Opinion ID: 1315464
Heading Depth: 1
Heading Rank: 5

Heading: Hospital's Status

Text: In considering the Hospital's status, the circuit court observed that the Hospital does not perfectly fit into any category, but that its purpose is essentially local and it is not a state governmental body as that term is defined by the Procurement Code; rather, it is a political subdivision, and more particularly, a special purpose district serving local needs: GHS [the Hospital] does not fit perfectly within the categories that the State Procurement Code creates. As a result, the decision in answering the questions raised in this case is a difficult and close one. In the final analysis, however, GHS was created to serve a local governmental purposeproviding hospital facilities and services in Greenville County. By its very nature, it is local: its Board consists of citizens from the City and County of Greenville; in the past it was funded through Greenville County bond issues; and its original structure came from the City of Greenville. One of the purposes of the State Procurement Code is to allow local political subdivisions the flexibility to choose competitive procurement mechanisms that are appropriate for their purpose. The Court finds that GHS is the type of local political subdivision that this policy objective is meant to cover. Thus the Court holds that GHS is not a governmental body as defined by ... the State Procurement Code. Instead, the Court holds that GHS is a political subdivision, and more specifically, a special purpose district. Background of the Hospital's Formation. The Hospital was created in 1947 by act of the South Carolina Legislature to provide hospital facilities to the residents of Greenville County. 1947 S.C. Acts 432. The legislature observed the city hospital then in existence was insufficient to meet the needs of all of the Greenville County residents and concluded that the most practical and economical solution of the problem would be for the County of Greenville to take over the hospital, to expand its physical facilities[,] and to operate it for the benefit of all residents of Greenville County. Id. § 1. Because the city was unwilling to convey the existing hospital to the county without some guarantee its future operation would be on a basis satisfactory to the city residents, the legislature created an independent Board, free from the control of the corporate authorities of the City or the County and charged with the duty of operating said hospital and its expanded facilities for the benefit of the taxpayers and residents of all Greenville County[.] Id. To this end, the legislature established a Board, to be known as the Greenville General Hospital Board of Trustees. Id. § 4. The board was authorized and empowered to do all things necessary or convenient for the establishment and maintenance of adequate hospital facilities for Greenville County[.] Id. § 5. In 1965, the legislature created and established in Greenville County a district to be known as `Greenville Hospital System District' (the district), which shall include and be comprised of all territory in Greenville County within the boundaries of Greenville County. 1965 S.C. Acts 626, § 2. In the act making this change, the legislature noted that public hospital facilities in Greenville County are being presently provided by a public agency known as the Greenville General Hospital Board of Trustees (the hospital board). Id. § 1. The legislature found that studies indicated the growth of Greenville County would require a tremendous expansion of existing facilities, so the legislature decided to establish a hospital district co-extensive with Greenville County, and to create a commission as the governing agency thereof.... Id. The district, acting through the commission, was empowered to issue general obligation bonds. Id. § 7. In 1966, the legislature repealed 1965 S.C. Acts 626, which created the district. 1966 S.C. Acts 1286, § 15. The legislature observed that the Hospital had been expanding using general obligation bonds issued by Greenville County, and that it was changed to a district in contemplation of the district acquiring from the board all existing public hospital facilities in the county and the district being empowered to issue bonds itself, but litigation had ensued challenging the validity of the act and also contending that the district had to follow the debt limitation set forth in the state constitution. Id. § 1(6). The legislature noted the trial court had upheld the validity of the district, but ruled that it must observe the debt limitation. Id. § 1(7). The legislature stated it had further considered the problem while an appeal was being perfected and found that, if the district were to be permitted to issue general obligation bonds, a constitutional amendment had to be adopted. Id. § 1(8). Further, the legislature noted that the district was not authorized to function until the Hospital board had conveyed the hospital properties to the district and, since no conveyance had yet been made, the board was still performing the functions committed to it under the Act of 1947. Id. The legislature concluded the board should, therefore, continue its functions and decided to repeal the Act of 1965 in order that public hospital facilities in Greenville County may continue to function under the Hospital Board and in accordance with the authorizations of the Act of 1947. Id. By separate act in 1966, the legislature changed the name of the board to the Greenville Hospital System Board of Trustees. 1966 S.C. Acts 1285, § 1. In 1999, the Hospital adopted, [i]n compliance with South Carolina Code Ann. § 11-35-50, and in accordance with the principles of appropriately competitive procurement practices, its Hospital Policy governing the approved procedures for the procurement of construction and design services. Sloan's Arguments. Sloan argues the clear intent of the legislature's actions in 1965 and 1966 was that the Greenville Hospital System Board would continue to operate as a Board created by the General Assembly, and not as a `special purpose district' or political subdivision. He asserts other districts have been established in the same geographical area; therefore, the Hospital cannot be a special purpose district in the same territory because they would impermissibly overlap. Sloan also contends special purpose districts must have five characteristics: a distinct geographical description, the authority to issue general obligation bonds, taxing authority, inclusion of district in the entity's name, and they must serve a local governmental purpose. Sloan states the Hospital does not meet this five-part test. The circuit court found Sloan's assertion there was an impermissible overlap of districts was without merit, observing: Each of the acts creating these subsequently formed hospital districts makes clear that the hospital facilities to be constructed or otherwise acquired in those respective districts are to be operated by GHS [the Hospital]. At most, these subsequent districts were created to provide support to GHS.... The three later districts do not perform the same functions as GHS. See Wagener v. Smith, 221 S.C. 438, 445-46, 71 S.E.2d 1, 4 (1952) (`[T]here cannot be at the same time, within the same territory, two distinct municipal corporations, exercising the same powers, jurisdiction, and privileges.' Dillon, Municipal Corporations, (5th Ed.), Vol. I, Sec. 354, page 616.... The foregoing inhibition does not prevent the formation of two municipal corporations coextensive in area for different purposes.); S.C.Code § 6-11-435(B) (2004) (codifying the overlap rule). Moreover, the circuit court stated that none of these districts operate today and [they] are inactive by operation of statute, specifically South Carolina Code Ann. § 6-11-1630. The circuit court also rejected the five-part test set forth by Sloan, stating the legislature has never defined the term special purpose district to mandate inclusion of all five of these parameters and Sloan's position has no support either in case law or the South Carolina Code. The court observed that [i]n defining the term `special purpose district' the General Assembly has consistently determined that one factor that must be present is that an entity must serve a local governmental function or power. [1] The circuit court noted that, prior to the adoption of home rule in South Carolina, governmental power was concentrated at the state level in Columbia, and counties and municipalities had limited authority to provide services to its citizens. Therefore, the legislature created special purpose districts to fill the void for these needed services. The provision of hospital services was among the kinds of services made available via special purpose districts. See Knight v. Salisbury, 262 S.C. 565, 573, 206 S.E.2d 875, 878 (1974) (stating [t]he special purpose district has been employed for hospitals, recreational and other purposes). In Knight, this Court observed that in 1973, home rule (in which more authority was vested in local governments) put an end to the practice of creating special purpose districts within a given county, as special legislation relating to one county was no longer permitted; however, any existing units were allowed to continue functioning and county governments began providing services that were previously provided at the local level by special purpose districts. Id. at 573-75, 206 S.E.2d at 878-79. We agree with the circuit court's determination that the true essence of a special purpose district is its scope and its focus on serving local, not statewide, needs. In this case, the Hospital was established to provide medical services to all of the residents of Greenville County, where the existing city hospital was found to be insufficient to meet the increasing demand for services. Although the word board was used in the enabling legislation, it was used in a descriptive, generic sense, as the legislation did not, in actuality, create a board that had statewide authority or impact; rather, it was directed solely to local needs in a limited geographic area, i.e., Greenville County, and was to provide medical services solely in that area. Thus, it was created to serve a local purpose. The board consisted of residents from the city and county of Greenville, the original hospital was built by the city, and part of its funding came from local bond issues. The use of the term board or the absence of the specific phrase special purpose district is not determinative of the characterization of the entity. Cf. McLure v. McElroy, 211 S.C. 106, 110, 44 S.E.2d 101, 104 (1947) (referring to the governing board of a public hospital known as the Union Hospital District and noting the district... is a governmental subdivision of the State), overruled in part by Weaver v. Recreation Dist., 328 S.C. 83, 492 S.E.2d 79 (1997). Sloan contends there was no intent that the Hospital function as a special purpose district, but our review of the legislative events leads us to the opposite conclusion. It is readily apparent that the 1966 legislation repealing the act creating the district was passed solely because of the pending litigation regarding the authority of the district to issue bonds, and was done after the trial court had already upheld the validity of the district. The legislative change was simply a temporary solution to allow the board to continue functioning on an interim basis until the legal questions involving the district could be resolved. After home rule was implemented in 1973, however, new special purpose districts could no longer be created within one county, but entities created before 1973 were allowed to continue operating. This complex legislative history makes the question of the Hospital's status difficult, as the circuit court noted, because it does not clearly fall into either category (governmental body or political subdivision), but we hold the circuit court properly resolved the question in favor of finding the Hospital was not a governmental body as that term is defined in the Procurement Code. The legislative definitions of a special purpose district do not contain the five-part test articulated by Sloan and in fact demonstrate the legislature's intent to be as broad as possible so as to encompass the wide variety of entities serving local needs that were created before the adoption of home rule. As the circuit court found, the statutes enumerated above require only that such entities (1) were created by the General Assembly, (2) that they were created prior to March 7, 1973, and (3) that they serve a local governmental function. This Court has previously recognized that certain entities were special purpose districts, even though they did not possess all of the characteristics in the five-part test asserted by Sloan. See, e.g., Newman v. Richland County Historic Pres. Comm'n, 325 S.C. 79, 480 S.E.2d 72 (1997) (observing the Commission is a special purpose district created in 1963 pursuant to 1963 S.C. Acts 69). The Richland County Historic Preservation Commission did not have the authority to tax or to issue general obligation bonds, and the enabling legislation created it without using the word district or otherwise defining its geographical scope. We hold the circuit court did not err in concluding the Hospital is not a state governmental entity subject to the procurement procedures detailed in the state's Procurement Code; rather, it is a special purpose district that is entitled to, and by law is required to, establish its own provisions embodying sound principles of appropriately competitive procurement as provided by section 11-35-50. The formulation of the Hospital and its board meets the broad parameters of a special purpose district as used in the Procurement Code, as there is no limiting definition that specifies particular requirements other than the essential one of serving a local need or purpose.
Sloan next argues in the alternative that, even if the Hospital is a local political subdivision, the Hospital Policy does not embody sound principles of appropriately competitive procurement as required by section 11-35-50.