15-1637

15-1637. Lease of property for health care
institution; requirements; conditions; reports; directors, members
and officers of nonprofit corporation; definition

A. The Arizona board of regents may lease real property, improvements or personal
property owned by the board to a nonprofit corporation as lessee for purposes of
operating a health care institution as defined in section 36-401. If the board leases
such property for such purposes, whether title to improvements on the property rests in
the board or in the lessee, the lease agreement and any amendments, renewals or
extensions of the agreement shall be deemed binding and effective according to its
terms. If, under the provisions of the lease, improvements or personal property related
to the operation of a health care institution are conveyed to the nonprofit corporation,
they shall be presumed to have been conveyed for their then fair market value.

B. Any lease agreement entered into pursuant to subsection A of this section may,
at the discretion of the Arizona board of regents, contain provisions requiring the
nonprofit corporation to acquire the approval of the Arizona board of regents prior to
entering into any business transactions that may adversely affect the interests of this
state or that are contained in subsection G, paragraph 2 of this section. The Arizona
board of regents shall specify in the lease agreement the type and nature of such
transactions which require prior approval of the board.

C. To satisfy the requirements of section 103 of the internal revenue code, as
defined in section 43-105, any nonprofit corporation which is a lessee as described in
subsection A of this section is declared to be:

1. A validly organized and existing body politic and corporate exercising its
powers for the benefit of the people, to improve their health and welfare and to increase
their prosperity.

2. Engaged in a purpose essential to public health care.

3. Performing an essential governmental function.

D. Any nonprofit corporation which is a lessee as described in subsection A of this
section is exempt from property taxation by this state or any agency or subdivision of
this state and possesses and may exercise only those powers of the Arizona board of
regents which are delegated to the nonprofit corporation by the Arizona board of regents
and which are necessary to satisfy the requirements of section 103 of the internal
revenue code, as defined in section 43-105, as specified in the terms, conditions,
restrictions and agreements of the lease agreement. These powers are in addition to all
those powers granted to a nonprofit corporation by title 10, chapters 24 through 40.

E. Any nonprofit corporation which is a lessee as described in subsection A of this
section may issue bonds and incur obligations and pledge its revenues as security for the
payment of the bonds or other obligations for health care institutional purposes to the
extent provided by the lease agreement or amendments, renewals or extensions of the
agreement. Nothing in this section shall be construed to authorize the incurrence of a
debt by the state within the meaning of any constitutional restriction on debt.

F. Except as provided in subsection G of this section, any nonprofit corporation
which is a lessee as described in subsection A of this section may acquire by purchase,
lease or otherwise, and may operate, other health care institutions and real and personal
property for purposes of providing products and services related to the operation of
health care institutions owned, leased or operated by it. Such acquisition or operation
does not affect the powers, rights, privileges or immunities conferred on such nonprofit
corporation by this section.

G. No nonprofit corporation which is a lessee as described in subsection A of this
section shall:

1. Until September 1, 1986 enter into any agreement with a county or a nonprofit
corporation to which property is conveyed pursuant to section 11-256.03, subsection A if
the agreement provides for the conveyance of any ownership interest whatever in the
nonprofit corporation to which property is conveyed pursuant to section 11-256.03,
subsection A or in the property described in section 11-256.03, subsection A. After
August 31, 1986 any such agreement must be approved by the Arizona board of regents and
the legislature. This subsection does not prevent the grant of an option to purchase
such property, provided that the option may not be exercised before September 1, 1986 and
the exercise of the option must be approved by the Arizona board of regents and the
legislature. Under no circumstances shall any state general fund monies be used to
acquire any interest in such property.

2. Own, lease, manage or operate any other health care institution or other real or
personal property unless such acquisition, management or operation either:

(a) Relates to and furthers the educational or research purposes and goals of the
university of Arizona hospital.

(b) Promotes the efficient and economical operation of the university of Arizona
hospital or any other health care institution acquired pursuant to paragraph 1 of this
subsection.

H. A nonprofit corporation which is a lessee as described in subsection A of this
section may manage and operate property described in section 11-256.03, subsection A
subject to the restrictions of subsection G of this section. Any management or operation
agreement shall provide that the nonprofit corporation which is a lessee as described in
subsection A of this section shall not be liable for any bonds or other obligation of any
kind relating to the ownership or operation of the property described in section
11-256.03, subsection A incurred before the property is conveyed to such nonprofit
corporation in accordance with subsection G of this section.

I. A health care institution which is the subject of a lease agreement as described
in subsection A of this section is subject to section 15-1630.

J. A nonprofit corporation which is a lessee as described in subsection A of this
section shall make semiannual progress reports as to its financial status and deliver
them on January 1 and July 1 of each year to the Arizona board of regents, the president
of the senate, the speaker of the house of representatives and the governor. The
nonprofit corporation shall present an independently audited financial statement to the
auditor general within ninety days of the close of the previous fiscal year. The auditor
general shall review such statements and transmit them together with a report to officers
entitled to receive progress reports by this subsection.

K. Any nonprofit corporation which is a lessee as described in subsection A of this
section shall:

1. Be organized as a nonprofit corporation pursuant to title 10, chapters 24
through 40 only upon the approval of the Arizona board of regents.

2. Be governed by a board of directors, the members of which are appointed by the
Arizona board of regents, provided that no more than forty-nine per cent of the members
of such board of directors of the nonprofit corporation shall be officers or employees of
this state and of such forty-nine per cent only two members of such board of directors
may be members of the Arizona board of regents. Members of the Arizona board of regents
who are appointed to the board of directors of such nonprofit corporation shall be
residents of different counties unless all members of the board of regents are residents
of the same county.

3. Be organized under articles of incorporation or bylaws approved by the Arizona
board of regents which shall provide among other things that:

(a) No earnings of the nonprofit corporation shall inure to the benefit of or be
distributable to its members, directors, officers or other individuals, except that the
nonprofit corporation shall be authorized to pay reasonable compensation for services
rendered to it by individuals other than members of the board of directors of the
nonprofit corporation acting solely in such capacity, to reimburse expenses in connection
with services rendered to or expenses incurred on behalf of the nonprofit corporation and
to make payments and distributions in furtherance of the purposes of the nonprofit
corporation.

(b) Upon the dissolution or liquidation of the nonprofit corporation, the board of
directors of the nonprofit corporation shall, after paying or making provision for the
payment of all of the liabilities of the nonprofit corporation, distribute all of the
assets of the nonprofit corporation to the Arizona board of regents or its successor.

(c) Neither the articles of incorporation nor the bylaws of the nonprofit
corporation shall be amended without the approval of the Arizona board of regents.

(d) The board of directors of the nonprofit corporation may adopt nondiscriminatory
rules and regulations providing for the use of the university of Arizona hospital by, and
staff privileges for, any persons licensed under title 32, chapter 7, 13 or 17 whether or
not such persons have a faculty teaching appointment with the school of medicine,
providing, however, that such rules and regulations shall contain requirements sufficient
to protect the educational and research purposes and goals of the university of Arizona
hospital.

L. No member of the Arizona board of regents who is also a member or director of a
nonprofit corporation which is a lessee as described in subsection A of this section
shall as a regent vote upon any matter pertaining to such a corporation as may come
before the Arizona board of regents.

M. For the purposes of this section "nonprofit corporation" means a corporation as
defined in section 10-3140.