Could a Louisiana hospital service district sell surplus land directly to a physician for a nearby medical practice?

Plain-English summary

In a 1997 opinion, Louisiana's Attorney General concluded that a parish hospital service district could negotiate a private sale of surplus land to a physician who planned to build a medical practice near the hospital. The proposed buyer had hospital staff privileges, treated patients there, and practiced in a specialty with few physicians on the active staff. The district had acquired the larger tract to support development of nearby practices.

The AG said the district should formally declare the parcel surplus, obtain an independent appraisal, and seek a reasonable price in light of the constitutional restriction on donating public property. A separate condition mattered if the land was revenue producing: under R.S. 33:4341(A), the AG said a sale of that kind required authorization by a majority of qualified voters at an election.

The source extract gives February 1997 but its day is unreadable, so this page leaves the precise issue date blank.

Currency note

This opinion was issued in 1997. Subsequent statutory amendments, court decisions, or later AG 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.

Historical summary

Hospital service district boards

The AG found no law in the opinion that prohibited a negotiated sale of the district's idle or surplus land to the physician described. He advised the board to declare the property surplus, get an independent appraisal, and keep the price reasonable relative to that appraisal. Those steps addressed his concern that the transaction not become a prohibited transfer of public value.

The board also had to distinguish ordinary surplus property from revenue-producing property. For the latter, the opinion said R.S. 33:4341(A) required an election authorizing the sale. The AG left the property's classification to the district.

Physicians seeking a practice site

The opinion permitted negotiation for a private purchase in the described hospital recruitment setting. It did not say that a physician had a right to buy district land or that the sale could occur without the district's property classification and other stated conditions.

Parish voters

If the district determined that the parcel was revenue producing, the AG said a majority of qualified electors voting at an election had to authorize its sale. The opinion did not call for an election merely because the buyer was a physician.

Common questions

Could the district sell surplus land to a physician without a public auction?

The AG said he found no prohibition on a negotiated private sale of the surplus parcel described. He advised a surplus declaration, independent appraisal, and reasonable price. His analysis also identified a voter approval requirement if the parcel was revenue-producing property.

Did a hospital district need a vote to sell every parcel?

The opinion tied the election requirement to revenue-producing property under R.S. 33:4341(A). It did not say that every sale of idle or surplus land required a referendum.

Why did the AG discuss the sale price?

He recommended comparing the purchase price with an independent appraisal so the transaction would not violate the Louisiana Constitution's restriction on giving away public property.

Background and statutory framework

The request concerned Morehouse Parish Hospital Service District No. 1's proposed sale of part of a larger tract to a physician with staff privileges at its hospital. The AG referred to legislation facilitating hospital contracts and joint ventures, an appellate decision recognizing a political subdivision's power to sell idle surplus land privately, and the constitutional public-property restriction. He then quoted R.S. 33:4341(A)'s election rule for revenue-producing property. He said earlier AG opinions had recognized hospital service districts as "revenue-producing public utilities" under the term defined in R.S. 33:4161.

Citations and references

• R.S. 46:1071: hospital health services legislation mentioned in the opinion.
• R.S. 33:4341(A): voter authorization for the sale of revenue-producing property.
• R.S. 33:4161: public utility definition referenced by the AG.
• Article VII, Section 14 of the 1974 Louisiana Constitution: restriction on transfers of public property discussed in the opinion.

Source

• Landing page: https://www.ag.state.la.us/Opinions
• Original PDF: https://www.ag.state.la.us/Opinion/Download/97-0007

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; the linked PDF is authoritative.

~t~te o~
DEPARTMENT OF JUSTICE
CIVIL DIVISION
P,O. Box 94005
TEL.: (504) 342-7013
BATON ROUGE
FAX: (504) 342-2090
RICHARD P. IEYOUB
70804-9005
ATTORNEY GENERAL
Ff~BRUARY ~ 1997

OPINION NUMBER 97-7

Syllabus

53: Hospitals
Mr. Doug Lawrence
90-B-3: Public Lands: Public & Private Domains
Article VII, Section 14 of the 1974 Constitution Assistant District Attorney
R.S. 46:1077 R.S. 33:4161 R.S. 33: 4341(A)
4th Judicial District
Post Office Box 1079
A hospital service district may negotiate the sale of surplus immovable
Bastrop, LA 71220
property to a physician for the purpose of constructing the physician’s
medical practice facility. If the property to be sold is revenue-producing, the district must call an election to authorize said sale.

Dear Mr. Lawrence:

You have requested an opinion of the Attorney General, in your capacity as legal advisor to the Morehouse Parish Hospital Service District No. 1 ("District") regarding the sale of a parcel of District-owned surplus immovable property to a physician desiring to construct a medical practice thereon.

The immovable property in question constitutes a portion of a larger parcel of land acquired by the District for the purpose of assisting physicians in the development of medical practices in close proximity to the hospital’s campus. The physician in question possesses staff privileges at the District-owned hospital, admits and treats patients at the facility and is one of the few physicians on the active medical staff who practices in his area of speciality.

You further state that, as a part of the District’s strategic plan, it seeks to recruit outstanding physicians to serve the medical needs of those in the rural setting of the Parish. Assisting physicians who move to this location in the development of their medical practices is consistent with this plan.

Given the above scenario, you ask our opinion as to whether it is legally permissible for the District to convey ownership of surplus land to a physician upon which the physician will construct facilities to house a medical practice.

As you correctly note, our legislature has recognized that the market for hospital and health care services has become increasingly competitive, and that hospital service districts are at a competitive disadvantage. Consequently, R.S. 46:1071, et seq., was enacted to facilitate contracts and!or joint ventures for hospital health services. While we have found no specific statutory authority for the private sale of the District’s surplus immovable property, we fred nothing to prohibit the District from negotiating the sale of such property to a physician. Our courts have recognized that an independent political subdivision of the state has full and complete legal authority to sell its idle and

Page 2

’ Opinion No. 97-7
Doug Lawrence
Asst. D.A. - 4th JDC
Page -2-

surplus real property at private sale. Alexis, Jr. v. Kare-Sue, Inc., et a/., 187 So. 2d 476 (La. App. 4th Cir. 1966). The District should, of course, declare the property to be surplus and should obtain an independent appraisal of same. We further recommend that the purchase price be reasonable in comparison to the appraisal so that the transaction does not constitute a violation of Article VII, Section 14 of the 1974 Louisiana Constitution.

We also draw your attention to R.S. 33:4341(A) which provides, in pertinent part, the following:

"A. Any... political subdivision or taxing district . . . may sell or lease any revenue-producing properties owned by it,.., provided the governing authorities have been first authorized to do so by a vote of a majority of the qualified electors, voting at an election held for that purpose as herein directed."

This office has previously recognized that hospital service districts constitute "revenue-producing public utilities" as that term is defined in R.S. 33:4161. Accordingly, if the District determines that the immovable property constitutes a "revenue-producing property", its sale would require a referendum pursuant to the requirements set forth in Sections 4341 through 4348.

Trusting this adequately responds to your inquiry, I am

Very truly yours,

RICHARD P. IEYOUB
ATTORNEY GENERAL

Assistant Attorney General

RPI/Rob3/cla