CHARLOTTESVILLE, VA -- It’s not always voiced, but a classic rivalry exists in the club industry—and in the latest battle between for-profits and a nonprofit, the latter came out on top.
In this case, it was a group of for-profit club owners in the Charlottesville, VA, area who lost out in November when a judge dismissed a case they’d filed against Albemarle County regarding the funding of a new YMCA.
In May, the Charlottesville Area Fitness Club Owners’ Association (CAFCOA), which represents ACAC Fitness and Wellness Centers, Gold’s Gym and Total Performance Sports and Fitness, argued that the county acted unfairly when it allocated $2.03 million in public funds toward building a new YMCA facility. The suit alleged that the county violated the Virginia Public Procurement Act by not allowing private clubs to bid on the fitness and aquatic services that will be offered by the new facility or to make alternative proposals to building the facility on public land.
The county argued that because its contribution was to a nonprofit organization, it was not subject to the requirements of the procurement act.
In May, the CAFCOA filed the same suit against the city of Charlottesville, which funded an additional $1.25 million for the project and also agreed to a 40-year lease of public park land to the Y for $1 per year. The date for that hearing has not yet been set, but it has been assigned to the same judge, Cheryl Higgins, who decided for the county in November.
In a media statement after the ruling, the CAFCOA said it respectfully disagreed with the ruling.
“While we agree that Albemarle County had the power to make appropriations to charities, we think the judge was in error in finding that the county could contract for the acquisition of services without also complying with the Virginia Public Procurement Act,” the CAFCOA said in the statement. “Although we are disappointed with the outcome, we appreciate the right to participate in the judicial process and will weigh our options going forward.”
The YMCA itself is not a party to either suit and, therefore, declined to comment on the matter.
Two of the entities involved in the Albemarle County suit had competed before in a different market. In 2004, the ACAC Fitness and Wellness Center beat out the YMCA in West Chester, PA, in a bid to provide swimming and diving facilities for the area’s public high schools. As part of the 39-year agreement, the West Chester Area School District agreed to pay ACAC $65,000 a year to use its aquatic facilities, plus $5,000 a year to cover taxes, insurance and parking lot maintenance.
“Obviously, the biggest issue between for-profit and nonprofit clubs has always been: What’s the fair playing field?” says Scott Chovanec, head of industry consultancy Scott Chovanec & Associates, Highland Park, IL. “It’s certainly a legitimate question, and I don’t think it’s always adequately answered.”
Many for-profit club owners argue that nonprofit facilities are given an unfair advantage through tax breaks and public funding. Nonprofit administrators argue that they are not competing for the same market but are fulfilling their mission to serve the community, including many who could not otherwise afford to belong to a health club.
As long as both sides exist, so, too, will these arguments. But Chovanec says room exists for both types of facilities in a community. They just need to do a little bridge building.
“There’s a strong need for more of a collaborative, rather than adversarial, relationship, as tough as that sounds,” he says.
Nonprofits have a responsibility to keep their missions and the communities they serve at the forefront, Chovanec says. But being a part of the community also means working cooperatively with area businesses, which generate wealth and provide jobs to local residents.
“For a nonprofit, it may mean that you have to restructure the type of facility you are,” he says. “You have to restructure some of the finishes, touches and services you offer because you don’t want to have to compete with the for-profits who are doing those kinds of things.”
But the onus isn’t one-sided, according to Chavonec.
“Today’s economic market is certainly making it very difficult on everybody,” he says. “The savvy operator—on either side—is going to focus on how to do a better job of taking care of their customers and what they need to do to improve the services they provide their customers. The savvy for-profit clubs are learning that if they’re going to keep their market share, they’re going to have to do a much better job at that. People will pay a little bit more of a premium if the perception is that the product is worth the price.”