BILL ANALYSIS                                                                                                                                                                                                    

                            Senator Dave Cox, Chair

          BILL NO:  SB 1458                    HEARING:  4/7/10
          AUTHOR:  Cogdill                     FISCAL:  No
          VERSION:  2/19/10                    CONSULTANT:   

                           Background and Existing Law  

          California's 80 local health care districts find themselves  
          pulled in two different directions.  As operators of  
          hospitals, they must survive by competing with  
          profit-oriented companies.  As public agencies, they must  
          adhere to the state laws which require specific procedures  
          and which impose limits on their activities.  The districts  
          must be aggressive in securing financing.

          A local health care district may enter into a line of  
          credit with a commercial lender that is secured by the  
          accounts receivable or other intangible assets of the  
          district, including anticipated tax revenues, and  
          thereafter borrow funds against the line of credit for any  
          district purpose (SB 776, Runner, 2005).  The district must  
          repay the money borrowed within five years from each  
          separate borrowing or draw upon the line of credit.  A  
          district may enter into a new and separate line of credit  
          to repay a previous line of credit.  

          SB 198 (Cogdill, 2009) extended the repayment period for  
          local health care districts' lines of credit from five  
          years to 20 years provided that the line of credit is:
                 Established on or after January 1, 2010, and
                 Established for the sole purpose of consolidating  
               debts incurred by a district prior to January 1, 2010.
          The Cogdill bill imposed a $2 million limit on the total  
          amount of debt a district can have outstanding at any one  
          time under the line of credit.

          Some hospital district officials are concerned that the  
          language in last year's Cogdill bill suggests that a  
          district can borrow no more than $2 million total, under  
          all of its lines of credit.  They want the Legislature to  
          clarify that the $2 million limit applies only to a 20-year  
          line of credit for debt consolidation.


          SB 1458 -- 2/19/10 -- Page 2

                                   Proposed Law  

          Senate Bill 1458 repeals and reenacts nearly identical  
          language into a paragraph that is separate from statutory  
          provisions authorizing health care districts to enter into  
          five year lines of credit.  The new paragraph authorizes a  
          health care district to enter into a line of credit with a  
          commercial lender for the sole purpose of consolidating  
          debt incurred before January 1, 2010.  Debt incurred under  
          that paragraph must be repaid within 20 years of the  
          consolidation borrowing.  The total amount of debt that a  
          district may have outstanding at any one time under that  
          paragraph may not exceed $2 million.


           Let's be clear  .  Health care districts confront a rapidly  
          changing and competitive marketplace.  In meeting these  
          substantial challenges, the districts need a variety of  
          financing tools to maintain their fiscal well-being.  SB  
          1458 clarifies the language enacted by last year's SB 198.   
          By clarifying this provision, SB 1458 helps health care  
          districts to refinance their current debts, thereby  
          reducing their annual debt loads and keeping more of their  
          funds available to pay for vital medical services.

                        Support and Opposition  (4/1/10)

           Support  :  Unknown.

           Opposition  :  Unknown.



          SB 1458 -- 2/19/10 -- Page 3