one member chosen by Democratic Gov. Laura Kelly and two by Republican House and Senate leaders Ron Ryckman and Ty Masterson.

The payments would be made behind closed doors and the only information made public would be the name and address of the business and the damages it received.

The money would be in addition to any previous COVID relief that businesses got during the pandemic. The three-member board is supposed to consider that in its deliberations.

Rep. John Carmichael, D-Wichita, ranking minority on the Judiciary Committee and member of the conference committee that worked the bill, harshly criticized it and said there’s no guarantee that the money paid to businesses will ever be shared with workers.

“The only class of citizens . . . who really have a shot at this money is the proprietorship, the LLC, the corporation, including the out-of-state corporation which just happens to be authorized to do business in Kansas,” Carmichael said.

Judiciary Committee Chairman Fred Patton, a Topeka Republican, carried the measure on the floor and was its chief defender.

“I do think we’ve come up with a decent product,” he said. “I think this is going to be good for business to be able to avert litigation and submit their claims and get some dollars in their pockets to help them when these restrictions cause them to lose revenue.”

The final House vote was 68 for to 24 against.

The bill started Friday languishing in committee, apparently doomed to be replaced by a more popular business relief plan.

The Legislature had appeared to be down to its last bill of the session, an omnibus tax plan called House Bill 2313 that included business relief and property tax breaks for senior citizens and disabled veterans. Those proposals were tied to a must-pass provision to fund schools with a 20 mill property tax levy.

Enter Genesis.

Club owner Rodney Steven II, who owns more than two-dozen fitness centers in Kansas and Missouri, is a prolific donor to House and Senate members. He has spent the last 10 years pushing for his clubs to get the kind of tax exemptions usually granted to nonprofit community organizations.

His argument is that it’s unfair that Genesis must compete with tax-exempt organizations, most prominently the YMCA.

In 2014, his bill got as far as Senate approval but was never taken up in the House. This year, it got a hearing but never passed out of committee.

But it surfaced again on Friday afternoon as a House-Senate conference committee tried to pound out the details of House Bill 2313.

It would ultimately unravel the entire tax package and set the stage for the return of SB 286 as SB 273.

Late Friday, House negotiators on the conference committee inserted the health club tax-break bill as a condition of their support for the senior-citizens and veterans tax breaks included in HB 2313.

But the Genesis tax break and the rest of the bill died in the full Senate on a 27-11 vote. It returned to the conference committee for more work.

Masterson replaced two of his three Senate conferees, including tax chairwoman Sen. Caryn Tyson, a Republican from Parker.

The new conferees immediately stripped HB 2313 of its tax-relief provisions for businesses and seniors, leaving SB 273 as the only viable option for compensating businesses for pandemic-related loss of profits.

Some senators expressed frustration that HB 2313 was gutted late at night in favor of a program that had been more hastily put together.

Sen. Tom Holland, a Baldwin Democrat and ranking minority on the tax committee, said the chamber had “just eviscerated” the policy he had helped to build over months.

Tyson said the two bills could have worked together and the Legislature had prioritized “gamesmanship and wins over quality legislation.”

“This was an attempt to get (businesses) some resources so they could continue operating in the best possible manner,” she said.

Just after 2 a.m. the Senate voted 24-14 to approve SB 273. While Republicans lauded the need to protect private business, Democrats asked several questions about the bill and criticized the rushed process and lack of transparency.

“There is little reason to support this given the unknowns,” said Senate Minority Leader Dinah Sykes.

Sen. Ethan Corson, a Johnson County Democrat, raised concerns that the federal government would bar use of stimulus dollars for the program.

That same concern has been raised repeatedly by Sedgwick County government, which has opposed the bill and said it could lead to service cuts or higher local taxes if the federal government rejects the idea of using it for business compensation.