EXTRATERRITORIAL OPERATIONS

PUBLIC HOSPITAL DISTRICTS ‑- MUNICIPAL CORPORATIONS ‑- EXTRATERRITORIAL OPERATIONS 

1.         A public hospital district organized under chapter 70.44 RCW has the authority to construct and operate a drug and alcohol treatment center located outside the boundaries of the district, where the primary purpose is to provide services for the residents of the district, but a district may not operate inside the boundaries of another public hospital district without the second district's agreement. 

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                                                                     July 1, 1988 

Honorable Clyde Ballard
House Minority Leader
418 Legislative Building
Olympia, Washington 98504

Cite as:  AGO 1988 No. 15                                                                                                                

 Dear Representative Ballard:

            By letter previously acknowledged, you have requested our opinion on the following question:

             Does a public hospital district organized under chapter 70.44 RCW have the authority to construct and operate a drug and alcohol treatment center located outside the boundaries of that district?

             We answer your question in the qualified affirmative.

                                                                      ANALYSIS

             Public hospital districts are creatures of statute.  See chapter 70.44 RCW.  As such, they enjoy only those powers expressly granted or necessarily implied in the statutes that authorize their creation.  Pacific First Fed. Sav. & Loan Ass'n v. Pierce Cy., 27 Wn.2d 347, 353, 178 P.2d 351 (1947).

             Additionally, municipal corporations generally are not authorized, in the absence of a legislative grant of authority, to operate beyond their own boundaries.

              [[Orig. Op. Page 2]]

             In accordance with the principle applicable to countries and states, it is the general rule that, while it has jurisdiction over the territory embraced within its corporate limits, a municipal corporation cannot, without legal authorization exercise its powers beyond its own corporate limits . . . .

 2 E. McQuillin, Municipal Corporations § 7.02 (3d ed. rev. 1979) (footnotes omitted).1/

             With the foregoing rules and limitations in mind, we turn now to an analysis of chapter 70.44 RCW to determine whether the Legislature has expressly granted a public hospital district the authority to construct and operate a health care facility beyond its boundaries or whether such authority can be necessarily implied.

             The purpose of chapter 70.44 RCW is to "authorize the establishment of public hospital districts to own and operate hospitals and other health care facilities and to provide hospital services and other health care services for the residents of such districts and other persons."  RCW 70.44.003.  To accomplish their stated purposes, public hospital districts are expressly authorized

             to provide hospital or other health care services for residents of said districtby facilities located outside the boundaries of said district, by contract or in any other manner said commissioners may deem  [[Orig. Op. Page 3]]

             expedient or necessary under the existing conditions . . . .

 RCW 70.44.060(3) (emphasis added).  Hospital districts are further authorized

             to take, condemn and purchase, lease, or acquire, any and all property, and property rights, ... and any and all other facilities necessary or convenient, and in connection with the construction, maintenance, and operation of any such hospitals and other health care facilities ....

 RCW 70.44.060(4) (emphasis added).

            We believe these statutes, particularly RCW 70.44.060(3), authorize a public hospital district to construct and operate health care facilities located outside the boundaries of the district, when necessary to provide hospital and other health care services for residents of the district.

             The wording of RCW 70.44.060 suggests that the principal way in which a hospital district would utilize out-of-district hospitals and other health facilities would be by contracting with presently existing facilities.  But the statute is very clear that services from out-of-district facilities may be obtained "in any other manner" the district deems expedient or necessary.  If the district deems it expedient or necessary to obtain such services by constructing and operating its own facility, then it appears to us that the district is authorized to do so.  Any other result would, in our opinion, be contrary to the plain meaning of RCW 70.44.060(3).  See, e.g.,Davis v. Department of Empl. Sec., 108 Wn.2d 272, 277-78, 737 P.2d 1262 (1987) (words of statute should be accorded their ordinary meaning);State v. Malone, 106 Wn.2d 607, 610, 724 P.2d 364 (1986) (same).

             Having concluded that a hospital district is authorized to provide hospital and other health care services by constructing and operating facilities located outside the boundaries of the district, we must point out that such authority is subject to at least two significant limitations.

             First, a public hospital district can operate beyond its boundaries only for the purpose of providing hospital and health care services "for residents of said district."  RCW 76.04.060(3).  This limit on the purposes for which a district can operate extraterritorially is also implied in the proviso at the end of RCW 76.44.060(3) that a district "must at all times make adequate provision for the needs of the district and residents of said district shall have prior rights to the  [[Orig. Op. Page 4]] available hospital and other health care facilities of said district  . . . ."

             Thus, although a district clearly is permitted to provide hospital services and other health care services for nonresidents, e.g., RCW 70.44.003, a district's primary focus and emphasis must be on adequately providing for the needs of its residents.

             The second limitation on a hospital district's extraterritorial authority follows from the general rule that there cannot be two municipal corporations exercising the same functions in the same territory at the same time.  McQuillin states the purpose for this general rule:

             This rule does not rest on any theory of constitutional limitation, but instead on the practical consideration that intolerable confusion instead of good government would obtain in a territory in which two municipal corporations of like kind and powers attempted to function coincidentally.

 2 E. McQuillin, at § 7.08 (footnote omitted).

             Although this second general rule has been significantly weakened by the case law of this state,

             it continues to serve as a touchstone in the sense that it expresses a public policy against duplication of public functions, and that such duplication is normally not permissible unless it is provided for in some manner by statute.

 Alderwood Water Dist. v. Pope & Talbott, Inc., 62 Wn.2d 319, 321, 382 P.2d 639 (1963).  In a sense, this general rule should alert courts, in situations where a literal reading of a statute would appear to authorize duplication of public functions, "to the necessity of closely examining in toto statutory provisions conferring authority upon the potentially competing municipal corporations."  Id.

             InAlderwood Water District, the entrepreneur of a residential real estate development located within the Alderwood Water District arranged for connection of the water lines in the development to water mains operated by the neighboring Silver Lake Water District.  The Alderwood Water District sued to enjoin the Silver Lake Water District from supplying water to the development in question.  Silver Lake Water District offered a defense that there was actual statutory authorization, RCW 57.08.045, for water districts to "provide water services to property owners outside the limits of the water district."   [[Orig. Op. Page 5]] Despite that language, the court held that the statute, taken in context, permitted water districts to serve property owners outside the district only when they were not within the boundaries of another water district.  62 Wn.2d at 323.

             TheAlderwood court concluded that the statutory prohibition against geographical overlapping of water districts, RCW 57.04.070, "obviously carries with it an implication that one water district should not infringe upon the territorial jurisdiction of another water district by extending services to individuals therein."  62 Wn.2d at 322.

             This implication was reinforced by the statutory requirement that commissioners of a water district formulate a comprehensive plan sufficient to fulfill the foreseeable needs of the district for making improvements or incurring any indebtedness.  RCW 57.16.010.  In formulating such a plan, the commissioners were required to, among other things, project into the future the probable changes in water consumption per inhabitant, population fluctuations, and the availability of water to the district.  According to the court,

             [t]he careful consideration of these factors in creating a comprehensive plan could be rendered meaningless if another district is permitted to purloin potential customers from a water district by invading its territory.

 62 Wn.2d at 322.

             The court also focused on the financing of water districts.  Water districts are financed by property tax levies, revenue bonds, creation of local improvement districts, connection charges, and the sale of water.  Referring to the property tax, the court said:

             [I]t makes no difference who supplies water to the individual property owner because the tax is levied upon all property within the water district.  However, the other methods of financing are dependent upon the district's supplying of water . . . .  Permitting one water district to "raid" another could result in a serious impairment of the "raided" district's financial position.

 62 Wn.2d at 322-23.

             After considering Title 57 RCW in its entirety, it was obvious to the court

              [[Orig. Op. Page 6]]

 [t]hat the legislative purpose in permitting water districts to supply water to individuals outside of their districts ... was meant to extend water services only to those individuals who were not within the boundaries of any other water district.

 62 Wn.2d at 323.

             We have reviewed theAlderwood Water District case in some detail because we believe the prohibition on one water district operating inside the boundaries of another water district applies equally to public hospital districts.  As with water districts, the development and operation of health care facilities by one district within the boundaries of another district would be contrary to the statutory scheme as a whole.

            First, the construction and operation of health care facilities by one district within the boundaries of another district would be inconsistent with the statutory emphasis on district planning.  For example, the hospital district superintendent is required to prepare yearly estimates of district expenses and yearly recommendations to the hospital commission regarding what development work should be undertaken.  RCW 70.44.090.  Also, whenever a district acquires, constructs, or improves a hospital or other health care facility, the hospital district commission must adopt a plan dealing with the work proposed, declare the estimated costs thereof, and provide for the method of financing.  RCW 70.44.110.

             In engaging in these planning functions, a hospital district must necessarily project into the future the probable health care needs of the residents of the district, population changes and demographics, and the availability of resources to the district.  To paraphrase the court inAlderwood Water District, "the careful consideration of these factors in creating a comprehensive plan could be rendered meaningless if another district is permitted to purloin potential customers from a [hospital] district by invading its territory."  62 Wn.2d at 322.

             Second, the ability of a district to finance its facilities and programs would likely be compromised by permitting hospital districts to develop and operate facilities within the boundaries of another district.  Hospital districts are financed by property tax levies, revenue bonds, general obligation bonds, interest-bearing warrants, assignment or sale of accounts receivable, and borrowing money on the credit of the district or the revenues of the district's hospitals.  RCW 70.44.060(5), (6).  Except for the property tax, these methods of financing are dependent in one degree or another upon the district's operation of hospital and other health care facilities and by the revenue derived from those facilities.  Permitting one hospital district to "invade"  [[Orig. Op. Page 7]] another could result in a serious impairment of the invaded district's financial position.  See Alderwood Water District, 62 Wn.2d at 322-23.

             Third, there are sound policy reasons why one district should not be allowed to construct and operate a health care facility within the boundaries of another district, absent express statutory authorization.  The ability of residents of a hospital district to identify and respond to the health care needs of their district could be significantly undermined if another district could, without the first district's approval, develop and operate a health care facility within the first district's boundaries.  Furthermore, local control is closely related to local accountability.  As long as the health care facilities in a district are operated by the elected representatives of the residents of that district, those representatives are accountable to the residents.  The representatives of the "invading" district would not be similarly accountable to the residents of the invaded district.

             One option a local district would have to retain local control in the face of a potential "invasion" by another district would be to try to fend off the invasion by constructing, purchasing, leasing, or otherwise acquiring its own facility.  This could easily result in premature district action and unnecessary or unwise public investment in facilities and programs.  We do not see that the public good would be served by any rule promoting this result.

             After considering chapter 70.44 RCW in its entirety, it is our opinion that the extraterritorial authority granted hospital districts by RCW 70.44.060(3) does not extend to the development or operation of facilities that are within the boundaries of any other hospital district.2/

              [[Orig. Op. Page 8]]

             To summarize our answer to your question, we conclude that a public hospital district has the authority to construct and operate a hospital or other health care facility outside the boundaries of its district but that such authority is limited at least in two ways.  First, a district cannot operate beyond its boundaries unless its primary purpose is to provide services for the residents of its own district.  Second, a district cannot operate inside the boundaries of another district, without the other district's approval.

             We trust that the foregoing will be of assistance to you.

 Very truly yours,
KENNETH O. EIKENBERRY
Attorney General 

MARK S. GREEN
Assistant Attorney General