Planet Fitness owner in a sweat over tax bill

Planet Fitness owner in a sweat over tax bill.

The Economic Development Commission is entertaining an unusual request by Planet Fitness owner Steven Eddleston for a tax treaty that would initially relieve, but would not ultimately reduce, the business owner’s personal property tax burden.

Eddleston opened Planet Fitness at the Apple Valley Mall, 445 Putnam Pike, in October 2013, in the “elbow” space that once housed the Apple Valley Cinema.

In presenting his request for an alternative payment plan, Eddleston said that though he had done due diligence prior to opening the facility, he was unaware that the Smithfield personal property tax rate would be so high. He said that unexpected construction costs at the site combined with the unanticipated tax liability prompted him to approach town officials to try to work out an alternative payment plan.

He provided a financial spreadsheet that showed his personal property bills at four other Planet Fitness locations in Rhode Island average $14,435 per year, with the lowest tax obligation in Warwick, at about $9,000, and the highest in Providence, at about $22,000. His 2014 personal property tax bill at the Smithfield location is nearly $50,000.

The town’s personal property – or tangible – tax rate is $59.70, down from $61.06 in 2013, but up from $41 in 2004.

Tony Franco, tax director for Connecticut-based consulting firm The Albano Group, who presented Eddleston’s request to the commission, said that this rate “is the highest I have seen in the country.”

Under the proposed plan, Eddleston would reduce his personal property tax payments each year for the next five years, but would phase in payment of the total bill by the end of 10 years. Eddleston has a 10-year lease at the mall, with options to extend in one- to five- year increments for up to 30 years.

A sympathetic EDC Chairman Daniel DiSantis told Eddleston, “We all got our tax bills today, so we feel your pain.”

“But,” he added, “I have to ask you, what will I say to the 900 businesses in town who are paying these taxes today?”

Eddleston responded that the quantity of “technologically sophisticated equipment” required to run his business profitably sets him apart from many other types of businesses.

“I would say that there is always a spectrum, and due to the special nature of my business, I am on the high end of the spectrum.” He noted that he needed expensive equipment and “I need a lot of it, so that no one is ever waiting for a machine.”

The franchise owner said that he is contractually obligated to reinvest and update his equipment every six years, for insurance purposes and also to prevent the facility “from looking dated.”

The proposed tax treaty would not affect Eddleston’s 2014 tax bill, which is due in August. The commission did not vote on Eddleston’s request at its July 31 meeting. If it does approve the request, it will then go before the Town Council, which will have to pass a special ordinance in order for the payment plan to take effect.

The EDC has approved only one other request for similar tax treaty in the past. Financial Planner Michael Phillips said that about four years ago, a longstanding, established business considered leaving town, and a tax treaty was worked out at the time to keep the business from moving. No other such alternative payment schedules are currently in place.