A former Davis County attorney is charging that the county's purchase last week of 57 acres of land adjacent to its new judicial complex site west of Farmington is illegal.
Loren Martin, who served as a deputy attorney and county attorney until two years ago, charged the County Commission used money earmarked for building county hospitals for the land purchase, which he said is illegal.The commission approved spending $660,000 to buy the 57 acres on the corner of Clark Lane and 11th West, bringing the county-owned parcel up to 102 acres.
Martin said the county commission in the early 1970s formed a special hospital district and issued bonds to build two hospitals in the county. But private corporations built them instead and the money was not used.
State law forbids the bond money or interest it earns from being used for any other purpose, Martin said, charging the county's action was "illegal, it's unlawful and a misappropriation of county funds."
County Commisioner Harold Tippetts said the commissioners questioned whether the money could be used for the land purchase and had deputy county attorney Gerald Hess research the issue.
Hess said Monday he, too, had some questions and obtained opinions from both the state auditor's office and the state attorney general's office agreeing the purchase is legal.
And, Hess said his search of the county records shows no special hospital district was created. The county held a bond election in June 1968, Hess said, and the sale of $5,750,000 in general obligation bonds to build hospitals was approved by the county voters, 3,124 for and 2,087 against.
County records show $1 million of the bonds were sold in October 1968, at 4.5 percent interest, and the remaining $4,750,000 in bonds was sold in June 1972, also at a low interest rate.
But before the county could build its two hospitals, one in the north and one in the south, private corporations stepped in and built Lakeview Hospital in Bountiful and Humana Hospital Davis North in Layton.
The county was able to redeem some of the bonds but not all of them, Hess said, and took about $2 million it received from the bond sale and invested it at a higher interest rate than it was paying out.
Over the years, the county has accumulated enough interest to set aside about $1 million in principal and $700,000 in interest still due on the bonds, Hess said, in addition to another $1.4 million in profit.
The commission agreed last week to take $660,000 out of that $1.4 million to buy the land, Hess said.
"It's really not hospital bond money. It's interest generated by the bonds, over and above the money needed to pay off the bonds," Hess said. "In our view, after looking at it carefully, the money is available for general use by the county."
Hess noted no tax money has been used to pay off the bonds. He said the county instead relied on the interest generated by the bonds themselves.
"It's really been a pretty good deal for the county," Hess said, also noting changes in federal law now forbid political entities from keeping money in similar cases.
The money earned by the difference in interest rates, called arbitrage, now has to be turned over to the federal government, he said.