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Ask MRSC

September 2013

Ask MRSC

In the periodic Ask MRSC PHD (Public Hospital Districts) e-newsletter, MRSC consultants respond to questions posed by officials and staff of Washington public hospital districts. Submit your own question via our simple online form.

IN THIS ISSUE

  1. When must a public hospital district have its 2014 budget approved for the 2014 budget year?
  2. We are working with a community member who is interested in an appointment to our hospital district board of commissioners to fill a vacancy. She is employed at the same company as one of our other commissioners, though they work in distinct areas. The current commissioner is an administrative assistant and the prospective commissioner is a vice president. Is this a conflict? Is there is policy that would prohibit this?
  3. What type of process must be used to accomplish a lease of public hospital district facilities to a nonprofit organization?
  4. Our current bylaws provide that the duties of the superintendent include those specified in RCW chapter 70.44, specifically including RCW 70.44.060, RCW 70.44.080, and RCW 70.44.090. Can the duties of RCW 70.44.060 be assigned or "delegated" to the superintendent?
  5. May the board of the hospital district, in a special meeting, vote on an item that was not included on the published agenda? Stated another way: Can the board take final action on an item in a special meeting that is not on the published agenda? If the board takes final action on an item not on the published agenda, is that action valid?

 

1. When must a public hospital district have its 2014 budget approved for the 2014 budget year?

Pursuant to RCW 70.44.060(6), the general rule is that the board of commissioners of a public hospital district must adopt the district's budget for the ensuing year on or before November 15, which here means by November 15, 2013.

In terms of additional background, the only specific reference to "budget" in the hospital district statute (chapter 70.44 RCW) is the above mentioned provision - RCW 70.44.060(6) - which provides, in relevant part regarding the budget process (emphasis added):

The superintendent shall prepare a proposed budget of the contemplated financial transactions for the ensuing year and file the same in the records of the commission on or before the first day of November. Notice of the filing of said proposed budget and the date and place of hearing on the same shall be published for at least two consecutive weeks, at least one time each week, in a newspaper printed and of general circulation in said county. On or before the fifteenth day of November the commission shall hold a public hearing on said proposed budget at which any taxpayer may appear and be heard against the whole or any part of the proposed budget. Upon the conclusion of said hearing, the commission shall, by resolution, adopt the budget as finally determined and fix the final amount of expenditures for the ensuing year. Taxes levied by the commission shall be certified to and collected by the proper county officer of the county in which such public hospital district is located in the same manner as is or may be provided by law for the certification and collection of port district taxes. The commission is authorized, prior to the receipt of taxes raised by levy, to borrow money or issue warrants of the district in anticipation of the revenue to be derived by such district from the levy of taxes for the purpose of such district, and such warrants shall be redeemed from the first money available from such taxes when collected, and such warrants shall not exceed the anticipated revenues of one year, and shall bear interest at a rate or rates as authorized by the commission.

Note that RCW 70.44.060(6) refers to a hospital district board of commissioners adopting the district's budget "upon the conclusion" of the public hearing that must be held on or before November 15. Perhaps some hospital districts interpret this provision to mean that "upon the conclusion" of the hearing doesn't necessarily mean that a hospital district must adopt its budget by November 15, but rather that the district must hold a public hearing on the budget by November 15 and then may adopt the budget subsequently that same calendar year. We're not aware of any case law or attorney general opinion authority specifically interpreting this timing language in RCW 70.44.060(6), but we think the goal for hospital districts should be to adopt the budget for the ensuing year by November 15 after holding a public hearing on the budget.

Note also that under RCW 84.52.020 hospital districts are required to submit to the county legislative authority on or before November 30 budgets or estimates of the amounts to be raised by taxation on the assessed valuation of the property in the district.

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2. We are working with a community member who is interested in an appointment to our hospital district board of commissioners to fill a vacancy. She is employed at the same company as one of our other commissioners, though they work in distinct areas. The current commissioner is an administrative assistant and the prospective commissioner is a vice president. Is this a conflict? Is there is policy that would prohibit this?

Based upon the facts as described, we don't see a conflict in such an appointment unless other circumstances exist (see below). As an initial matter, we're presuming that both the current commissioner and the potential appointee who both work for the same company would be able to meet the letter and spirit of their oaths of office to faithfully and independently uphold the duties of their respective offices, and that these commissioners would not improperly exert pressure on each other or others in their roles as hospital district commissioners.

The general provision that governs appointments for public hospital district boards of commissioners is RCW 70.44.045, which provides in relevant part:

A vacancy in the office of commissioner shall occur as provided in chapter 42.12 RCW ... . A vacancy shall be filled as provided in chapter 42.12 RCW.

RCW 42.12.070 sets forth the process for how such appointments are made, including subpart (1) which states:

Where one position is vacant, the remaining members of the governing body shall appoint a qualified person to fill the vacant position.

Based upon RCW 70.44.045 and chapter 42.12 RCW, the board of commissioners can appoint anyone who is qualified to fill the vacant position. In terms of who is "qualified" to be appointed by the board, RCW 70.44.040(2) provides that in order to hold office as (or be a candidate for) a commissioner of a hospital district, the person to be appointed must be a registered voter who resides in the commissioner district at issue.

There is not a provision in chapter 70.44 RCW (governing hospital districts) or otherwise that would categorically prohibit two people who work for the same company from also serving simultaneously as commissioners at the same hospital district. However, there could be situations in which other restrictions or prohibitions are implicated.

For example, there are restrictions and prohibitions under chapter 42.23 RCW related to contractual conflicts of interests that could apply if the commissioners at issue work for a company that is contracting with the hospital district for which they serve as commissioners. Also, RCW 42.23.070 prohibits any commissioner from using his/her position to secure special privileges or exemptions for himself, herself, or others, or from disclosing confidential information gained by reason of the commissioner's position, or from otherwise using such information for his/her personal gain or benefit.

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 3. What type of process must be used to accomplish a lease of public hospital district facilities to a nonprofit organization?

RCW 70.44.310 provides that a public hospital district can lease or rent out surplus hospital district real property. To do so, the board of commissioners of the district must pass a resolution stating that the board has determined that the property is presently not required for hospital district purposes and is to be leased or rented out. RCW 70.44.310 gives the district rather broad discretion regarding the process to be used, allowing the district to lease or rent out such property "upon such terms and conditions as the board in its discretion finds to be in the best interest of the district."

RCW 70.44.240 can apply to such lease/rental situations as well. RCW 70.44.240 specifically authorizes a hospital district to contract or join with other districts, hospitals, corporations, or individuals to provide services or facilities. In relevant part regarding leasing, RCW 70.44.240 provides:

A public hospital district contracting or joining with another party pursuant to the provisions of this chapter may appropriate funds and may sell, lease, or otherwise provide property, personnel, and services to the legal entity established to carry out the contract or joint activity.

More generally, we think the district should, as applicable, utilize a commercially reasonable process in leasing out such facilities to ensure the district is receiving a commercially reasonable rate for the lease. We note, too, that the contractual "consideration" in such a lease or rental agreement can consist of more than money, such as forbearance of a legal interest.  

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4. Our current bylaws provide that the duties of the superintendent include those specified in RCW chapter 70.44, specifically including RCW 70.44.060, RCW 70.44.080, and RCW 70.44.090. Can the duties of RCW 70.44.060 be assigned or "delegated" to the superintendent?

The short answer is that it depends on the type and extent of the delegation at issue. RCW 70.44.060 describes, in broad terms, the powers of a hospital district. The other provisions you mention, RCW 70.44.080 and RCW 70.44.090, set forth the specific powers and duties of the superintendent (or CEO).

In terms of hospital district governance, a key principle is that the board of commissioners has general authority over legislative matters and policymaking for the district and the superintendent, as set forth in RCW 70.44.080, "shall have control of administrative functions of the district." Additionally, RCW 70.44.090 describes the duties of the superintendent, including that the superintendent has the duty to "carry out the orders of the commission, and to see that all the laws of the state pertaining to matters within the functions of the district are duly enforced."

Regarding the general powers of a hospital district described in RCW 70.44.060 and otherwise in chapter 70.44 RCW (which governs hospital districts), many of those powers are clearly within the authority of the board of commissioners and aren't administrative. For example, the general authority of the board includes the authority to contract, sell and purchase property, tax district residents, and issue bonds for the district. Although the board can delegate some authority to the superintendent, keep in mind from a practical perspective that the board is ultimately responsible for any action taken pursuant to a delegation of its authority.

Perhaps the most common delegation we have seen at hospital districts (and other municipalities) is for the board to delegate to the superintendent contract authority up to a specific dollar amount (e.g., $10,000, $20,000) and only with respect to certain types of contracts (e.g., professional services agreements, consultant contracts). Whether a particular delegation is appropriate will depend upon the activity at issue and the degree of delegation. For example, we think, as above mentioned, that the board can delegate some of its contract authority to the superintendent, but only the board can exercise taxation authority on behalf of the district.

Regarding more specifically what types of activities are appropriate for delegation, we think it's important to consider the types of activities that require board action. AWPHD has available a document entitled, "Statutorily Required Board Actions by Resolution" (revised April, 2011), that includes a detailed list of actions that must be done by resolution of the board. That list will give you a good sense of the types of actions that require board approval, regardless of board delegation.

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5. May the board of the hospital district, in a special meeting, vote on an item that was not included on the published agenda? Stated another way: Can the board take final action on an item in a special meeting that is not on the published agenda? If the board takes final action on an item not on the published agenda, is that action valid?

RCW 42.30.080(3) provides (emphasis added):

The call and notices required under subsections (1) and (2) of this section shall specify the time and place of the special meeting and the business to be transacted. Final disposition shall not be taken on any other matter at such meetings by the governing body.

Therefore, unless the matter or item at issue was in the call and notice of the special meeting, the board cannot take final action on that item at that meeting. To clarify, this doesn't prevent the board from discussing the item, but it does prevent the board from taking final action on the item by, for example, voting on the matter.

Regarding the consequences of violating chapter 42.30 RCW (the Open Public Meetings Act), RCW 42.30.060(1) provides (emphasis added):

No governing body of a public agency shall adopt any ordinance, resolution, rule, regulation, order, or directive, except in a meeting open to the public and then only at a meeting, the date of which is fixed by law or rule, or at a meeting of which notice has been given according to the provisions of this chapter. Any action taken at meetings failing to comply with the provisions of this subsection shall be null and void.

Based on the provisions above in the context of your specific question, the general rule is that if the board takes final action on an item that was not on the special meeting notice, that action would be "null and void." Note, however, that there is an exception to this rule for certain types of emergencies. Under RCW 42.30.080(4):

The notices provided in this section may be dispensed with in the event a special meeting is called to deal with an emergency involving injury or damage to persons or property or the likelihood of such injury or damage, when time requirements of such notice would make notice impractical and increase the likelihood of such injury or damage.

Under RCW 42.30.080(4), if such an emergency exists the board can meet without the required notices and can take action on matters directly related to the emergency at issue. At times, whether a particular circumstance or occurrence is the type of emergency that falls under RCW 42.30.080(4) may be somewhat unclear, so it's important to consult with your district's attorney.

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