138 [84 Op. Att’y

1

 The Task Force was convened by Governor Harry Hughes in

August 1984 and chaired by Eugene M. Feinblatt, Esquire. Among its

members were State legislators, agency officials, business executives,

hospital administrators and union representatives.

HEALTH SERVICES COST REVIEW COMMISSION

HOSPITALS ) BONDS ) MARYLAND HOSPITAL BOND PROGRAM

AVAILABLE FOR BONDS ISSUED BY MARYLAND INDUSTRIAL

DEVELOPMENT FINANCING AUTHORITY ON BEHALF OF

CLOSING HOSPITAL

March 29, 1999

Mr. Don S. Hillier, Chairman

Health Services Cost Review Commission

You have requested our opinion as to whether bonds issued on

behalf of a hospital by the Maryland Industrial Development

Financing Authority (“MIDFA”) may be paid and refinanced under

the Maryland Hospital Bond Program (“Bond Program”), Annotated

Code of Maryland, Article 43C, §16A.

For the reasons given below, we conclude that the Bond

Program is available for bonds issued by MIDFA on behalf of a

hospital, assuming that other conditions of the Bond Program are

satisfied.

I

The Maryland Hospital Bond Program

A. 1984 Task Force on Health Care Cost Containment

The Maryland Hospital Bond Program traces its origin to the

December 1984 report of the Governor’s Task Force on Health Care

Cost Containment (“Task Force”).1

 The Task Force was formed to

address the rapid escalation of health care costs in the early 1980's.

The Task Force identified excess hospital capacity as a major factor
Gen. 138] 139

in rising health care costs in that excess capacity “creates an

artificial demand that can lead to inappropriate or unnecessary

costs.” Governor’s Task Force on Health Care Cost Containment,

Final Report (December 14, 1984) pp. 36-37. The Task Force

ultimately agreed upon 30 recommendations, two-thirds of which

required legislative action by the General Assembly. 

To eliminate excess hospital capacity and the attendant long

term costs, the Task Force suggested that voluntary consolidations,

mergers, conversions, and closings be encouraged to reduce excess

capacity. Final Report, at pp. 36-48. To that end the Task Force

made a number of recommendations, including that the Health

Resources Planning Commission (“HRPC”) conduct an institutionspecific study and develop an institution-specific plan for the State

regarding excess hospital capacity. Id. at pp. 40-41. In addition, it

recommended that the State create incentives for hospitals to

consolidate, convert, or close. Id., pp. 41-42.

The Task Force recognized that closing a hospital would not be

a simple matter. A critical issue in many circumstances would be

how the outstanding long term indebtedness of the hospital would be

repaid. The Task Force Report described the problem: 

The Task Force has concluded that the

financial disruptions caused by closure of a

hospital should be minimized by protecting

the bonded indebtedness of the closing

hospital. The Task Force finds that failure to

meet net outstanding long term indebtedness

could have a serious adverse effect on

subsequent bond issues financing health care

facilities, and possibly the State of Maryland

itself. Obligations of the Maryland Health and

Higher Education Facilities Authority, the

primary bonding source for Maryland

hospitals, are a special concern. A program to

insure the timely payment of outstanding long

term bonded indebtedness is, therefore,

necessary. 

Final Report, Recommendation 26, at pp. 44-45. In order to ensure

the timely payment of outstanding bonds of a closed hospital, the
140 [84 Op. Att’y

2

 The Task Force contemplated that this program of spreading debt

would apply only to hospital closures that did not result from mergers or

consolidations. The Task Force believed that, in the case of a closure

resulting from a merger or consolidation, the outstanding debt of the

closing facility should be financed through the rates of the surviving

facilities. Final Report, at p. 45.

3

 Although the primary purpose of the Bond Program was to

preserve financing options for hospitals, the General Assembly also

expressed concern that the failure to provide for payment of public

indebtedness of hospitals might have an adverse effect on the ability of the

State or local subdivisions generally to obtain financing:

The General Assembly finds that the failure

to provide for the payment of public body

obligations of a closed or delicensed hospital

could have a serious adverse effect on the ability

of Maryland health care facilities, and potentially

the ability of the State and local governments, to

secure subsequent financing through the issuance

of tax-exempt bonds.

The purpose of this section is to preserve the

access of Maryland’s health care facilities to

adequate financing by establishing a program to

facilitate the refinancing and payment of public

(continued...)

Task Force recommended that the debt be spread among remaining

hospitals.2

 Id. at p. 45. The Task Force included these

recommendations in its prescription for legislative action.

B. 1985 Legislation 

The General Assembly responded to the various

recommendations of the Task Force in legislation enacted during its

1985 session. See Chapter 109, Laws of Maryland 1985. In

particular, in response to Recommendation 26 of the Task Force,

that legislation created the Maryland Hospital Bond Program

codified in the Annotated Code of Maryland, Article 43C, §16A. 

The stated purposes of the Bond Program are to minimize the

financial disruption caused by the closure of a hospital and to

preserve the ability of Maryland hospitals to obtain financing

through the issuance of tax exempt bonds.3 See Chapter 109,
Gen. 138] 141

3

 (...continued)

body obligations of a closed or delicensed

hospital.

Article 43C, §16A(b).

4

 Under HG §19-115(l) a hospital may close without obtaining a

certificate of need if the HRPC finds that the proposed closing is in the

public interest and consistent with the State health plan or an institutionspecific plan developed by the HRPC.

5

 In practice the HRPC has determined whether a hospital closing is

the result of a merger.

Preamble, Laws of Maryland 1985; Article 43C, §16A(b).

Accordingly, the Bond Program permits refinancing of a closing

hospital’s outstanding bond indebtedness and payment of the debt

and costs of closure through a fee assessed on all Maryland

hospitals. Implementation of the program requires coordination and

consultation among the Secretary of Health and Mental Hygiene, the

HRPC, the Health Services Cost Review Commission (“HSCRC”),

and the Maryland Health and Higher Educational Facilities

Authority (“MHHEFA”), the primary State bond issuing authority

for hospitals.

The Bond Program provides for the payment and refinancing

of a hospital’s public indebtedness if certain conditions are met: 

1. The closure of the hospital is in

accordance with Md. Ann. Code, HealthGeneral Article (“HG”), §19-115(1), a

process administered by the HRPC;4

2. There are outstanding “public body

obligations” issued on behalf of the

hospital;

3. The closure of the hospital is not the

result of a merger or consolidation with

one or more other hospitals;5

 and 

4. The plan for closure and the related

financing plan are acceptable to the
142 [84 Op. Att’y

6

 Closure costs may include expenses of operating the hospital,

payments to employees and consultants, legal fees, utilities, debt service

and a variety of other expenses. Article 43C, §16A(a)(1).

Secretary of Health and Mental Hygiene

and MHHEFA.

Article 43C, §16A(c)(1)-(4). 

A closing hospital that seeks the benefits of the Bond Program

must provide MHHEFA and the HSCRC with a written statement of

any outstanding public body obligations issued on behalf of the

hospital. Article 43C, §16A(f). The HSCRC determines whether to

provide for payment of the closure costs of the hospital.6 Article

43C, §16A(g). MHHEFA then prepares a schedule of payments

necessary to meet the public body obligations of the hospital and,

following consultation with the issuer of each public body obligation

and the HSCRC, prepares a plan to finance, refinance, or otherwise

pay those obligations. Article 43C, §16A(h).

The statute authorizes MHHEFA to issue new bonds or notes

to finance the closing costs and the retirement of the eligible public

body obligations. Article 43C, §16A(i). These new debt

instruments are payable from fees assessed by the HSCRC or from

other available sources. Id., §16A(i)(2).

After the plan is developed, the HSCRC assesses a fee on all

hospitals that it regulates in an amount sufficient to:

g Pay the principal and interest on any public

body obligations, or any bonds or notes issued

by MHHEFA to finance or refinance those

public body obligations;

g Pay the costs of closure and any debt

instruments issued by MHHEFA to finance

those costs.

g Maintain any reserve required in the resolution,

trust agreement, or other financing agreement

securing the public body obligations, bonds, or

notes;
Gen. 138] 143

g Pay any required financing fees or other similar

charges; and 

g Maintain reserves deemed appropriate by

MHHEFA to ensure that the amounts collected are

sufficient in the event of defaults by other hospitals

in paying the fees. 

Article 43C, §16A(j)(1). The amount assessed each hospital is based

on the proportion of each hospital’s total gross patient revenue to the

total gross patient revenue of all hospitals regulated by the HSCRC.

Id., §16A(j)(2). As a result, the amount assessed in each case will

differ depending upon the plan developed by MHHEFA, as well as

the nature and the extent of the public body indebtedness involved.

The statute provides that the Bond Program does not relieve a

closed hospital of its obligations with respect to the payment of

public body obligations and that MHHEFA is subrogated to rights

of the bondholders against the hospital. The statute also confers on

MHHEFA the right to proceed against any guarantees or collateral

in order to protect the interests of bondholders. Article 43C,

§16A(k).

II

MIDFA Bonds

A. MIDFA 

The Maryland Industrial Development Financing Authority

(“MIDFA”) was created by the General Assembly in 1965 to relieve

unemployment and encourage economic development in Maryland.

Chapter 714, Laws of Maryland 1965; Article 83A, §5-902. MIDFA

was established as “a body corporate and politic and a public

instrumentality of the State.” Article 83A, §5-904. MIDFA is

funded through the State budget as an agency of the Department of

Business and Economic Development. It issues bonds to provide

financing support for businesses that are located in Maryland or that

are considering a move to the State. Md. Ann. Code, Article 41,

§14-101 et seq. MIDFA also insures the principal and interest

payments due under various financing arrangements. Md. Ann.

Code, Article 83A, §5-914. The agency consists of nine members,

including the Secretary of Business and Economic Development,
144 [84 Op. Att’y

7

 You have not asked, and this opinion does not address, whether the

closing of Liberty Medical Center satisfies other criteria for application of

the Bond Program.

either the Comptroller or the Treasurer by designation of the

Governor, and seven other members appointed by the Secretary with

the approval of the Governor. Id., §5-905. The appointed members

serve at the pleasure of the Governor. Id.

B. Liberty Medical Center Financing

In 1989, MIDFA issued bonds on behalf of Liberty Medical

Center (“Liberty”), a hospital on the west side of Baltimore City, in

the aggregate principal amount of $13.6 million. In 1996, Liberty

merged with a nearby hospital operated by Bon Secours Baltimore

Health Corporation (“Bon Secours”). Approximately $11.8 million

of the bonds issued by MIDFA on behalf of Liberty remain

outstanding.

In November 1998, Bon Secours notified the HRPC of its

intention to close Liberty Medical Center and requested application

of the Bond Program. On February 9, 1999, the HRPC concluded

that closure of Liberty was in the public interest and approved the

closure pursuant to HG §19-115(l). The HRPC then formally

notified MHHEFA and HSCRC that Liberty's closing satisfied the

first condition for application of the Bond Program. This has

prompted your question as to whether the Liberty's MIDFA bonds

are “public body obligations” that satisfy the second condition for

application of the Bond Program.7

III

Analysis

A. Public Body Obligation

As noted above, the Bond Program applies to “public body

obligations” of hospitals. Under the statute, the term “public body

obligation” includes:

Any bond, note, evidence of an indebtedness,

or other obligation of the payment of
Gen. 138] 145

8

 A 1992 amendment of the statute excludes from the definition of

“public body obligation”:

[A]ny obligation, or portion of any such

obligation, if: 

(a) the principal of and interest on the

obligation or such portion thereof is: 

(i) insured by an effective municipal

bond insurance policy; and 

(ii) issued on behalf of a hospital that

voluntarily closed in accordance with §19-115(1)

of the Health General Article; 

(b) the proceeds of the obligation or such

portion thereof were used for the purpose of

financing or refinancing a facility or part thereof

which is used primarily to provide outpatient

services at a location other than the hospital; or 

(c) the proceeds of the obligation or such

portion thereof were used to finance or refinance

a facility or part thereof which is primarily used

by physicians who are not employees of the

hospital for the purpose of providing services to

non-hospital patients.

Article 43C, §16A(a)(2)(ii). See Chapter 600, Laws of Maryland 1992.

At one time MIDFA provided bond insurance and the State and Baltimore

City also provided certain guarantees to support a letter of credit issued by

a bank in connection with the MIDFA bonds. However, upon the

consolidation of Liberty and Bon Secours in 1996, the MIDFA insurance

and guarantees were replaced with a guarantee by Bon Secours itself.

Because there is no longer any bond insurance related to Liberty’s MIDFA

bonds, we do not consider the question whether MIDFA insurance affects

eligibility for the Bond Program.

borrowed money issued by [MHHEFA] or any

public body as defined in Article 31, §9 of the

Code, the Mayor and City Council of

Baltimore, or any municipal corporation ....

Article 43C, §16A(a)(2)(i) (emphasis added). Bonds that are insured

by a municipal bond insurance policy or that were used to finance

facilities separate from the hospital itself are not eligible for the

Bond Program.8

 
146 [84 Op. Att’y

Thus, in defining eligible debt, the statute identifies two issuers

by name ) MHHEFA and Baltimore City ) and two more general

categories of issuers ) municipal corporations and “public bodies”

defined in Article 31, §9. Since MIDFA is not identified by name

and is not a municipal corporation, whether the Bond Program is

available in connection with Liberty’s closure depends upon whether

MIDFA is a “public body” under the definition set forth in Article

31, §9. That section defines “public body” to mean:

Any county, public corporation or other

political subdivision of this State or any

instrumentality or agency of any county,

public corporation or other political

subdivision of the State, except that said term

shall not be construed to include the Mayor

and City Council of Baltimore, any municipal

corporation subject to the provisions of Article

XI-E of the Maryland Constitution, or any

housing authority formed pursuant to the

provisions of Article 44A of the Code.

Article 31, §9(a) (emphasis added.) Since MIDFA is not a county

or political subdivision, it is a “public body” for purposes of the

Bond Program only if it is a “public corporation” for purposes of

Article 31, §9. 

B. Public Corporation Under Article 31, §9

While the statute does not define or list “public corporations,”

the Court of Appeals has described such an entity as follows:

The essential difference between a public and

a private corporation has long been recognized

at common law. A public corporation is an

instrumentality of the state, founded and

owned by the state in the public interest,

supported by public funds, and governed by

managers deriving their authority from the

state.

Levin v. Sinai Hospital of Baltimore, 186 Md. 174, 178, 46 A.2d 298

(1946). See also Andy’s Ice Cream, Inc. v. City of Salisbury, 125

Md. App. 125, 143 (1999). MIDFA falls squarely within this
Gen. 138] 147

description, given that it is as a “body corporate and politic and a

public instrumentality of the State,” that it is supported by public

funds, and that MIDFA members serve at the pleasure of the

Governor. However, the context of the term “public corporation” in

Article 31, §9 raises two questions that require further analysis. 

1. Relation to Political Subdivisions

First, the phrase “county, public corporation or other political

subdivision of this State” in the definition of “public body” in

Article 31, §9 might be construed to mean that only public

corporations that are also “political subdivisions of this State” ) e.g.,

municipal corporations ) are within the scope of §9. Assuming that

MIDFA is not a “political subdivision of this State” it would not be

covered. However, this interpretation would render the term “public

corporation” in §9 meaningless. Section 9 already explicitly

includes counties and “other political subdivisions” and explicitly

excludes Baltimore City and municipal corporations. Because all

political subdivisions of the State are already covered, the term

“public corporation” would not have any additional meaning. A

cardinal rule of statutory construction is to give all terms meaning

and not to render any language of a statute superfluous. Jung v.

Southland Corp., 351 Md. 165, 177, 717 A.2d 387 (1998).

Moreover, the definition of “public body” was originally included

sixty years ago in a part of Article 31 that applied to public securities

generally and appears to have been an attempt to encompass virtually

all issuers of public securities. See Chapter 630, Laws of Maryland

1939. Accordingly, in our opinion, the term “public corporation” in

Article 31, §9, is not restricted to entities that are also political

subdivisions of the State. 

2. Application to State Entities

Second, a 1985 revision of Article 31 that restricted application

of that article to local government entities might be construed to

exclude MIDFA from the definition of “public body” in §9. In

particular, that legislation added the current §1 of Article 31, which

states that, with an exception not pertinent to this opinion, “this

Article does not apply to the State or to any of its units or its

instrumentalities.” Chapter 11, §4, Laws of Maryland 1985. One

might construe that section to exclude MIDFA, an “instrumentality

of the State,” from the definition of “public body” in §9. Under that

construction, the cross-reference to Article 31, §9 in the definition
148 [84 Op. Att’y

of “public body obligations” in the Bond Program statute would

incorporate only local government issuers, and MIDFA bonds would

not qualify as “public body obligations” eligible for the Bond

Program. 

Despite its superficial logic, such a conclusion would be at

odds with the legislative history and purpose of the Bond Program.

When a mechanically logical interpretation of a phrase results in an

illogical result:

We may and often must consider other

“external manifestation” or “persuasive

evidence,” including a bill’s title and function

paragraphs, amendments that occurred as it

passed through the Legislature, its relationship

to earlier and subsequent legislation, and other

material that fairly bears on the fundamental

issue of legislative purpose or goal, which

becomes the context within which we read the

particular language before us ....

Kaczorowski v. City of Baltimore, 309 Md. 505, 515, 525 A.2d 628,

632-33 (1978). See also Catonsville Nursing v. Loveman, 349 Md.

560, 570, 709 A.2d 749 (1998).

When the legislation establishing Bond Program was drafted

in early 1985, Article 31 governed the public securities of both State

and local entities. At that time, the cross-reference to the definition

of “public body” in §9 encompassed a wide range of bond-issuing

public agencies, including State entities such as MIDFA. The

amendment of Article 31 during the same legislative session to add

the limiting language of §1 was a product of the code revision

process that created the new State Finance and Procurement Article

(“SFP”). Essentially, the portions of Article 31 that related to State

finance and debt instruments were consolidated in the new article.

See Chapter 11, §4, Laws of Maryland 1985. The new §1 of Article

31 apparently was designed to clarify that general provisions

concerning the public debt of the State and its instrumentalities were

being consolidated in the new SFP Article and that Article 31

henceforth would govern debt issued by local government units. See
Gen. 138] 149

9

 For example, the Revisor’s Note following SFP §8-221 states:

Most of the sections of this subtitle repeat the

substance of provisions of present Art. 31 that,

before enactment of this subtitle, applied to

political subdivisions and their units and

instrumentalities, as well as to units and

instrumentalities of the State. In light of this

subtitle, provisions of Art. 31 have been amended

to delete the references to the State and its units

and instrumentalities. Those provisions of present

Art. 31 ultimately will be revised in a local

government Article.

The Revisor’s Notes to both §§1 and 9 of Article 31 similarly reveal that

the Legislature intended to delete references to the State and its units and

its instrumentalities from Article 31 and insert them, instead, in the new

Article. 

id., Revisor’s Notes.9 Absent an “unmistakable” intention to modify

the law, changes made in code revision are presumed to be for

purposes of clarity rather than substantive change. Blevins v.

Baltimore County, 352 Md. 620, 724 A.2d 22 (1999). Nothing in the

Revisor’s Notes or the legislative history of that bill suggests that, as

part of creating the SFP Article, the General Assembly intended to

limit the availability of the Bond Program for MIDFA bonds.

Nor is there any reason to believe that the Legislature intended

to exclude otherwise eligible MIDFA bonds from the Bond Program.

The stated purpose of the Bond Program was to provide for the

payment of the bond indebtedness of closed hospitals in order to

preserve access to the financial markets for surviving institutions.

Article 43C, §16A(b); Chapter 109, Preamble, Laws of Maryland

1985. While the General Assembly explicitly contemplated that the

program would involve bonds issued by MHHEFA, the State entity

most likely to issue bonds on behalf of a hospital, it did not limit the

program to debt instruments issued by MHHEFA. 

The legislative history of the program demonstrates that it was

targeted at the public indebtedness of hospitals without specific

reference to the identity of the public issuer. The Task Force

expressed concern about the ramifications of a “failure to meet net

outstanding long term indebtedness” of closing hospitals. Although
150 [84 Op. Att’y

10 This situation is analogous to the General Assembly’s inadvertent

repeal, during code revision, of a provision authorizing a certain “bad

check fee.” We concluded that the repeal should not be given effect. See

82 Opinions of the Attorney General 165 (1997).

it referred to MHHEFA as the primary bond issuing source for

hospitals, its description of the problem and its prescription of a

solution referred to public bonds generally. See Final Report,

Recommendation 26, at pp. 44-45. A legislative staff summary of

the bills establishing the Bond Program indicated that it was

intended to implement Recommendation 26 of the Task Force. See

Research Analysis House Bill 1551, prepared for House

Environmental Matters Committee at p.1 (1985). When the bills

were considered in the Legislature, the Secretary of Health and

Mental Hygiene testified in support of the bill. As a member of the

Task Force and a representative of the administration that had

proposed the Bond Program, she explained its purpose: “The intent

of this is to protect the public credit of the State and its hospitals by

providing refinancing of any outstanding public body obligation held

by a closed or delicensed hospital.” Testimony of Adele Wilzack on

SB 655 before Senate Finance Committee at p.2 (February 21, 1985)

(emphasis added). It is apparent that neither the proponents of the

program nor the Legislature itself made fine distinctions among

different potential State issuers of such bonds. 

3. Summary

A review of the legislative history of the Bond Program and of

Article 31 suggests the following conclusion: By cross-referencing

the then broad definition of “public body” in Article 31, the

Legislature apparently intended in 1985 that the Bond Program be

generally available for public securities issued on behalf of hospitals.

We think it unlikely that the General Assembly, by the coincident

creation of the SFP Article and the enactment of §1 of Article 31 as

part of code revision, intended to limit indirectly the Bond Program

that it created during the same session. Given that the State entity

primarily responsible for issuing bonds on behalf of hospitals was

explicitly included in the Bond Program statute, it is perhaps

unsurprising that the Legislature apparently failed to discern that

creation of the SFP Article arguably could affect the application of

the Bond Program to hospital bonds issued by a State agency.10 In

our opinion, the Legislature did not have such an intention, and
Gen. 138] 151

MIDFA should be considered a “public body” for purposes of the

Bond Program.

IV

Conclusion

In summary, it is our opinion that the provisions of the

Maryland Hospital Bond Program are available for bonds issued by

MIDFA on behalf of a hospital. Assuming that all the other criteria

necessary to implement the Bond Program have been met, such

bonds are subject to the process set forth in that statute. 

J. Joseph Curran, Jr.

Attorney General

Stanley Lustman

Assistant Attorney General

Robert N. McDonald

Chief Counsel

 Opinions and Advice