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Legal Response on Chase County Hospital District PDF Print E-mail
Written by Wauneta Breeze   
Sunday, 01 May 2011 22:14

Chase County Hospital District

Information Sheet

The following information relates to questions pertaining to the formation of the Chase County Hospital District. These questions came from the public and were presented to the Chase County Hospital District Board. In an effort to provide accurate information in addressing these questions, the Chase County Hospital District Board submitted these questions to the law firm of Cline, Williams, Wright, Johnson & Old Father L.L.P of Lincoln, Nebraska. Each question has been addressed by the firm as follows:

1.     Is Chase County Community Hospital and Clinic obligated to transfer operations to the newly formed Chase County Hospital District Board based on this petition and vote?

There is no obligation under Nebraska law for an existing county hospital to transfer its assets or operations to a newly formed hospital district unless the county hospital and the hospital district have entered into an agreement of some type for that purpose, such as an asset sale. The hospital district is a distinct political subdivision created by the process outlined in Neb.Rev.Stat. §§ 23-3528 et seq. (Reissue 2007) (the Nebraska Local Hospital District Act). Members of the hospital district board following their initial appointment by the county board are  accountable to the registered voters living within the district and subject to election pursuant to Neb.Rev.Stat. §§ 23-3534 (Reissue 2007).

2.     If transfer of the Chase County Community Hospital to the Chase County Hospital District were to take place, what types of costs would be associated with this transfer and what level of cost do you project for this transfer?

Before addressing the issue of cost, other important questions to be answered are:

(a) What would the parties be attempting to accomplish by such a transfer? (b) What advantages and disadvantages would there be to have the assets of the hospital transferred to the hospital district? (c) Can the parties’ mutual goals be accomplished in some other way?

An asset transfer of a hospital is not a simple or inexpensive task. Alex M. (Kelly) Clarke’s letter of May 21, 2010, to Lola Jones outlines the different ways in which a transfer of the hospital assets could occur. He notes that the hospital board could lease the hospital to the hospital district provided the voters approved doing so. Mr. Clarke stated that the county board could sell the hospital to the district, but the process involved in doing so, whether through auction or to the highest bidder, was uncertain. He further mentioned that the county could also transfer the hospital to the district by a gift. Again, however, the process or conditions of a gift transfer were not altogether certain. His letter generally describes the issues presented by a potential sale, lease or other transfer of a county hospital to a hospital district. Letter from Alex M. (Kelly) Clarke to Lola Jones (May 21, 2010).

Assuming that the transfer of assets and ownership would occur in a manner similar to a commercial transaction such as an outright sale of the assets by the county to the hospital district, the parties could anticipate a number of transaction-related costs including, but not limited to, the following:

a. Substantial board/staff time on the part of both parties to gather and review data, conduct due diligence into the assets, liabilities, and operations of the hospital, determine a timeframe for the transaction, negotiate terms, meet with each other, conduct document review, meet with consultants, meet internally to discuss the transaction, and obtain proper approvals of the transaction as required by law. (Est. $100,000)

b. Substantial consultant’s fees

i.     Attorneys’ fees for the drafting of transaction documents, involvement in negotiations, conducting due diligence, review of contracts to be assumed or assigned to the hospital district, consultation and research about the implications of the transaction for purposes of compliance with legal requirements. (Est. $75,000 - $100,000 for each party and could be higher depending upon counsel selected and their hourly rates).

1.     Both parties would engage their own counsel for the transaction.

2.     The work of highly specialized counsel would be needed to address the health care, employee benefit, and bond implications.

3.     Bond counsel expertise would be needed to determine the implications of the transaction to the hospital’s present bond obligations and the financing of the transaction by the hospital district.

ii. Accountants to assist in reviewing and advising the parties about the financial ramifications of the transaction. (Est. $40,000)

1.     Each party would have its own accountant to provide it the independent advice required.

2.     Due to the nature of the transaction, accountants having experience working with health care entities and with critical access hospitals in particular would be needed to address government program reimbursement issues.

iii. Qualified appraisers to determine the fair market value of the assets to be transferred. ($20,000)

iv. Costs of issuance of new bonds by the hospital district to finance the transaction and to obtain sufficient working capital. ($75,000)

v. Costs of having a special election to approve the issuance of hospital district bonds for the purchase of the hospital’s assets. ($25,000)

The list above is just an overview of the types of costs that could be involved in an asset transfer between the parties. It is not intended to be a comprehensive or exhaustive list. The potential costs related to such a transfer could range from $200,000 to over $300,000 based upon the estimates above. The potential costs could change and could be higher or lower depending upon how the transaction is structured, the professionals involved, the complexity of the issues raised, the amount of time necessary to complete the transaction, the risk tolerance of the parties, conflict among the parties, etc.

3.     What other additional taxes can the hospital district levy and are they included in the three and five-tenths cents limit or would they be in addition to that limit?

Taxes may be levied by or on behalf of a hospital district in three different ways: (a) For purposes of funding a budget that has been approved by the county board, which tax is subject to the three and five-tenths cents limit referred to in the question, (b) for purposes of levying the tax approved by voters of the district as an additional tax, and (c) by the county board on behalf of the hospital district for purposes of paying the interest and principal of bonds issued by the hospital district. The taxes referenced in (b) and (c) are in addition to the three and five-tenths cents limit provided for in Neb.Rev.Stat. § 23-3552(1) (Reissue 2007).

The three and five-tenths cents per $100 of taxable value tax referred to in the question relates to the levy a hospital district can make to fund its annual budget. This general tax cannot exceed three and five-tenths cents on each $100 of the taxable value of taxable property within the hospital district. Although the hospital district board can approve this annual tax levy, a hospital district's budget and the annual tax levy itself is subject to approval by the county board of each of the counties having land within the hospital district. Neb.Rev.Stat. § 23-3552(1).

In addition to the tax that may be levied by a hospital district as a general matter on an annual basis, a hospital district may also authorize an additional annual tax not to exceed three and five-tenths cents on each $100 of taxable value of taxable property within the district, however, this tax cannot be authorized until the question of the additional tax has been submitted and approved by the voters of the district at a primary, general, or special election called for that purpose. Neb.Rev.Stat. § 23–3552(2).

The third type of tax levy related to a hospital district involves a tax for the payment of interest and principal on a hospital district's bonds. The county board within which a hospital district is found is empowered to levy annually on all of the taxable property within each hospital district in the county a tax sufficient to pay interest on any bonds issued by the hospital district. The levy can also provide a sinking fund for the final redemption of such bonds. This bond levy can occur when the annual levy for the county is made. The funds levied and collected are maintained by the county treasurer in a special fund for the payment of the interest on the bonds and for repayment of the bonds upon maturity. Neb.Rev.Stat. § 23–3565 (Reissue 2007). Property tax levies for bonded indebtedness approved according to law and secured by a levy on property are not subject to county allocation and lid limits as provided in Neb.Rev.Stat. § 77-3443(1).

4.  Does the county board (commissioners) have the authority to collect an additional tax for county health care facilities?

A county board in Nebraska has the authority to collect additional taxes for county health care facilities. Neb.Rev.Stat. §§ 23–3509 and 23-3511 (Reissue 2007). A county board may levy a tax annually in an amount not to exceed three and five-tenths cents per $100 of taxable value of all the taxable property in the county for the purpose of “acquiring, remodeling, improving, equipping, maintaining, and operating” county health care facilities. For counties in which 7000 or fewer people live, the tax cannot exceed seven cents on each $100 of taxable value. Neb.Rev.Stat. § 23-3511. A county board may issue bonds without voter approval for improvements, additions, or equipment for a county health care facility provided the cost is no more than fifty percent of the facility’s current replacement cost. Neb.Rev.Stat. §§ 23-3504 and 23-3508(1)(Reissue 2007). Additionally, the county board may issue and sell bonds either under or exceeding that fifty percent replacement cost limitation by submitting the issue to and obtaining the approval of the voters of the county. Neb.Rev.Stat. § 23-3508(2)(Reissue 2007).

5.  If a county board can collect an additional tax for a county health care facility, what are the benefits of having a hospital district as opposed to a county hospital or other health care facility?

As a short answer, it is evident from a review of the statutes that Nebraska hospital districts and county hospitals are more similar than dissimilar. Determining whether having a hospital district is more advantageous than a county hospital will depend upon the value interested parties place on the attributes of the two types of entities.

To fully analyze this question it is important to: (1) compare the features of a county hospital and a hospital district; and (2) understand the benefits of maintaining a hospital district in addition to a county hospital. A comparison between these two entities highlights their differences and comparative advantages and disadvantages. However, an analysis of the second consideration may show that many of the benefits of hospital districts can be obtained without transferring ownership from the county to the district.

A comparison of county hospitals and hospital districts shows that the two entities are very similar.[1] For instance, both have governing boards with broad operational powers. See, e.g., Neb. Rev. Stat. §§ 23-3502 to 23-3506; 23-3534, 23-3547. Additionally, both entities may issue bonds and levy taxes. Id. §§ 23-3508, 23-3509, 23-3511, 23-3552 to 23-3572.

However, there are some differences which may be important. First, the Board of Directors for a hospital district is elected directly by the district voters Id. § 23-3534. Thus, the hospital district Board is directly accountable to these voters. On the other hand, the Trustees of a county hospital are appointed by the county board. Id. § 23-3502. Nevertheless, the county board itself is elected by county voters. For this reason it is not clear that governance of a hospital district will be significantly more responsive to the public than a county hospital’s Board of Trustees. In fact, a county hospital’s Board of Trustees may be more responsive because they are subject to removal at any time by the county board while a hospital district’s Board of Directors can only be removed at the next election. Id. §§ 23-3502, 23-3534.

A county hospital’s operations may be limited in some ways that do not apply to a hospital district. Unlike a hospital district, a county hospital is limited regarding the extent of improvements or additions it may make to the facility or its equipment without county voter approval. Specifically, the county hospital may not make any such improvements or additions which “cost more than fifty percent of the current replacement cost of such existing facility and equipment unless the proposition is submitted to the voters . . . .” Id. § 23-3504. Additionally, a county hospital may not lease its facilities and equipment to another organization unless it first obtains county voter approval. Id. These limitations do not apply to hospital districts, thereby affording hospital districts slightly greater operational flexibility. However, it should be noted that the two foregoing limitations should only arise occasionally. Therefore, although these limitations may be significant at some point in a hospital’s life, it is unlikely that they will significantly impact a hospital’s operations.

Requirements for the issuance of bonds by county hospitals and hospital districts also differ between the two types of entities. County boards are able to issue bonds for county hospitals without voter approval up to 50% of the current replacement cost of the hospital’s facility and equipment. Id. § 23-3508. Any bond issue over this amount must be approved by county voters. Id. In contrast, a hospital district must obtain district voter approval before issuing any bonds. Id. § 23-3555. Thus, county hospitals have an advantage because they are able to issue bonds up to the 50% replacement cost of the hospital’s facility and equipment without the need for voter approval. On the other hand, hospital districts may be more responsive and voters may exercise greater control over hospital district borrowing because voter approval is required before the hospital district can issue bonds.

Similarly, tax levy requirements differ between county hospitals and hospital districts. As previously noted in this memorandum, a county may levy two different taxes for a county hospital: (1) a tax sufficient to pay principal and interest on issued bonds; and (2) a tax for maintenance and improvement purposes. Id. §§ 23-3508, 23-3509, 23-3511. The second tax is allowed up to: (a) three and five-tenths cents on each one hundred dollars of the taxable value of the taxable property in the county for counties with more than seven thousand individuals; or (b) seven cents on each one hundred dollars of the taxable value of the taxable property in the county for counties with seven thousand or less individuals. Id. §§ 23-3509, 23-3511.

In contrast, a hospital district may levy three different taxes: (1) a tax for funding an approved budget; (2) an additional tax; and (3) a tax sufficient to pay principal and interest on issued bonds. Id. §§ 23-3552, 23-3565. The first two types of tax levies are each  respectively limited to three and five-tenths cents on each one hundred dollars of the taxable value of the taxable property within the district. Id. § 23-3552. Compared to county hospitals, hospital districts would be able to levy more in taxes without regard to the number of people living in the county, however, voter approval would be required for a hospital district to levy the “additional tax.” Id.

Further, hospital districts differ in their ability to encompass varying geographic areas. A hospital district may add or withdraw land from the district provided certain requirements are met. Id. §§ 23-3539, 23-3540. A hospital district may also merge with other hospital districts. Id. §§ 23-3573 to 23-3578. Thus, a hospital district has some flexibility in the expansion of its tax base. It is important to note, however, that adjoining counties that meet certain requirements may together establish and support a hospital, issue joint bonds and govern the hospital jointly. Id. §§ 23-3515 to 23-3519. Therefore, hospital districts may not have a significant advantage over county hospitals in this regard.

Although the language in the Nebraska statutes is not altogether clear, it appears likely that the lid requirements applicable to counties will apply to hospital districts as well. As a general matter, the lid requirements recited in the state constitution and Neb. Rev. Stat. § 77-3442 limit counties to a maximum tax levy unless otherwise authorized by the vote of the people of the county. The state constitution generally prevents counties from assessing more than fifty (50) cents per $100 of taxable value unless the voters approve otherwise. Neb. Const., Article VIII, § 5 provides

County authorities shall never assess taxes the aggregate of which shall exceed fifty cents per one hundred dollars of taxable value as determined by the assessment rolls, except for the payment of indebtedness existing at the adoption hereof, unless authorized by a vote of the people of the county.

Neb. Const. Art. VIII, § 5. Similarly, the applicable state statute, section 77-3442(8), generally limits county tax levies to a maximum of fifty (50) cents per $100 of taxable valuation of property subject to the levy. Importantly, within that maximum taxing authority, the statute also permits a county to allocate up to fifteen (15) cents of its taxing authority to other political subdivisions that are subject to a county allocation of property tax authority under Neb. Rev. Stat. § 77-3443. Neb. Rev. Stat. § 77-3442(8)(Cum. Supp. 2010). By incorporating the maximum tax levy allocation authority within the overall maximum tax levy authority of the county, the statute appears to bring within the county lid those political subdivisions that are subject to the levy allocation provisions of Neb. Rev. Stat. § 77-3443(1) (Cum. Supp. 2010).

Hospital districts are among the types of political subdivisions which are subject to a county’s tax allocation authority and which must seek approval from a county for their levy allocation under Neb. Rev. Stat. §§ 77-3443(1) & (3). Neb. Rev. Stat. § 77-3443(1) provides,

(1)  All political subdivisions, other than (a) school districts, community colleges,  natural resources districts, educational service units, cities, villages, counties, municipal counties, and sanitary and improvement districts and (b) political subdivisions subject to municipal allocation under subsection (2) of this section, may levy taxes as authorized by law which are authorized by the county board of the county . . . .”

Neb. Rev. Stat. § 77-3443(1) (Reissue 2009). A hospital district is not subject to municipal allocation, Neb. Rev. Stat. § 77-3443(2), and is a distinct type of political subdivision not listed in Neb. Rev. Stat. § 77-3443(1)(a). See Neb. Rev. Stat. § 23-3528 through § 23-3552 (1997). As a result, hospital districts are likely to be subject to a county’s levy allocation and as such, are subject also to the county’s maximum tax levy authority.

Unfortunately, the statute that expressly addresses tax levies by hospital districts, Neb. Rev. Stat. § 23-3552, is far from clear and appears to cast some doubt upon the foregoing conclusion. Reading Neb. Rev. Stat. § 23-3552 together with the provisions of Neb. Rev. Stat. §§ 77-3442 and 77-3443 confirms, however, that the lid requirements imposed upon counties in the state constitution and section 77-3442 serve as an overlay to the taxing authority of hospital districts and other political subdivisions that are otherwise subject to a county’s tax levy allocation authority under Neb. Rev. Stat. § 77-3443.

The statute that expressly addresses the taxing authority of hospital districts is Neb. Rev. Stat. § 23-3552. Section 23-3552(1) provides that a hospital district, after adoption of its budget statement may levy and collect an annual tax not to exceed three and five-tenths cents per $100 of valuation in the district. Neb. Rev. Stat. § 23-3552(1). Additionally, subsection 2 of § 23-3552 provides that a hospital district may authorize another annual tax not to exceed three and five-tenths cents per $100 of valuation in the district, again, subject to a county board’s approval, but also subject to approval by a majority of the voters of the district in a primary, general, or special election. Neb. Rev. Stat. § 23-3552(2). The taxing authority of hospital districts in both subsections of Neb. Rev. Stat. § 23-3552(1) & (2) is qualified by the provisions of Neb. Rev. Stat. § 77-3443. As noted previously, section 77-3443 requires hospital districts to obtain the approval of a county board for their annual levy allocation requests.

The third subsection of section 23-3552 creates confusion about whether the county lid applies to hospital districts at all. Concerning the taxes authorized by subsections (1) and (2) of section 23-3552, subsection 3 provides that hospital districts are not subject to the county lid provisions. Specifically, section 23-3552(3) provides that after July 1, 1998, taxes authorized under section 23-3552(1) & (2) “shall not be included within the levy limitations for general county purposes . . . in section 77-3442 or Article VIII, section 5 of the” state constitution. Neb. Rev. Stat. § 23-3552(3).

Whether that statutory language of the third subsection of section 23-3552 accomplishes what appears to be intended in its plain language is doubtful. First, if the legislative intent found in the subsection is contrary to the state constitution, the state constitution will control since it is Nebraska’s foundational law. Further, the section appears to contradict itself because section 23-3552 reiterates that a hospital district’s tax levying authority must be approved by the county board under Neb. Rev. Stat. § 77-3443. Given that a county’s taxing authority is limited by the state constitution and state statute, a county can only authorize what itself would be empowered to do. As a result, despite the apparent contradiction within section 23-3552, it appears likely that a hospital district will be subject to the county lid provisions.

The conclusion above is supported by the following language found in the lid statute itself. Neb. Rev. Stat. § 77-3442(11) states:

The limitations on tax levies provided in this section are to include all other general or special levies provided by law. Notwithstanding other provisions of law, the only exceptions to the limits in this section are those provided by or authorized by sections 77-3442 to 77-3444.

Neb. Rev. Stat. § 77-3442(11) (emphasis added). The italicized phrase is an express recognition by the Legislature that other Nebraska statutes may appear to exempt certain tax levies from the reach of the lid statute. The phrase makes clear that the only exceptions to the lid are to be found within the lid statute itself, sections 77-3442 to 77-3444. To emphasize the point made by section 77-3442(11), the statute’s next subsection recites that “Tax levies in excess of the limitations in this section shall be considered unauthorized levies . . . . unless approved under section 77-3444.” Neb. Rev. Stat. § 77-3443(12).

The conclusion above is likely to be upheld by a Nebraska court if challenged because of the rules used by the courts in interpreting statutes. Nebraska courts will generally attempt to determine the meaning of a statute based upon its plain language. Citizens of Decatur for Equal Education v. Lyons-Decatur School Dist., 274 Neb. 278, 739 N.W.2d 742, 754 (2007). “Absent anything to the contrary, we will give statutory language its plain and ordinary meaning.” Id. Nebraska courts will attempt to give effect to all of a statute’s language, and to reconcile different provisions of a statute “so they are consistent, harmonious, and sensible.” Id. “When possible, we will try to avoid a statutory construction that would lead to an absurd result.” Id. “When construing a statute, appellate courts are guided by the presumption that the Legislature intended a sensible, rather than an absurd, result in enacting the statute.” Nicholson v. Gen. Cas. Co. of Wisconsin, 262 Neb. 879, 636 N.W.2d, 372,376 (2001).

Both Neb. Rev. Stat. § 77-3442(11) and Neb. Rev. Stat. § 23-3552(3) appear to contradict each other directly. Where section 77-3442(11) would apply its tax levy limitations to all types of levies unless specifically excepted in sections 77-3442 through 77-3444, section 23-3552(3) would appear to exempt a hospital district’s levy from the lid’s requirements. Nevertheless, the two statutes can be harmonized by the language at the end of 23-3552(3) which recognizes a county’s authority to approve a hospital district’s tax levy authority by allocating a portion of a county’s own taxing authority under 77-3443. In  addition, the “notwithstanding” phrase in 77-3442(11) evidences the Legislature’s intent that even though contrary provisions in Nebraska’s law may exist concerning a political subdivision’s taxing authority and the application of the lid, section 77-3442(11) was intended to be the Legislature’s definitive statement on that issue and that the only exceptions to the limitations found in the lid statute are to be found within the lid statute, Neb. Rev. Stat. §§ 77-3442 to 77-3444, itself. Consequently, it is our opinion that a hospital district is likely to be subject to the county lid requirements as a result of a hospital district being subject to the county’s overall tax levy authority.

Finally, as mentioned before, it is important to consider whether there are any benefits to maintaining a hospital district in addition to a county hospital. Specifically, a hospital district may levy taxes and issue bonds in support of a county hospital which is located in the hospital district. A hospital district does not need to own the hospital in order for the district to levy taxes or issue bonds in support of such hospital as long as the hospital is located within the district. However, with the application of the lid allocation rules found in 77-3443, it can be questioned whether this power of a hospital district would be significantly beneficial under the circumstances.

6.       What is considered the annual district election?

Mr. Clarke’s August 5, 2010, letter provides an extensive analysis and discussion of this issue, the confusing state of the Nebraska statutes in this regard, the legislative history of the pertinent sections of the law, and the guidance provided by the Nebraska Supreme Court concerning statutory interpretation and the powers of municipal corporations.

Mr. Clarke concludes that the setting of a time for a hospital district’s annual election is something within the hospital district board’s discretion, that there is “no support for tying the ‘next annual district election’ . . . to only statewide or other primary election dates.” He further states:

We have no express authority for another specific date, such as the general election, but believe that the most reasonable construction of the statute vests discretion of the district board to set an annual district election date and using the general election for that purpose makes good sense.

Letter from Alex M. (Kelly) Clarke to Lola Jones at 4 (Aug. 5, 2010). At the time of the letter, the November 2010 general election was approximately three months away. We believe that Mr. Clarke's letter provides a comprehensive analysis of the issues presented by this question, and we agree with his conclusions on this issue.

7.       Does the Chase County Hospital District Board have the ability to call a special election to deal with the question of dissolution?

A hospital district board does not have the authority to call a special election to address the question of the district’s dissolution.

In interpreting a statute, Nebraska courts will give effect to the purpose and intent of the Legislature as ascertained from the entire language of the statute considered in its plain, ordinary, and popular sense. When possible, the Nebraska courts determine the legislative intent from the language of the statute itself and will not read into a statute a meaning that is not there. Cargill v. Colfax County Bd. of Equalization, 281 Neb. 93, ___ N.W.2d ___ (2011). It is important to attempt to give effect to all parts of the statute so that its words, clauses, or sentences are not rejected as superfluous or meaningless. State v. State Code Agencies Teachers Assn., 280 Neb. 459, 468,788 N.W.2d 238 (2010). An appellate court will not read anything plain, direct, or unambiguous out of a statute. A court will place on a statute a reasonable construction which best achieves the statute's purpose, rather than a construction which would defeat that purpose. Herrington v. P.R. Ventures, LLC, 279 Neb. 754, 757, 781 N.W.2d 196, 199 (2010).

The language used in the relevant statute, Neb.Rev.Stat. § 23–3544, states,

Upon the filing of a petition with the board of directors signed by ten percent of the qualified electors in the district, the board of directors shall submit the question of dissolution of the district to the district electors at the next annual district election.

Elsewhere in the statute, the Legislature specifically provided for hospital districts being able to call special elections under certain circumstances, such as where a change has been proposed for the boundaries of a district, see Neb.Rev.Stat. § 23–3532, where a bond issue is submitted to the electors, see Neb.Rev.Stat. § 23–3555, and for the levy of an additional annual tax. See Neb.Rev.Stat. § 23-3553(1). In other words, when the Legislature intended to empower a hospital district with the authority to call a special election, it said so in the statute.

Although we agree that a hospital district board has the authority and discretion to set the date of a hospital district's annual election and that authority and discretion can be fairly implied as incident to powers expressly granted to a hospital district, we do not believe it can be implied in the relevant language of the statute, Neb.Rev.Stat. § 23-3544, that a hospital district board could call a special election to consider the issue of dissolution. "Words and phrases shall be construed and understood according to the common and approved usage of the language; . . . .” Neb.Rev.Stat. § 49–802(5). The dictionary definition of "annual" means "occurring or happening every year or once a year: in YEARLY <and annual reunion>. “Annual,” Merriam-Webster Online Dictionary. 2011.  http://www.merriam-webster.com (17 March 2011).

In light of this interpretation, we would recommend that the hospital district set a date upon which an annual hospital district election could occur. Ideally, for the convenience of voters and to encourage voter participation, a hospital district's annual election should occur on those dates set for state or local primary or general elections when other ballot issues or offices are also on the ballot. For example, statewide primaries in Nebraska are set on the first Tuesday following the second Monday in May during even-numbered years.

The hospital district could select the first Tuesday following the second Monday in May each year as its date for an annual hospital district election. Doing so would allow the annual election date to coincide with the statewide primary during even-numbered years. As noted in Mr. Clarke's letter, however, there is no specific authority in the Nebraska statutes that would tie a hospital district's annual election to any specific date. The choice of dates, it appears, is entirely within the discretion of the hospital district board.

8.  If Chase County Community Hospital and Clinic does transfer its assets to the Chase County Hospital District, and then after transfer is completed, the hospital district is dissolved, would the Chase County Hospital District have to sell the hospital as described in statute 23-3546?

The statute at issue provides in pertinent part,

When a district is dissolved its board of directors shall convert all property of the district to cash and discharge all indebtedness of the district. All funds remaining after discharge of the district's indebtedness shall be deposited in the county treasuries of the counties in which the district is located in proportion to the population of the district located in each county, and credited to the general fund.

Neb.Rev.Stat. § 23–3546. Notwithstanding the language of the statute, the sale of the hospital assets to an outside third-party and the potential loss of local control of those assets would not necessarily be a foregone conclusion.

As noted above, the transfer of assets from a county hospital to a hospital district is not automatic. For the hospital district to own the assets of the county hospital in the first place, the hospital district and the county would likely have a contractual arrangement effecting the transfer. If the county hospital’s assets were transferred to the hospital district, the parties could address the concerns in their agreement. As an example, the parties could include within their agreement a right of first refusal or option to purchase that the county could exercise in the event the hospital district would be dissolved or in the event the hospital district received an offer from a third party. It is possible that the issue could also be addressed by including in the parties’ agreement or documents of conveyance a reversionary interest in the hospital assets. The pros and cons of these possible solutions would require further examination and analysis if the parties determined to move forward with a transfer of hospital assets to the hospital district. Nonetheless, the fact of a hospital district dissolution would not have to mean the loss of local control over hospital assets.




A pdf. chart that compares various features of county hospitals and hospital districts can be found by clicking here.