BILL ANALYSIS                                                                                                                                                                                                    



                                                                       



           ------------------------------------------------------------ 
          |SENATE RULES COMMITTEE            |                  AB 2731|
          |Office of Senate Floor Analyses   |                         |
          |1020 N Street, Suite 524          |                         |
          |(916) 651-1520         Fax: (916) |                         |
          |327-4478                          |                         |
           ------------------------------------------------------------ 
           
                                         
                                    CONSENT


          Bill No:  AB 2731
          Author:   Arambula (D)
          Amended:  4/8/10 in Assembly
          Vote:     21

           
           SENATE LOCAL GOVERNMENT COMMITTEE  :  3-0, 6/9/10
          AYES:  Kehoe, DeSaulnier, Price
          NO VOTE RECORDED:  Cox, Aanestad
           
          ASSEMBLY FLOOR  :  76-0, 5/13/10 (Consent) - See last page  
            for vote


           SUBJECT  :    Health care districts:  federal loans or grants

           SOURCE  :     Author


           DIGEST  :    This bill revises current law to allow a health  
          care district to secure federal mortgage insurance, federal  
          loans, grants, or federally insured loans issued by the  
          United States Department of Agriculture pursuant to the  
          federal Consolidated Farm and Rural Development Act through  
          specified financing mechanisms.

           ANALYSIS  :    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 restrictions.
                                                           CONTINUED





                                                               AB 2731
                                                                Page  
          2


          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.

          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, this bill 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 insurance. 

           Comment  

          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  







                                                               AB 2731
                                                                Page  
          3

          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,  
          this bill helps rural health care districts maintain  
          financial sustainability, thereby ensuring that residents  
          in rural communities retain access to much-needed medical  
          care.

           FISCAL EFFECT  :    Appropriation:  No   Fiscal Com.:  No    
          Local:  No

           SUPPORT  :   (Verified  6/10/10)

          Association of California Healthcare Districts
          California Hospital Association
          California State Rural Health Association


           ASSEMBLY FLOOR  : 
          AYES:  Adams, Ammiano, Anderson, Arambula, Bass, Beall,  
            Bill Berryhill, Tom Berryhill, Blakeslee, Block,  
            Blumenfield, Bradford, Brownley, Buchanan, Charles  
            Calderon, Carter, Chesbro, Conway, Cook, Coto, Davis, De  
            La Torre, De Leon, DeVore, Emmerson, Eng, Evans, Feuer,  
            Fletcher, Fong, Fuentes, Fuller, Furutani, Gaines,  
            Galgiani, Garrick, Gilmore, Hagman, Hall, Harkey,  
            Hayashi, Hernandez, Hill, Huber, Huffman, Jeffries,  
            Jones, Knight, Lieu, Logue, Bonnie Lowenthal, Ma,  
            Mendoza, Miller, Monning, Nava, Nestande, Niello,  
            Nielsen, V. Manuel Perez, Portantino, Ruskin, Salas,  
            Saldana, Silva, Smyth, Solorio, Audra Strickland,  
            Swanson, Torlakson, Torres, Torrico, Tran, Villines,  
            Yamada, John A. Perez
          NO VOTE RECORDED:  Caballero, Norby, Skinner, Vacancy


          AGB:mw  6/10/10   Senate Floor Analyses 

                         SUPPORT/OPPOSITION:  SEE ABOVE

                                ****  END  ****