Elk Rapids Cinema Alleges Conflict Of Interest In Tax Exemption Request

The Chalfonte Foundation, the Detroit nonprofit that purchased the Elk Rapids Cinema in 2023, has alleged that an ongoing tax dispute with Elk Rapids Township might have been motivated by local officials with agendas against the theater.

According to a new Chalfonte Foundation press release, Elk Rapids Village Manager John Matthews was a key player in a competing effort to buy the Elk Rapids Cinema in 2023. Despite the unsuccessful bid, the foundation claims Matthews was still involved in a decision to deny tax exempt status to the theater.

“The village manager's dual role on the board of an organization with a vested interest in the Cinema and his influence over the assessor's decision presents a clear conflict of interest,” proclaimed Chalfonte Foundation President Aaron Timlin.

While it’s common practice in Michigan for nonprofit-owned theaters to have tax exemptions – local examples include the Traverse City State Theatre, the Bay Theatre in Suttons Bay, and the Garden Theater in Frankfort – Elk Rapids Township denied the Chalfonte Foundation’s application for an exemption in a February 13, 2024 email to the foundation.

“After discussion with the Village Administrator [Matthews] and others, it has been determined that the Cinema is not being used solely for charitable purposes,” wrote Township Assessor Karleen Sempert in the email. “Therefore, the exemption is not being granted.”

The Ticker has since reviewed documents showing that Matthews and his wife were part of an organization that tried to acquire the theater. Per the Michigan Department of Licensing and Regulatory Affairs (LARA), the Elk Rapids Theater Organization (ERTO) filed articles of incorporation with the state on August 10, 2023, a few weeks before the Elk Rapids Cinema was listed for sale. The documents tout goals such as “maintaining and protecting the historic Elk Rapids Cinema building and supporting events and fundraising,” and notably indicate that ERTO planned to operate as a tax-exempt corporation.

Matthews is listed as a member of that organization’s board of directors, while his wife, Barbara Matthews, is identified as secretary. Barbara is also currently listed on the Elk Rapids Downtown Development Authority (DDA) website as the DDA's board chair. Scott Epskamp, DDA vice-chair, is ERTO’s treasurer, while Epskamp’s wife, Nancy Baker, is board president.

Despite being involved in ERTO’s ultimately unsuccessful attempt to acquire the theater, Matthews denies any wrongdoing or ill will towards the Chalfonte Foundation. He says he has “zero influence over the assessor or the township” and doesn’t know why Sempert denied the tax exemption.

While he acknowledges having conversations with Sempert about the Chalfonte Foundation’s revenue generation, he denies influencing her decision and refutes the foundation’s suggestion that the tax dispute has anything to do with ERTO.

“When [ERTO] was dreamed up, the whole goal was to save the theater and keep the theater a theater,” Matthews says. “I actually applaud Aaron and Chalfonte, because they are keeping the theater a theater. In regards to anything else, there’s no win or lose for me; I don’t have anything in that game. All I want to do is go to the movies, eat the popcorn, and thank them for being part of the community.”

Sempert’s email did not cite specific reasons for the denial, and the assessor has previously declined The Ticker’s requests for explanations on the matter, citing pending litigation. However, emails obtained by The Ticker via a Freedom of Information Act (FOIA) request show an ongoing correspondence between Sempert and Matthews on the subject.

Among other items discussed, emails obtained under the FOIA show that the two discussed the short-term rental of a house owned by the foundation on Ottawa Street, with Matthews inferring that rentals of the home meant the foundation was a for-profit outfit. Timlin tells The Ticker the house was purchased almost 50 years ago by the foundation’s founder and says its use supports the foundation’s operations and mission.

While Timlin is confident the Chalfonte Foundation will prevail in its effort to secure a tax exemption, he says the process – barring a change of heart from Sempert – will likely take years and prove burdensome for all parties. The matter is now with the Michigan Tax Tribunal, which has scheduled a “two-week Prehearing General Call” to begin on October 1, 2025. In the meantime, the Chalfonte Foundation is on the hook for all property taxes – including a $10,000 summer 2024 tax bill that Timlin says “wiped us out for a minute.” If the appeal process goes the foundation’s way, the township and its taxpayers will have to pay that money back – plus interest.

Per The Ticker’s FOIA request, local officials have been warned of that potentially costly fight. In a letter dated November 22, 2024 and addressed to “Elk Rapids Village Council & Township Board members,” Ellen Elliott, executive director of Friends of the Penn, wrote about her organization’s 32-month battle to win a tax exemption for the Penn Theatre in Plymouth, Michigan.

“I recently submitted a FOIA request asking for documentation regarding how much the municipality spent to fight our case,” Elliott wrote. “The answer: $30,785.85. If you had to pay this amount where would the money come from? How will you explain this to your constituents? I’m sure if you asked them, they would have many suggestions about how to spend this money and I highly doubt that anyone would say ‘let’s give it to our attorney.’”

“You are fighting a losing battle,” Elliott added. “Every other nonprofit movie theatre in the state of Michigan has a property tax exemption.”