Can a Mississippi county renew a 1989 community hospital lease without using the statutory bid process, and can it change how the hospital trust fund is spent?

Plain-English summary

In 1989, Union County leased the former Union County General Hospital premises to Baptist Memorial Hospital under a 35-year lease. The lease cited Section 41-13-1 et seq. and gave Baptist a one-time renewal option of up to 15 years. The original lease expires May 1, 2024, and Baptist has given notice that it intends to renew.

Two extra wrinkles complicated the renewal:

First, the same 1989 legislative session produced a local and private bill, House Bill 1443, that set up the Union County Health Foundation and Fund and dictated how the fund's principal and income would be invested and spent. Baptist's lease payments built up the principal; at least 15% of the annual income gets added back to the principal, and the remaining 85% is spent under specific rules in Section 5(b)(i)-(xi) of H.B. 1443.

Second, the county no longer has a board of trustees for the hospital. So who negotiates the renewal terms?

The county attorney asked four questions. The AG answered:

1. Yes, the county (as owner) can negotiate the lease renewal directly. Section 41-13-15(11) says: "If no board of trustees is then existing, the owner shall have the right to enter into a lease upon such terms and conditions as agreed upon by the parties."

2. The AG won't say which provisions of § 41-13-15(11)(a)-(e) must appear in the renewal. That gets into contract interpretation and validation of past actions, both of which are outside the AG's jurisdiction. But the AG flagged the obvious point: if you're using the statutory authority, you have to follow the statutory requirements.

3. & 4. No, the county cannot change H.B. 1443 by contract. The local and private legislation governing the trust fund stays in force until the legislature amends it or a court invalidates it. Negotiating a different distribution scheme with Baptist does not override the statute.

The opinion is a useful reminder of three Mississippi rules: (1) AG opinions only address prospective state-law questions, not contracts or past actions; (2) when a community hospital has no board of trustees, the county owner steps directly into the negotiation role; and (3) local and private legislation has the same binding force as general statute, and it cannot be amended by private agreement.

What this means for you

If you are a county board of supervisors negotiating a hospital lease renewal

If your hospital has no board of trustees, you have direct authority to negotiate the renewal. You are not locked into a specific statutory template, but if you renew under § 41-13-15, you have to comply with that statute's requirements, including the conditions in § 41-13-15(11)(a)-(e): continued operation safeguarding community health interest, proceeds first applied to bonds/notes/indebtedness under § 41-13-19, surplus proceeds for health-related purposes, and (when there is a board) board approval plus owner approval. Be careful with item (b): if there is outstanding hospital indebtedness, lease proceeds have to satisfy that first.

If your county hospital has a private-and-local bill governing trust funds (like H.B. 1443)

You cannot rewrite that legislation through a lease. The legislature passed it, and only the legislature can change it. Treat any provision in your lease that purports to change how the trust principal or income is spent as void from the start. If the existing distribution rules no longer fit current needs, the path forward is to ask your local legislative delegation to introduce an amending local and private bill in the next session.

If you are a hospital lessee renewing a long-term Mississippi lease

Plan around the statutory floor. Section 41-13-15(11) lets the owner enter renewal "upon such terms and conditions as agreed upon," but if either side wants the protection of statutory authority, the renewal still has to satisfy the conditions in (11)(a)-(e). That means lease proceeds are not unconstrained: bond and indebtedness obligations come first, surplus is for health-related purposes. Build that into your offer.

If you are a county attorney drafting the renewal documents

Three traps to avoid. (1) Do not put past-action validation in the lease; the AG will not bless it and a court may not either. (2) Do not include any provision that purports to amend H.B. 1443 (or whatever local and private bill governs your trust fund); it will be unenforceable. (3) Make sure the lease either (a) genuinely fits within the original lease's renewal option (so you are exercising a contractual right) or (b) is a new lease that satisfies § 41-13-15(11)(a)-(e). Mixing the two creates ambiguity that nobody benefits from.

Common questions

Q: What does Section 41-13-15(11)(a)-(e) actually require?
A: For lease extensions or renewals of community hospital leases that were entered before July 15, 1993, the renewal is conditioned on five things: (a) the leased facility continuing to operate in a manner that safeguards community health interest; (b) proceeds first being applied to outstanding bonds, notes, or other evidence of indebtedness issued under § 41-13-19; (c) surplus proceeds being used for health-related purposes; (d) board of trustees approval, if there is a board; and (e) owner approval. The renewal term cannot exceed 15 years.

Q: Why doesn't the renewal option in the original lease control everything?
A: Because the AG cannot interpret contracts. The renewal option is contractual. The statute is statutory. Both apply. The AG has to defer on the contract side and only opined on the statute. From a practical perspective, your lawyers, not the AG, decide whether the renewal option is being properly exercised under the contract.

Q: Could Union County and Baptist agree to use the trust fund's annual income for, say, a county park instead of health-related purposes?
A: No. H.B. 1443 specifies how the income is spent. Until the legislature changes the bill, those distribution rules govern.

Q: What if a court has not yet decided whether H.B. 1443 is valid?
A: Then it is presumptively valid. The county must comply with H.B. 1443 unless and until the legislature amends it or a court of competent jurisdiction invalidates it.

Q: Can the county and Baptist amend the trust fund by agreement and then ask the legislature to ratify the change later?
A: That is putting the cart before the horse and inviting a State Auditor finding. The cleaner path is the reverse: get the legislative amendment first, then conform the lease and the fund administration.

Background and statutory framework

Section 41-13-15(11) governs renewals and extensions of pre-1993 community hospital leases. The key passage:

A lessee of a community hospital, under a lease entered into under the authority of Section 41-13-15, in effect prior to July 15, 1993, or an affiliate thereof, may extend or renew such lease whether or not an option to renew or extend the lease is contained in the lease, for a term not to exceed fifteen (15) years, conditioned upon (a) the leased facility continuing to operate in a manner safeguarding community health interest; (b) proceeds from the lease being first applied against such bonds, notes or other evidence of indebtedness as are issued pursuant to Section 41-13-19; (c) surplus proceeds from the lease being used for health related purposes; (d) subject to the express approval of the board of trustees of the community hospital; and (e) subject to the express approval of the owner. If no board of trustees is then existing, the owner shall have the right to enter into a lease upon such terms and conditions as agreed upon by the parties.

The last sentence is the operative one for Union County: with no board of trustees, the county supervisors negotiate directly.

H.B. 1443 (1989) is local and private legislation. The Mississippi Constitution and longstanding practice treat local and private legislation the same as general statutes for purposes of binding force on the relevant locality. The county and the lessee cannot override it by agreement.

The AG opinion repeats two recurring jurisdictional limits: the AG only opines on prospective state-law questions (§ 7-5-25) and does not interpret contracts. The Hall opinion (Dec. 9, 2016) is cited for the proposition that the AG will not approve specific terms and conditions of a hospital lease renewal by official opinion.

Citations

• Miss. Code Ann. § 41-13-15(11)
• Miss. Code Ann. § 41-13-15(11)(a)-(e)
• Miss. Code Ann. § 41-13-19 (referenced)
• Miss. Code Ann. § 7-5-25
• 1989 Mississippi House Bill No. 1443
• MS AG Op., Hall (Dec. 9, 2016)

Source

• Landing page: https://attorneygenerallynnfitch.com/divisions/opinions-and-policy/recent-opinions/
• Original PDF: https://attorneygenerallynnfitch.com/wp-content/uploads/2024/04/L.N.Rogers-April-3-2024-Renewal-of-Hospital-Lease.pdf

Original opinion text

April 3, 2024
L.N. Chandler Rogers, Esq.
Attorney, Union County Board of Supervisors
Post Office Box 1771
New Albany, Mississippi 38652
Re: Renewal of Hospital Lease

Dear Mr. Rogers:
The Office of the Attorney General has received your request for an official opinion.

Background
According to your request, in 1989, Union County, Mississippi, acting through its board of supervisors ("County") entered a thirty-five-year lease agreement with Baptist Memorial Hospital ("Baptist") for the premises formerly occupied by the Union County General Hospital. You provided a copy of the 1989 lease, which cites Mississippi Code Annotated Sections 41-13-1, et seq., as the legal authority to enter the lease and which grants Baptist the option to renew the lease for one term of not more than fifteen years upon the terms and conditions set forth in the lease. The initial lease expires on May 1, 2024, and Baptist has given notice of its intent to renew the lease with the County for another fifteen years.

You also provided our office with a copy of local and private legislation, 1989 Mississippi House Bill No. 1443 ("H.B. 1443") (authorizing the County to establish and maintain the Union County Health Foundation and Fund and for related purposes). H.B. 1443 Section 5 specifies how the fund shall be invested and disbursed. According to your request, Baptist previously paid certain sums of monies (the "principal fund") to the County as part of the lease agreement, which were deposited into a trust. Historically, and continuing to present, not less than fifteen percent of the annual income is added to and becomes part of the principal fund. This corresponds with the language in H.B. 1443 Section 5(b). The remaining eighty-five percent of the annual income is disbursed pursuant to H.B. 1443 Section 5(b)(i)-(xi).

Questions Presented
1. Because there is no board of trustees, may the County, as owner of the premises, enter into a lease for the renewal period upon such terms and conditions as agreed upon by it and Baptist?
2. May those terms and conditions not include Section 41-13-15(11)(a)-(e), or stated differently, must the terms and conditions include Subsections (a)-(e)?
3. To the extent permitted by contract or agreed upon by the parties, is there any prohibition statutorily or via local and private legislation, that prevents the County and Baptist from altering the use of annual income received from interest accruing on the principal fund, as set forth in H.B. 1443 Sections 5(b)(i)-(xi), in a manner they deem appropriate?
4. To the extent permitted by contract or agreed upon by the parties, is there any prohibition, statutorily or via local and private legislation, that prevents the County and Baptist from altering the use of the principal fund in a manner they deem appropriate?

Brief Response
1. Section 41-13-15(11) provides, in part: "If no board of trustees is then existing, the owner [here, the board of supervisors] shall have the right to enter into a lease upon such terms and conditions as agreed upon by the parties."
2. The Attorney General's Office neither validates nor invalidates past action or interprets contractual agreements by official opinion. We cannot opine on how the County can comply with a lease that was originally executed in 1989 or on the terms and conditions within said renewal. Notably, if the parties are renewing the lease under the authority of Section 41-13-15, they must comply with the statutory requirements in that section, including Section 41-13-15(11)(a)-(e).
3. The County cannot by agreement alter the requirements of local and private legislation. The County must comply with H.B. 1443 until or unless it is amended by the Mississippi Legislature, or it is determined to be invalid by a court of competent jurisdiction.
4. See Response 3.

Applicable Law and Discussion
Official Attorney General's opinions are issued on prospective questions of state law pursuant to Section 7-5-25. This office cannot validate or invalidate past action. We also cannot interpret or opine on the validity of contracts. Thus, we offer no opinion on the interpretation of or compliance with the contracts you provided between the County and Baptist. With these limitations, we offer the following for prospective purposes.

Your first question asks whether the County may enter into a lease for the renewal period upon such terms and conditions as agreed upon by it and Baptist. Section 41-13-15(11) specifically provides that "[i]f no board of trustees is then existing, the owner [here, the board of supervisors] shall have the right to enter into a lease upon such terms and conditions as agreed upon by the parties." As stated above, the Attorney General's Office does not approve either the contractual terms and conditions or any contractual agreements by official opinion.

Your second question asks whether the lease renewal must include the requirements set forth in Section 41-13-15(11)(a)-(e). This section provides, in relevant part:

A lessee of a community hospital, under a lease entered into under the authority of Section 41-13-15, in effect prior to July 15, 1993, or an affiliate thereof, may extend or renew such lease whether or not an option to renew or extend the lease is contained in the lease, for a term not to exceed fifteen (15) years, conditioned upon (a) the leased facility continuing to operate in a manner safeguarding community health interest; (b) proceeds from the lease being first applied against such bonds, notes or other evidence of indebtedness as are issued pursuant to Section 41-13-19; (c) surplus proceeds from the lease being used for health related purposes; (d) subject to the express approval of the board of trustees of the community hospital; and (e) subject to the express approval of the owner. If no board of trustees is then existing, the owner shall have the right to enter into a lease upon such terms and conditions as agreed upon by the parties.

Miss. Code Ann. § 41-13-15(11). The original lease was executed in 1989 and contains a fifteen-year renewal option. We cannot by official opinion opine on whether the County may renew an executed lease nor can we approve the terms and conditions of the agreement by official opinion. See MS AG Op., Hall at *3 (Dec. 9, 2016). However, we note that if the parties are renewing the lease under the authority of Section 41-13-15, they must comply with the statutory requirements in that section, including Section 41-13-15(11)(a)-(e).

Your third and fourth questions essentially ask whether the parties must comply with the provisions of H.B. 1443. The County cannot by agreement alter the requirements of local and private legislation. The County must comply with H.B. 1443 until or unless it is amended by the Mississippi Legislature, or it is determined to be invalid by a court of competent jurisdiction.

If this office may be of any further assistance to you, please do not hesitate to contact us.

Sincerely,
LYNN FITCH, ATTORNEY GENERAL
By: /s/ Beebe Garrard
Beebe Garrard
Special Assistant Attorney General