Churches nationwide are combining faith with fitness as they build tax-exempt fitness facilities that often rival for-profit clubs.
At first glance, the fitness center at Germantown Baptist Church in the Memphis suburb of Germantown, TN, resembles many other recreation centers nationwide. The 83,000-square-foot building features aerobic studios, two basketball courts, cardio and weight training rooms, racquetball courts and locker rooms. A closer look, however, reveals two differences that set the Germantown Recreation Outreach Center (ROC) apart from the surrounding clubs — it's free to use and it has a religious environment. Upbeat Christian music plays over the PA system, Bible scripture banners hang in the gym and a modest dress code is enforced.
“We built our facility 10 years ago to build a relationship with the community as a means of reaching out with our love of God,” says Carla Rafferty, associate minister of recreation for the ROC, which draws about 30 percent of its visitors from its congregation of 10,000 people and 70 percent from the local community.
The Germantown ROC is just one of a growing number of church-owned fitness facilities reaching out to congregations and communities. No clearinghouse exists to show how many churches have built fitness facilities, but in the Southern Baptist religion alone, 20,000 churches have fitness facilities of some sort, estimates Brad Bloom, publisher of Faith and Fitness, an online magazine for Christians who are interested in fitness.
In 1953, the Baptist denomination began to focus on sports and recreation as a ministry, and today, other churches and religions view fitness centers and programs as a way to help members grow spiritually and physically, says John Garner of Lifeway Christian Resources, a Christian publisher based in Nashville, TN.
Bloom says that the number of church-based clubs is growing.
“Churches are realizing that if they want to impact the lives of people in the community, you have to do more than a church service on Sunday,” Bloom says.
These facilities bring up a sticky issue for for-profit club owners, who often complain that religious-based groups such as the YMCAs and YWCAs build and operate fitness facilities with an unfair tax advantage. Church-based fitness centers are also tax-exempt, which means they don't pay taxes on new equipment and they are exempt from state and local income and property taxes.
Due to their growing numbers, their tax-exempt status and their ability to receive tax-deductible contributions, church fitness facilities can often afford to build state-of-the-art fitness centers that rival many for-profit clubs. During the last 10 years, the size, scope and design of church fitness facilities has changed to the point that the centers are on par with any recreation complex across the country, says Garner.
Despite the church facilities' tax advantages, few for-profit clubs have publicly raised an uproar about them. In fact, some for-profit club owners say that church-owned clubs are not their competitors.
Gina Harden, manager of a 65,000-square-foot Prairie Life Center club that opened in May 2005 two miles from the Germantown ROC, says she doesn't view the Germantown ROC as competition because her club and the church fitness center have different missions and offer different services. She compares it to running a Starbucks across the street from a church with a coffee shop.
“Our club's main goal and main mission is to provide services and programs to enhance our members' quality of life and needs,” says Harden, who belongs to a nearby non-denominational church that also has a fitness center. “One of the amenities a church may have is a fitness center, but we are a health club and that's all we do.”
Rafferty disagrees, saying that her facility does compete with Prairie Life Center in addition to an area community center, a Curves and other church fitness centers.
“Their biggest competition is our rec center because it's hard to compete with a free facility,” Rafferty says. “We're more of a competition for them than they are for us because we don't charge a monthly fee.”
Michael Scott Scudder, owner of consulting and training company MSS FitBiz Connection, Taos, NM, says that the faith-based revival in some parts of the country has affected economics in other retail areas, and it wouldn't be surprising if they affected the fitness business, too.
“So if they, on a faith-based business basis, choose to get into health and fitness, it has to have an impact on other commercial fitness operators,” Scudder says.
However, Bloom says that to some extent, church facilities and for-profit facilities are going after different markets.
“There's still a lot of market that is to be had,” he says. “A lot of people won't step foot into a faith-based facility because it turns them off.”
Money and Value
Although a religious focus may turn off some people, free membership could be a draw to others. Most church-owned fitness facilities are open only to members and charge a membership fee ranging from $15 to $40 per month (although some charge less than $50 per year), but the Germantown ROC is open to anyone for free unless they take a group fitness class, which costs $3.50 per class. About 15,000 people participated in the fitness classes at the facility last year (although some of them were most likely repeats), and on average, the church fitness center has between 60,000 and 70,000 sign-ins each year. About 2,000 people are regulars, Rafferty says.
Group fitness at the facility generates about $150,000 annually and personal training generates about $130,000, Rafferty says. That money is used to pay the 11 certified personal trainers and is reinvested in equipment. The 15 certified group instructors are volunteers, but the church also uses some of the money to pay for their certifications, continuing education, music and shoes. The $160,000 annual budget from the church, which is funded by donations from church members, pays for the utilities, salaries for the remaining staff and other expenses.
Even without advertising, the ROC stays busy year round.
“We're at the point where we're getting enough participation that we're not looking for any more,” Rafferty says.
Harden, who worked for a YMCA before moving to Prairie Life, says her club can give members more value for their dollar and for their time than the church fitness centers in the area can give. Unlike many of the church fitness centers, Prairie Life has an indoor and outdoor pool, tanning beds, massage therapy, a nail technician on staff, a steam room, a Jacuzzi, a sauna, a food bar and a pro shop as well as the standard amenities such as an indoor track, gym court, aerobics studios, and cardio and strength-training equipment. The club charges between $19 and $59 per month for memberships, depending on how many people sign up for the membership agreement. Although the churches in her area may offer free or discounted memberships, Harden says residents must consider whether a fitness facility offers comparable services, high-quality programming and the ability to meet members' fitness goals.
“People have to ask what they're paying for,” she says. “To a lot of people, including myself, my time is more valuable to me, so I would be willing to pay more if the services and quality of the program are better. I don't think they (church fitness facilities) can compete with for-profit clubs. The money that we get from our club, we use in our club. With a nonprofit club, where are you getting the money, and are you able to fit the needs of your members?”
However, Rafferty argues that free membership and nonprofit status don't make the facility second class.
“Even without a membership fee, we have quality equipment and staff, keep our facility clean and keep everything top notch,” she says.
The Question of Taxes
Just like other nonprofit fitness facilities such as Jewish Community Centers and YMCAs, church fitness facilities are exempt from federal income taxation under 501(c)3, according to the Tax Guide for Churches and Other Religious Organizations. Churches must withhold, report and pay income taxes for their employees. Their unrelated business income may be subject to taxes, too, but because church fitness centers are often open to the community and charge low rates, they often are not required to pay this tax unless they have a two-tiered fee system that is not within the financial reach of the community, says Robert Marvin, national media relations specialist for the Internal Revenue Service.
“Generally, providing recreational facilities to the general public that are affordable and available to the community would further charitable purposes,” Marvin says. “Therefore, fees charged for the use of such facilities would not be subject to unrelated business income tax.”
Churches, like any nonprofit organization, must diligently follow the nonprofit guidelines established by the government (see sidebar on page 50) or risk losing their nonprofit status, Bloom says.
“The ones that are doing a great job want to demonstrate that they are following the expectations,” he says. “Where the church fitness facilities really have an opportunity and an obligation is to assure that the programming they're providing is distinctively faith based, which more than qualifies them to be a nonprofit.”
To maintain their tax-exempt status and serve their mission, many church-based fitness centers offer Bible study, devotionals or prayer time.
“It varies across denominations, but the Baptists are more upfront with it,” Garner says. “In our recreation and fitness programs, we try to do it in a way that will attract people. We don't beat them over the head with a Bible, but they know when they come in that it's a church, and there will be prayer time.”
The First Baptist Raytown ROC in Raytown, MO, plays Christian music in the weight room, has Bible scripture verses painted on the gym floor and has its dress code policies posted in the weight room and cardio area.
“We go by Christian principles, and we intend to keep it that way,” says David Foster, the fitness and wellness director. He adds that a dress code prevents inappropriate attire and the staff can direct members should they want anything from the church.
The Raytown ROC's Christian atmosphere led Bobi Swope to join the facility when it opened two years ago. She comes in for twice weekly workouts on the treadmill and elliptical and in the weight room.
“We're here to find people looking for a church home who feel more comfortable coming to a gym,” Foster says. “That's our goal, and that's why we built this place.”
Raising the Roof
Churches often own the land surrounding their buildings and don't pay property taxes, Garner says. To finance the construction of a new fitness center, a church often borrows money from a bank or asks its members to pledge money to finance the project. Many times, a church decides to do both, says James Rainey, a financial consultant with GreenField Group LLC, a firm that provides financial advisory services to churches.
“They always go to the congregation first with some kind of giving plan,” he says. “It can get as high tech as bringing in a capital stewardship coordination team to start up a three-year campaign and set goals and targets. The item that I stress to a church is to overcome their boundaries and limit their financing ability. They won't succeed if the membership is not committed to the project.”
The Raytown ROC launched a program called Building Beyond the Walls to encourage church members to give more than their normal tithe of 10 percent of their income to build the $15 million facility two years ago. The center, which has $250,000 worth of exercise equipment, has about 600 members; 90 percent come from the church's 1,200 members, and 10 percent come from outside the church. Non-church members pay a $50 initiation fee and $40 per month. Church members can use the facility for free unless they enroll in a key card program, which costs $50 for an initiation fee and $20 per month for an individual membership.
“Since they built the fitness center and paid for it, why should we charge for them to use it?” says Foster, who is the only full-time employee at the Raytown ROC. He supervises four part-time, certified personal trainers and 30 volunteers, some of whom are also certified personal trainers.
Personal training sessions cost $25 for a 45-minute session, and unlimited fitness classes cost $15 per month. The Raytown ROC is marketing to community members by offering 14-day trial memberships.
“The Recreation Outreach Center is really an outreach tool,” says Dave Bundrick, recreation outreach pastor at the First Baptist Raytown church. “The church built it to attract people to church who wouldn't otherwise come. We're nonprofit in every sense of the word, and we're a ministry extension of the church.”
Businesses that focus on building churches are recognizing the construction of fitness and wellness centers as an opportunity for growth, Bloom says. The construction of church fitness facilities comprises 10 percent to 20 percent of business for Rainey, who helps churches set a budget and decide how to spend their money on a fitness center.
The cost of building a fitness facility can vary depending on the center's amenities, Rainey says. Basic gyms can cost about $40 per square foot, but more elaborate, multipurpose facilities can top $120 to $200 per square foot.
Rainey and the architects usually work from a pastor's grand vision and then trim the plans depending on the cost and the church's budget.
“It can range from a million-dollar, basic gym facility with a simple laminate-type flooring to a multipurpose facility,” he says. “The sky is the limit.”
Regardless of the cost to build these facilities, those who run them say that their purpose is not to make a profit but to reach souls. Rafferty says her recreation center uses sports, recreation and fitness as an opportunity to reach out to people, break down barriers and share their faith by providing an environment that is less intimidating than at other clubs and by getting to know the visitors personally.
“The interesting thing about using recreation to reach the community is not everyone is drawn to a church because of the Sunday school or choir, but everyone wants somewhere to spend their leisure time and play,” she says. “We use fitness as a way to build relationships with people. If we gain their trust, that opens the door to sharing our faith.”
That combination of faith and fitness is unattainable for many for-profit clubs and undesirable to others. Regardless, the growth of these types of facilities adds to the number of competitors in an already crowded fitness market, leaving for-profit club owners who find a church-based fitness facility in their market with the delicate question of how to compete when the competitor has what some would call an unbeatable ally.
Requirements For Tax-Exempt Status
The organization must be operated exclusively for religious, educational, scientific or other charitable purposes.
Net earnings may not inure to the benefit of any private individual or shareholder.
No substantial part of the organization's activity may be attempting to influence legislation.
The organization may not intervene in political campaigns.
The organization's purposes and activities may not be illegal or violate fundamental public policy.
Source: Internal Revenue Service
Tips for Infusing Spirituality into a Club
Reach out to a local church and offer discounts to members
Invite Bible study groups to meet in your community room or lounge
Play Christian music
Offer such group exercise classes as Gospel Aerobics
Hire a minister or chaplain to be on staff to serve members' spiritual needs
IRS Tax Guide for Churches and Religious Organizations: http://www.irs.gov/pub/irs-pdf/p1828.pdf
A PDF explaining exemption and unrelated business tax issues for health clubs: http://www.irs.gov/charities/article/0,,id=96391,00.html
The International Health, Racquet and Sportsclub Association's page on tax-exempt competition: http://cms.ihrsa.org/IHRSA/viewPage.cfm?pageId=641
Outside of the Church
A few for-profit fitness facilities are jumping on the spiritual bandwagon by tapping into the religious market. Holy Spirit gym, one of the few full-service, Christian-themed health clubs in the country, has attracted about 100 Orange County (CA) residents looking for an uplifting, wholesome and less intimidating environment to get fit, says Gil Yurly, owner. To attract more members, he has contacted local churches and has offered incentives such as free memberships to senior pastors and free workout nights for local church members.
So far, however, the churches have not been responsive, he says.
“I'm disappointed that the churches have not gotten more involved,” he says. “I have contacted some of the Protestant churches, and they had some interest and were excited, but no one is following up.”
Despite the challenges of partnering with local churches, Yurly's 5,200-square-foot facility has received a positive response from the community since it opened in June 2006.
“A lot of people love the [religious] concept and have joined because of it,” he says. “I've had people call and ask me if I'm going to be opening gyms in other parts of the country. If our gym does well and we open up more, it may lead to more people jumping on the bandwagon.”