Can a Texas hospital district sell its hospital and lease it back?

Plain-English summary

The Angleton-Danbury Hospital District was created under the Texas Constitution to take full responsibility for medical and hospital care for the needy people who live within it. A state representative asked the Attorney General a focused question: can the district sell one of its hospital facilities to a third party and then lease the same facility back from the buyer, using that arrangement to keep meeting its obligation to care for needy residents?

The opinion answered yes. It acknowledged that no single statute spells out a "sell and lease back" deal as such. But it found the district had each of the pieces it needed. First, a hospital district has specific statutory authority to sell a hospital it owns and operates, including the real property, as long as its governing board does so by a resolution that finds the sale is in the best interest of the district's residents. Second, the district's enabling law gives the board specific power to lease land and broad power to negotiate and contract with third parties (other governments, private individuals, associations, or corporations) whenever the board determines doing so is necessary, convenient, or incidental to carrying out the purposes for which the district was created.

Putting those together, the opinion concluded the district is authorized to sell a facility and lease it back, with two conditions attached. The board must adopt a resolution finding the transaction to be in the best interest of the district's residents, and the transaction must stay consistent with the district's constitutional and statutory responsibilities, including its duties under the Indigent Health Care and Treatment Act. The opinion was careful to stop there. It had no details about any particular deal and expressed no view on whether a specific sale-leaseback would actually be in residents' best interest; the statute leaves that determination to the district itself.

Currency note

This opinion was issued in 2012. Subsequent statutory amendments, court decisions, or later Attorney General opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

What the opinion meant for those who asked

The requesting legislator (as the opinion described it): The opinion answered that the district had legal authority to do a sale-leaseback, while leaving the merits of any specific deal to the district's board.

Hospital district boards (as the opinion described it): The opinion treated the board's sale authority, lease authority, and broad contracting power as together supporting a sale-leaseback, conditioned on a board resolution finding the deal in residents' best interest and consistency with the district's duties.

District residents and patients (as the opinion described it): The opinion stressed that selling and leasing back a facility does not change the district's underlying constitutional and statutory duty to provide care for its needy residents, including under the Indigent Health Care and Treatment Act.

Common questions

Can a Texas hospital district sell its hospital and lease it back?
According to the opinion, yes. The district has authority to sell a hospital and to lease land and contract with third parties, so it may structure a sale-leaseback, subject to the conditions the opinion set out.

What does the board have to do first?
The opinion said the board must adopt a resolution finding that the transaction is in the best interest of the district's residents, and the deal must remain consistent with the district's constitutional and statutory responsibilities.

Does selling the building end the district's duty to care for the needy?
No. The opinion emphasized that the district's duty to provide care, including under the Indigent Health Care and Treatment Act, continues regardless of the sale.

Did the opinion approve a specific deal?
No. The opinion expressly declined to opine on whether any particular arrangement was in residents' best interest, leaving that determination to the district.

Background and statutory framework

The Angleton-Danbury Hospital District was created under article IX, section 9 of the Texas Constitution and enabling legislation codified in chapter 1002 of the Special District Local Laws Code. Tex. Const. art. IX, § 9; Tex. Spec. Dist. Code Ann. §§ 1002.001-.352 (West 2011). The board "has all powers necessary, convenient, or incidental to carry out the purposes for which the district was created" (§ 1002.103(a)), including the power to lease land and to negotiate and contract with third parties to operate and maintain a hospital (§ 1002.103(b)).

A hospital district's governing body is also authorized to order the sale or lease of all or part of a hospital it owns and operates, including real property, by a resolution that includes a finding that the sale or lease is in the best interest of the district's residents. Tex. Health & Safety Code Ann. § 285.051(a) (West 2010). The opinion read these provisions together with the district's continuing obligations under the Indigent Health Care and Treatment Act (§ 61.055(a), (c)), and relied on its prior opinions JC-0220 (2000) (section 285.051(a) authorizes such a district to sell, lease, or close a hospital) and JM-864 (1988) (the sale of a hospital does not affect the district's duties under the constitution, its enabling statutes, and the Indigent Health Care and Treatment Act).

Citations

Statutes:

• Tex. Const. art. IX, § 9
• Tex. Spec. Dist. Code Ann. §§ 1002.001-.352 (West 2011)
• Tex. Spec. Dist. Code Ann. § 1002.103(a) (West 2011)
• Tex. Spec. Dist. Code Ann. § 1002.103(b) (West 2011)
• Tex. Health & Safety Code Ann. § 285.051(a) (West 2010)
• Tex. Health & Safety Code Ann. § 61.055(a), (c) (West 2010)

Prior Attorney General opinions referenced:

• Tex. Att'y Gen. Op. No. JC-0220 (2000)
• Tex. Att'y Gen. Op. No. JM-864 (1988)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-0945
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2012/ga0945.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

May 30, 2012

The Honorable Dennis Bonnen Opinion No. GA-0945
Chair, Select Committee on Voter
Identification and Voter Fraud Re: Whether the Angleton-Danbury Hospital District
Texas House of Representatives is authorized to sell a hospital facility to a third party
Post Office Box 2910 and lease it back to fulfill its responsibility to provide
Austin, Texas 78768-2910 hospital care for the District's needy residents
(RQ-1033-GA)

Dear Representative Bonnen:

You ask whether the Angleton-Danbury Hospital District (the "District") is authorized to sell a hospital facility to a third party and then lease the facility back from the purchaser to fulfill its responsibility to provide hospital care for the District's needy residents.[1]

The District was created and established under article IX, section 9 of the Texas Constitution and special enabling legislation that is now codified in chapter 1002 of the Special District Local Laws Code. TEX. CONST. art. IX, § 9; TEX. SPEC. DIST. CODE ANN. §§ 1002.001-.352 (West 2011). The District was created to "assume full responsibility for providing medical and hospital care for its needy inhabitants." TEX. CONST. art. IX, § 9; see also TEX. SPEC. DIST. CODE ANN. § 1002.002 (West 2011). The District's board of directors ("Board") "has all powers necessary, convenient, or incidental to carry out the purposes for which the district was created." TEX. SPEC. DIST. CODE ANN. § 1002.103(a) (West 2011). The Board's powers include

the power to negotiate and contract with any person to ... lease land, ... to operate and maintain a hospital or hospitals, and to negotiate and contract with other political subdivisions of the state or private individuals, associations, or corporations for those purposes, all as may be determined to be necessary or desirable for the district by the board.

Id. § 1002.103(b). The governing body of a hospital district such as the Board is also authorized to "order the sale [or] lease ... of all or part of a hospital owned and operated by the hospital district, including real property," provided that the Board does so by resolution that includes "a finding by the governing body that the sale [or] lease ... is in the best interest of the residents of the hospital district." TEX. HEALTH & SAFETY CODE ANN. § 285.051(a) (West 2010); see also Tex. Att'y Gen. Op. No. JC-0220 (2000) at 4 (concluding that section 285.051(a) of the Health and Safety Code authorizes an article IX, section 9 hospital district to sell, lease, or close a hospital owned by the district).

No single statute specifically addresses the District's authority to both sell and lease back a hospital facility. Nevertheless, the District has specific statutory authority to sell a hospital. TEX. HEALTH & SAFETY CODE ANN. § 285.051(a) (West 2010). The District also has specific authority to lease land and broad authority to negotiate and contract with third parties when doing so is necessary, convenient, or incidental to fulfill the District's constitutional responsibility. TEX. SPEC. DIST. CODE ANN. § 1002.103(b) (West 2011). Accordingly, we conclude that the District is authorized to sell a hospital facility to a third party and lease it back, provided that when it does so, the Board adopts a resolution finding the transaction to be in the best interest of the District's residents, and the transaction is consistent with the District's constitutional and statutory responsibilities.[2] TEX. CONST. art. IX, § 9; TEX. HEALTH & SAFETY CODE ANN. § 285.051(a)-(b) (West 2010). See also TEX. HEALTH & SAFETY CODE ANN. § 61.055(a), (c) (West 2010) (Indigent Health Care and Treatment Act, requiring a hospital district to provide specified basic health care services together with services required by the constitution and the statutes creating the district); Tex. Att'y Gen. Op. No. JM-864 (1988) at 6 (determining that the sale of a hospital has no effect on a hospital district's duties under the constitution, statutes creating the district, and the Indigent Health Care and Treatment Act).

SUMMARY

The Angleton-Danbury Hospital District is authorized to sell a hospital facility to a third party and lease it back, provided its Board does so by resolution finding the transaction is in the best interest of the District's residents, and the transaction is consistent with the District's constitutional and statutory responsibilities.

Very truly yours,

DANIEL T. HODGE
First Assistant Attorney General

JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel

JASON BOATRIGHT
Chair, Opinion Committee

William A. Hill
Assistant Attorney General, Opinion Committee

[1] See Letter from Hon. Dennis Bonnen, Chair, House Comm. on Voter Identification & Voter Fraud, to Hon. Greg Abbott, Tex. Att'y Gen. at 1 (Dec. 7, 2011), http://www.texasattorneygeneral.gov/opin ("Request Letter").

[2] You do not provide us with details about the specific sale-leaseback arrangement in question, and we express no opinion as to whether any particular arrangement is in the best interest of the District's residents. Pursuant to statute, the District must make that determination. TEX. HEALTH & SAFETY CODE ANN. § 285.051(a) (West 2010).