Applicable statutes set forth a procedure for the dissolution of a public hospital district and ensure that a district is not dissolved before all its debts are paid off. A dissolution must be approved by a court, and if any assets remain after all debts of the district have been repaid, they are transferred to the school district or districts in which the public hospital district is located.

To dissolve a district, a majority of the board of commissioners must present a petition to the superior court of the county in which the district is located.

Upon the filing of a petition for dissolution, the superior court must enter an order setting a date for a hearing on the matter. The hearing must be held not less than thirty (30) days from the date of filing.

The county clerk must give proper notice of the hearing. The notice must be published in a newspaper of general circulation in the county in which the district is located and must run in the newspaper once a week for three (3) successive weeks. The notice must also be posted in three (3) public places in the county at least twenty-one (21) days before the hearing date. At least one (1) of these notices must be posted in the district itself. The notice should state the purpose of the hearing and the date and place of the hearing.

After the court has held its hearing on the dissolution, it will enter a court order dissolving or refusing to dissolve the district. For a court to find that dissolution is desirable, it must formally find that the best interests of all persons concerned will be served by the proposed dissolution.

If the court finds that the public hospital district is financially solvent, it will order a sale of all assets except cash. The county sheriff is responsible for carrying out this sale. The sale proceeds, together with any cash on hand must (after the payment of any costs and expenses) be paid to the treasurer of the county and placed to the credit of the school district or districts which are located within the public hospital district boundaries.

If the court finds that the public hospital district is financially insolvent , the court must determine the extent and nature of the indebtedness of the district, including an identification of the creditors and their claims. The court must then set a date and place for a second hearing. This hearing must be held not less than sixty (60) days nor more than one hundred twenty (120) days from the first court hearing.

The county clerk must give notice of this second hearing by publication in a newspaper of general circulation in the county in which the district is located. The notice must be given at least twenty-one (21) days before the hearing. Notice must also be given to all creditors and other interested parties as the court may deem necessary or advisable. At least one (1) notice must be posted in the district. The notice must announce the filing of the petition, its purpose, the finding of the court on the petition, and the purpose of the second hearing.

The purpose of this second hearing is to determine “ways and means” of retiring the established business indebtedness of the district and paying all costs and expenses of any necessary insolvency proceeding. These “ways and means” may include the levy of assessments against the property in the district.

At the second hearing, the court has the authority to order the sale of any district property. If the proceeds of this sale, together with any cash remaining on hand to the credit of the district, are not sufficient to retire the entire indebtedness together with all costs and expenses, then the court has authority to order the district board of commissioners to levy assessments in the manner provided by law against the property in the district in the amounts sufficient to retire the indebtedness and pay the costs and expenses.

At the hearing, any property owner within the district may appear and be heard for or against such a levy.

After the indebtedness of the district has been settled or paid, the court must then again decide the matter of dissolution. The court must determine whether the best interests of all persons concerned will be served by the proposed dissolution and shall make a finding to this effect. The court will then enter an order dissolving or refusing to dissolve the district.

Further Legal Background

Oddly enough, there is no mention of district dissolution in the public hospital district statute. Instead, one must turn to chapter 53.48 RCW, “Dissolution of Port and Other Districts” for the procedural steps.