## THE A’CI’ORNEY GENERAL OF TEXAS **AUMIWN.** TIEKA~ 7t37ll

November 7. 1974
The Honorable Gerald W. Schmidt CountyAttorney Opinion No. H- 445 Gillespie County Courthouse Fredericksburg,. Texas 78624 Re: Financing ofaddition to hospital conveyed to county andleased back to original owner*. Dear Mr. Schmidt:

You have requested our opinion aa tothe propriety of a proposed transaction whereby Gillespie Countywill acquire ownership ‘ofan existing hospital, will finance rather extensive improvement8 andthen will lease thehospital back toits present owners.

The hospital war erected and equipped at a coat of approximately $1,600,000 dollars. There is an existing lien against the property to aecure a loan of $300,000 included in the original cost. The present owner is Hill County Memorial Hospital, organized under the Texas Non-Profit Corporation Act, Article 1396, V. T. C. S.

The rapid growth in the Gillespie County-Frederickeburg area n indicates the need to increase the size ofthehospital at an estimated, coat of $650,000. You state thatthe only feasible way to raise’the’ necessary funds would be a county-wide bondissue. For thie reason it ia planned to convey the hospi,tal to the County of Gillespie and fork the Countythen to finance the improvements through a bondissue. After the improvemente have been financed, thehospital would be leased toHill County Memorial Hoaptal for a period of 99years.

We have had numerous occasiona to review the powers and duties ofa county acting through ite commissioners court. Generally, it is held that the powera **of** counties are those “specifically conferred upon them.” Canales v. Laughlin, 214S.W. 2d 451. 453 (Tex. Sup. 1948)
p. 2050 I fTheHonorable Gerald W. Schmidt page 2 (H445)

Anderson v. Wood, 152 S.W. 2d 1084 (Tex. Sup. 1941); Attorney General Opinions H-392 (1974); H-374 (1974); H-51 Q973); H-45 (19733; H-16 0973).

Article 4478, V. T. C.S., amended in 1973 (Acts 1973, 63rd Leg., ch. 502. p. 1332), gives the counties such broad powers over hospitals that, in our opinion, there is ample authority “conferred” uponGillespie County to carry outthe proposed transaction. Article 4478 provides: The commissioners court of any county shall have power to establish a county hospital and any medical or other health facilities andto enlarge any existing hospitals or facilities for the care and treatment ofpersons suffering from any illness, disease oriujury, subject tothe provisions ofthis chapter. At intervals ofnot less thantwelve months, ten percent ofthe qualified property tax paying voters ofa.county may petition such court to provide for the establishing **or** enlarging of **a** county hospital, or any medical or other health facilities, in which event said’court within tire time deaignated in such petition shall su,bmitto such ,voters at

### a special or regular election the proposition ofissuing bonds in such aggregate amount as may be designated in said petition for

‘the e,stabliahing or enlarging of such hospital or facilities. Whenever any such proposition shall receive a majority ofthe votee of thequalified property tax payers voting at such election, said commissioners court shall establish and maintain such hospital or facilities and shall have the following powers: 1. To purchase and l,ease real property therefor, or acquire such real property, and easements therein, by condemnation proceedings. 2. To purchase or erect all necessary buildings.
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. The Honorable Gerald W. Schmidt page 3 (H-445)

make all necessary improvements and repairs and ’ alter any existing buildings, for the use of said hospital or facilities. The plans for such Erection, alteration, or repair shall first be approved by the State Health Officer, if his approval is requested by the said commissioners court. 3. To cause tobe assessed, levied and collected, I such taxes upon the real and personal property owned’ in the county as it shall deem necessary toprovide the funds for the maintenance thereof, andfor all ‘I other necessary expenditures therefor. 4. To issue county bonds to provide funds for the establishing, enlarging and equipping of said hospital or facilities andfor all other necessary permanent improvements in connection therewith; to doall other things that may be required bylaw in order to render said bonds valid. 5. To appoint a board ofmanagers for said hospital

. or facilities, or both. 6: To accept andhold in trust for the county,’ any, .“: grant or devise of land, or any gift.or bequest of money or other personal property or any donation to be applied, principal or income or both, for the benefit of said hospital or facilities, and apply the same in accordance with the terms of the gift. 7. The commissioners court may lease all or part ofany medical facility so constructed, purchased or acquired under this Act. See aleo V. T. C.S. art. 44941. --

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The Honorable Gerald W. Schmidt page 4 (H-445)

However, there is another limitation **on** the authority of commissioners courts, i. e., the prohibition ofArticle 3, section 52 of the Texas Constitution that the Legislature may notauthoriee any county to lend its credit or to grant public money or anything ofvalue in aid of or to any individual, association or corporation.

Inconstruing this provision along with sections 50and 51of Article 3and section 3 ofArticle 8, the courts have developed the rule that an expenditure ofpublic funds, even if it benefits a private person, association or corporation, may nevertheless be upheld if it serves a proper public purpose. See, e&, Attorney General Opinion H-403 (1974) and the cases cited therein.

You have not told us whether any consideration will be paid by the county for the conveyance ofthehospital to it and, if so, how much. You have not indicated what disposition is to be made of the obligation of $300,000 secured by a lien onthehospital. Finally, you have not told us what rental will be paid to the county and the relationship it will bear to the financial obligation to be assumed by the couidy. All of these are facts pertinent to the decision as towhether the proposed expenditure would be for aproper public purpose.

The construction and maintenance ofhospitals has been held to constitute a publ.icpurpose, and bonds issued to finance construction of county-owned hospitals are therefore valid under Article 3, section 52. Seydler v. Border, 115S.W. 2d 702, 703 (Tex. Civ. App. --Galveston 1938, writ ref’d). However, the constitutional prohibitions against lending of credit and donation of publ,icmoney also impose upon **a** county thatleases its facilities the duty toobtain bothsufficient assurance that the public purpose will be accompl,ished by the lessee andanadequate rental. Gillham v. Citv of Dallas, 207 S.W. 2d 978 (Tex. Civ. App. -,-Dallas 1948, writ ref’d n.r. e.); Dodson V. Marshall, 118S.W. 2d 621 (Tex. Civ. App. --Waco 1938, writ dis’m.).

Articles 44’78 and 44941 give counties the power to lease their hospital facilities, butthe authority granted by ,these statutes must be conditioned uponcompliance with the constitutional provisions. In
po 2053The Honorable Gerald W. Schmidt page 5 (H-445)

Gillham, the city sought to issue bonds tofinance the building of refrigeration and cold storage facilities for preservation and conservation of perishable foods to be used in connection with a public market. After finding thatthe proposed use constituted a public purpose, the court indicated thatthe city was obligated to ensure thatthefacilities would be used for the contemplated purpose: So long 

### as the City authorities supervise and control the contemplated buildings and the business conducted therein, and such buildings and use thereof serve some public market purpose . . . the statutes do not exclude the erection ,ofsuch buildings by the expenditure of bond funds. 207 S.W. 2dat 983. Similarly, in Dodson, the court sanctioned theleasing of a portion ofa courthouse rotunda for use as a concession stand, noting thatadequate control over the use ofthe space was reserved by the commissioners court because the lease was terminable at will.

Since theproposed lease of thehospital in question is for ninetynine **years,** the county should make some provision to retain some degree of control over future use ofthe facility. For example, thelease could ; require that one or more directors ofthe hospital corporation be appointed ” by the commissioners court, it could spell outin detail the obligations of. ‘
.’ thehospital toward indigent patients, or it could contain other provisions insuring county authority.

Moreover, the county must receive an adequate rental for the facility. Ifthe county fails to receive adequate consideration for the transaction, it will have effectively made an unconstitutional “donation” to a private entity. Dodson v. Marshall, supra. at 624; Llano Countyv. Knowles, 29 S.W. 549 (Tex. Civ. App. 1895, nowrit). The Attorney General is notin a position to assess all ofthe circumstances thatmust be considered in determining whether the rental.is satisfactory. Such factors as the value to the county of thefacilities andthe value of being relieved ofthe responsibility ofhospital operation must be assessed by the commissioners court in light ofits constitutional obligation.

ps 2054The Honorable Gerald W. Schmidt page 6 (H-445)

SUMMARY A county may issue bonds to finance additions toahospital and may lease thehospital to a private non-profit corporation if there is sufficient assurance thatthefacility will be used only for county hospital purposes, andif the county receives an adequate rental. Very truly yours,

JOHN L. HILL Attorney General of Texas AP RO ED.: \ :&p&444 2

--- DAVID M. KENDALL, Chairman Opinion Committee

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