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The following opinion is presented on-line for informational use only and does not replace the official version. (Mich Dept of Attorney General Web Site - www.ag.state.mi.us)



STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL


Opinion No. 6431

April 16, 1987

CONSTITUTIONAL LAW:

Const 1963, art 9, Sec. 18--county support of private, nonprofit hospital

COUNTIES:

Payment of funds in aid of a private, nonprofit hospital

Power to contract with private, nonprofit hospital for services

The payment of public funds by a county to aid a private, nonprofit hospital violates Const 1963, art 9, Sec. 18.

A county may enter into a contract with a private, nonprofit hospital and pay public funds to such a hospital for the contracted services if the services aid the county in the performance of its governmental functions.

Mark E. Luoma, Esq.

Alger County Prosecuting Attorney

Courthouse Complex

Munising, Michigan 49862

You have requested my opinion on the following question:

"Is Alger County constitutionally prohibited from using funds generated from a county-wide approved millage to support the operation of a private non-profit hospital located within the county?"

In your letter you state that on April 7, 1986, a millage proposal was submitted to the voters of the county to assess two mills over three years on all taxable property within the county, in accordance with MCL 331.101; MSA 14.1121, to support, finance, and maintain the Munising Memorial Hospital, a private, nonprofit facility. The monies collected by the county would be turned over to the Munising Memorial Hospital, without the county acquiring anything of value in return. The millage proposal was approved by the voters.

In this connection, it is to be noted that MCL 331.101; MSA 14.1121, provides, in pertinent part, that:

"The several boards of county supervisors of this state may raise by a tax to be levied on the property of said county, subject to taxation for county purposes, a sum of money to be used for constructing or maintaining or assisting to construct or maintain any hospital or sanatarium [sic] within said county."

Const 1963, art 9, Sec. 18, provides: "The credit of the state shall not be granted to, nor in aid of any person, association or corporation, public or private, except as authorized in this constitution." This provision is applicable to political subdivisions and instrumentalities of the state, including counties. Oakland County Drain Comm'r v City of Royal Oak, 306 Mich 124; 10 NW2d 435 (1943).

In Alan v Wayne County, 388 Mich 210, 325-326; 200 NW2d 628, 684 reh den, 388 Mich 626 (1972), the court discussed Const 1963, art 9, Sec. 18, in regard to the state acquiring or transferring something of value in return for value as not being violative of the constitutional provision:

"Michigan case law interpreting Const 1963, art 9, Sec. 18 is neither ample nor precise. It is clear the state or its subdivision the county cannot give anything away without consideration. Detroit Museum of Art v Engel, 187 Mich 432 (1915) (salary of employee of private museum, no consideration, no public purpose); Younglas v Flint, 345 Mich 576 (1956) (transfer of city park to US reserve armory) but see contra Sommers v Flint, 355 Mich 655, 663 (1959). See generally 15 McQuillan Municipal Corporations (3rd ed), Sec. 39.30. Note that the constitution as far as the state and county are concerned makes no difference between a public and private purpose in this regard. When the state acquires or transfers something of value in return for value the state does not offend Const 1963, art 9, Sec. 18. Walinske v Detroit-Wayne Joint Building Authority, 325 Mich 562, 583 (1949) (lease of building); Jackson Broadcasting Television Corp v. State Board of Agriculture, 360 Mich 481, 498 (1960) (time-sharing on rental basis of studio); Hays v Kalamazoo, 316 Mich 443 (1947) (Michigan Municipal League membership)."

If a county provides public funds to a private, nonprofit hospital in the county and receives nothing of value in return, a political subdivision of the state is giving away something of value without consideration. Doing so would violate Const 1963, art 9, Sec. 18.

On the other hand, OAG, 1973-1974, No 4851, p 196 (November 4, 1974), and OAG, 1977-1978, No 5212, p 199 (August 17, 1977), concluded that a municipality may enter into a contract for services with a private agency if the services contracted for aid the municipality in the performance of its governmental functions. The terms of the contract would control the manner and use of the public funds appropriated to the private entity to assure compliance with the stated governmental services sought.

The fact that the voters of the county, by approval of the ballot question, imposed the two-mill increase for the support and maintenance of the private hospital rather than by legislative action of the county board of commissioners does not alter the fact that the appropriation of public funds to a private, nonprofit hospital, without the county acquiring anything of value in return, is prohibited by Const 1963, art 9, Sec. 18. See, Bates v Hastings, 145 Mich 574; 108 NW 1005 (1906).

It is my opinion, therefore, that payment of public funds by a county to aid a private, nonprofit hospital violates Const 1963, art 9, Sec. 18. It is my further opinion that a county may enter into a contract with a private, nonprofit hospital and pay public funds to such a hospital for the contracted services if the services aid the county in the performance of its governmental functions.

Frank J. Kelley

Attorney General


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