BILL ANALYSIS                                                                                                                                                                                                    

                            Senator Dave Cox, Chair

          BILL NO:  AB 2731                    HEARING:  6/9/10
          AUTHOR:  Arambula                    FISCAL:  No
          VERSION:  4/8/10                     CONSULTANT:   
                        HEALTH CARE DISTRICTS' BORROWING

                           Background and Existing Law  

          California's 80 local health care districts are governed by  
          directly elected boards of directors.  As hospitals, they  
          face market pressures to compete with other health care  
          providers.  As local governments, they must follow the  
          Brown Act, the Public Records Act, the Political Reform  
          Act, the public contracting laws, and other statutory  

          Health care districts can borrow money, issue debt, and use  
          their assets as collateral for federal mortgage insurance  
          loans, federal loans, or federally insured loans issued  
          under the National Housing Act for construction,  
          reconstruction, or the initial equipping of facilities.   
          Districts cannot use their tax revenues to pay for the  
          principal, interest, insurance premiums, inspection fees,  
          and other financing costs.    

          The United States Department of Agriculture (USDA) offers  
          financial help for rural health care facilities and  
          essential equipment through the Community Facilities  
          program authorized by the federal Consolidated Farm and  
          Rural Development Act, commonly known as the Con Act.  The  
          USDA's Community Facilities program offers financing as  
          loans, both direct and guaranteed, and grants to eligible  
          participants in rural areas.

          Although health care districts can secure loans issued  
          under the federal National Housing Act (SB 776, Runner,  
          2005), state law does not mention loans or grants issued  
          pursuant to the federal Con Act.  Health care district  
          officials want to clarify their authority to secure those  
          federal loans.

                                   Proposed Law  


          AB 2731 -- 4/8/10 -- Page 2

          To secure federal loans or grants or guaranteed loans  
          issued under the federal Consolidated Farm and Rural  
          Development Act for financing or refinancing the  
          construction of new health facilities, the expansion,  
          modernization, renovation, remodeling, or alteration of  
          existing health facilities, and the initial equipping of  
          those health facilities, Assembly Bill 2731 authorizes a  
          health care district's board of directors to either:
                 Borrow money or issue bonds, in addition to other  
               financing methods, or
                 Execute, in favor of the United States, appropriate  
               federal agency, or federally designated mortgagor,  
               first mortgages, first deeds of trust, or other  
               necessary security interests as the federal government  
               may reasonably require with respect to a health  
               facility project property as security for that  


           Vital financing for vital facilities  .  Health care  
          districts provide vital health services to residents in  
          many rural communities.  Faced with a rapidly changing and  
          competitive marketplace, state budget cuts, and the recent  
          recession, health care districts confront severe fiscal  
          challenges.  As a result, districts need a variety of  
          financing tools to remain solvent.  By authorizing health  
          care districts to use federal financing available through  
          the USDA's Community Facilities program, AB 2731 helps  
          rural health care districts maintain financial  
          sustainability, thereby ensuring that residents in rural  
          communities retain access to much-needed medical care.

                                 Assembly Actions  

          Assembly Health Committee:19-0
          Assembly Floor:          76-0

                        Support and Opposition  (6/3/10)

           Support  :  Association of California Healthcare Districts,  
          California Hospital Association, California State Rural  


          AB 2731 -- 4/8/10 -- Page 3

          Health Association.

           Opposition  :  Unknown.