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Ask MRSC

December 2014

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. What's the position of the State Auditor's Office regarding the extent to which hospital districts can use day labor - that is, their own employees - for public works projects?
  2. If a public hospital district commissioner is a candidate for a position on the governing body of another special purpose district, can that candidate accept a campaign contribution from a hospital district employee?
  3. The district contracts with a collection agency to pursue delinquent accounts in situations in which patients receive services and don't pay on time. There are situations in which payment is sent to collections after insurance has paid their share and, if applicable, the district's charity care policy has applied. What are the rules related to allowing the collection agency to enter into agreements with debtors to pay off what is due over some period of time?
  4. We have a regular meeting of the board of commissioners scheduled for this afternoon and due to illness, we have two commissioners who will attend in person and one commissioner who will attend via speaker phone. We have five commissioners and realize that three commissioners constitute a majority for purposes of taking action. Is it permissible for a commissioner to participate in a meeting and vote via telephone?
  5. When we open bids for a public works project, does this need to occur at a public meeting of the board of commissioners?
  6. What rules apply to our hospital district and communicating to the public about a district annexation proposition that may be on the ballot in the upcoming election?

1. What's the position of the State Auditor's Office regarding the extent to which hospital districts can use day labor - that is, their own employees - for public works projects?

Based on communications we've had with the State Auditor's Office (SAO), it's our understanding that the SAO's position is that hospital districts may use day labor/employees on a public works project when the estimated cost of that project does not exceed $75,000 (including materials, sales tax, and labor costs). The statutory provision in the hospital district statute (chapter 70.44 RCW) that relates to this issue is RCW 70.44.140 ("All materials purchased and work ordered, the estimated cost of which is in excess of seventy-five thousand dollars, shall be by contract. ...").

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2. If a public hospital district commissioner is a candidate for a position on the governing body of another special purpose district, can that candidate accept a campaign contribution from a hospital district employee?

It would be legally permissible for such a candidate to accept and use an unsolicited campaign contribution from a hospital district employee, assuming that the contribution wasn't offered and/or made using district facilities or during the employee's working hours. RCW 41.06.250(2) guarantees employees of political subdivisions of the state the right to vote and to express their opinions on all political subjects and candidates:

Employees of the state or any political subdivision thereof shall have the right to vote and to express their opinions on all political subjects and candidates and to hold any political party office or participate in the management of a partisan, political campaign. Nothing in this section shall prohibit an employee of the state or any political subdivision thereof from participating fully in campaigns relating to constitutional amendments, referendums, initiatives, and issues of a similar character, and for nonpartisan offices.

Also, a regulation adopted by the state Public Disclosure Commission, WAC 390-05-271(1), provides:

RCW 42.17A.555 does not restrict the right of any individual to express his or her own personal views concerning, supporting, or opposing any candidate or ballot proposition, if such expression does not involve a use of the facilities of a public office or agency.

The provision referenced above, RCW 42.17A.555, prohibits the use of a public office or public facilities in support of or in opposition to any candidate or ballot proposition. The right to express opinions/views regarding candidates includes, in our opinion, the right to make campaign contributions in support of candidates.

Note, however, that the candidate here cannot solicit contributions from hospital district employees, as that is prohibited by RCW 42.17A.565(1), which states:

No state or local official or state or local official's agent may knowingly solicit, directly or indirectly, a contribution to a candidate for public office, political party, or political committee from an employee in the state or local official's agency.

So, in the context of unsolicited campaign contributions, a hospital district commissioner who is a candidate, regardless of whether he or she is running for a position, for example, on the governing body of another local government or is running for reelection on the hospital district board of commissioners, can receive unsolicited campaign contributions from the personal funds of employees of the hospital district. However, with regard to solicited campaign contributions, a hospital district commissioner who is a candidate cannot solicit campaign contributions from an employee in that hospital district commissioner's agency, regardless of whether that commissioner is seeking reelection on the hospital district board or a position, for example, on the governing body of another local government.

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 3. The district contracts with a collection agency to pursue delinquent accounts in situations in which patients receive services and don't pay on time. There are situations in which payment is sent to collections after insurance has paid their share and, if applicable, the district's charity care policy has applied. What are the rules related to allowing the collection agency to enter into agreements with debtors to pay off what is due over some period of time?

A hospital district can take reasonable measures to pursue and collect debts owed by patients served by the district. The situation you describe wouldn't implicate the lending of credit or gift of public funds prohibition because the debtors you describe are infirm, and perhaps poor, and the prohibition doesn't apply to expenditures to provide necessary support of such persons. The gift of public funds prohibition set forth in Article VIII, Section 7 of the Washington State Constitution, as stated and as interpreted by case law, provides that the prohibition doesn't apply to expenditures, for example, by a hospital district for the necessary support of the poor and/or the infirm.

Additionally, a significant consideration in the lending of credit and gift of funds analysis is whether there is donative intent on the part of the district related to the expenditure at issue. There is an attorney general opinion, AGO 1986 No. 8, for example, that addresses a situation involving a hospital district charging discounted rates. In that opinion, the attorney general's office concludes that the discount wouldn't constitute a gift of funds because, in part, the hospital district would be deriving an economic benefit by providing the discount.

Hospital districts also have specific statutory authority to contract with collection agencies to pursue and recover debt. RCW 19.16.500 authorizes governmental entities, such as hospital districts, to retain, by written contract, collection agencies for the purpose of collecting public debts owed by any person.

Regarding such situations, it's advisable to review RCW 19.16.500 in full and to become familiar with its various requirements. Note, for example, that RCW 19.19.16.500 (2) provides, regarding notice to the debtor:

No debt may be assigned to a collection agency unless (a) there has been an attempt to advise the debtor (i) of the existence of the debt and (ii) that the debt may be assigned to a collection agency for collection if the debt is not paid, and (b) at least thirty days have elapsed from the time notice was attempted.

In the specific context of working with a collection agency and settlement of debt, RCW 19.16.500 (3) provides, for example:

Collection agencies assigned debts under this section shall have only those remedies and powers which would be available to them as assignees of private creditors.

In the situation you describe, the district has the authority to enter into a contract with a collection agency to pursue debt owed to the district, and for the collection agency to pursue remedies that are available to them as provided in RCW 19.16.500 and otherwise. By extension, the district's authority in this regard would include the discretion to enter into settlement agreements through which debtors agree to reasonable payment plans with the district and/or the collection agency.

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4. We have a regular meeting of the board of commissioners scheduled for this afternoon and due to illness, we have two commissioners who will attend in person and one commissioner who will attend via speaker phone. We have five commissioners and realize that three commissioners constitute a majority for purposes of taking action. Is it permissible for a commissioner to participate in a meeting and vote via telephone?

A hospital district board of commissioners may allow its members to participate by telephone or other similar electronic means in order to establish a quorum for business. We recommend that the board adopt a rule to allow for such telephonic or similar electronic participation for extraordinary circumstances in which a commissioner has a valid reason for not being able to attend a meeting in-person.

We recommend that such a rule make clear that the telephonic participation needs to be by speakerphone (or equivalent), such that the member participating telephonically or otherwise electronically can be heard by all those present at the meeting, and can hear all that is said by those present at the meeting. If the board doesn't have such a rule, we think the board can adopt one at the meeting you describe and make the rule effective immediately to allow for a quorum for this meeting and for the meeting to be otherwise conducted. We recommend that you consult with the district's legal counsel regarding this matter as well.

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5. When we open bids for a public works project, does this need to occur at a public meeting of the board of commissioners?

The relevant statute is RCW 70.44.140(1), which provides, in part:

At the time and place named, such bids shall be publicly opened and read, and the commission shall proceed to canvass the bids, and may let such contract to the lowest responsible bidder upon plans and specifications on file, or to the best bidder submitting his or her own plans and specifications:

Note the requirement for a public bid opening and reading the bids. While RCW 70.44.140(1) seems to imply that the bid opening be at a meeting of the board of commissioners, it doesn't say so explicitly and such action would be contrary to accepted practice in almost all other municipalities in Washington state, where the common practice is for agency staff to open the bids, read them, and make a recommendation to their council/board/commission at a later public meeting of the governing body. At that meeting, the board of commissioners would "canvass" the bids.

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6. What rules apply to our hospital district and communicating to the public about a district annexation proposition that may be on the ballot in the upcoming election?

Regarding communicating about ballot propositions, a key statutory provision governing such situations is RCW 42.17A.555, which provides in part:

No elective official nor any employee of his or her office nor any person appointed to or employed by any public office or agency may use or authorize the use of any of the facilities of a public office or agency, directly or indirectly, for the purpose of assisting a campaign for election of any person to any office or for the promotion of or opposition to any ballot proposition. Facilities of a public office or agency include, but are not limited to, use of stationery, postage, machines, and equipment, use of employees of the office or agency during working hours, vehicles, office space, publications of the office or agency, and clientele lists of persons served by the office or agency. However, this does not apply to the following activities: ...

Generally speaking, RCW 42.17A.555 prohibits, for example, use of a district facility, such as district-owned meeting room space, by district officials or employees, "directly or indirectly, for the purpose of assisting a campaign for election of any person to any office or for the promotion of or opposition to any ballot proposition."

However, there are several exceptions to this general prohibition, so it's important to review RCW 42.17A.555 in full to determine its applicability to the specific situation at issue. One of the exceptions applies to situations, for example, in which a district board of commissioners has formally taken action at an open public meeting "to express a collective decision, or to actually vote upon a motion, proposal, resolution, order, or ordinance, or to support or oppose a ballot proposition," as long as certain other conditions are met. See, RCW 42.17A.555(1).

Two other exceptions under RCW 42.17A.555 are:

(2) A statement by an elected official in support of or in opposition to any ballot proposition at an open press conference or in response to a specific inquiry;

(3) Activities which are part of the normal and regular conduct of the office or agency.

We've found the state Public Disclosure Commission (PDC) to be a very useful resource regarding such issues, including with respect to what specific types of political and/or campaign activities are permissible. A particularly good and detailed resource is the PDC publication, "Guidelines for Local Government Agencies in Election Campaigns " (revised May 22, 2013). The local guidelines publication is full of practical information and it covers key issues and questions that generally arise in such situations.

In part, that PDC publication explains that a local government elected official (see p. 9):

  • May engage in political activities on his or her own time, if no public equipment, vehicle or facility is used. (An elected official may use his or her title, but should clarify that he/she is speaking on his/her own behalf, and not on behalf of the agency. If the elected legislative body has adopted a resolution, the official can then speak on behalf of the agency.)
  • May attend any function or event at any time during the day and voice his or her opinion about a candidate or ballot proposition as long as they are not being compensated and are not using any public equipment, vehicle or other facility.

But local elected officials:

  • Shall not direct agency staff to perform tasks to support or oppose campaign activities or ballot measures.
  • Shall not use public facilities or resources to engage in political activities.

Key questions are:

  • Is the elected official using staff time, a public vehicle, or other public resources?
  • Has the agency adopted a resolution? If yes, the elected official can speak on behalf of the agency. If not, has the elected official made it clear that he or she is not speaking on behalf of the agency?

Of interest may also be an article we posted on our MRSC Insight blog (which we encourage you to sign-up for - see the right side of the blog's homepage) entitled, Election Season "Do's and Don'ts." We also recommend, particularly in situations in which you are wondering about the PDC's interpretation of any of its rules, that you contact the PDC directly to get their latest thinking on the matter. Your district's legal counsel should also be consulted regarding such matters.

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If you have comments for the newsletter editor, please contact Joe Levan, Legal Consultant.

Washington city, county, and public hospital district officials and members of the Washington Association of Sewer and Water Districts and Enduris (elected and/or staff) can call or email MRSC free of charge for advice and information on local government issues.

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