BILL ANALYSIS                                                                                                                                                                                                    


          |SENATE RULES COMMITTEE            |                  SB 1458|
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          Bill No:  SB 1458
          Author:   Cogdill (R)
          Amended:  As introduced
          Vote:     27 - Urgency

           SENATE LOCAL GOVERNMENT COMMITTEE  :  5-0, 4/7/10
          AYES:  Cox, Aanestad, Kehoe, DeSaulnier, Price

           SUBJECT  :    Hospital districts

           SOURCE  :     Author

           DIGEST  :    This bill repeals and reenacts provisions of  
          existing law relating to health care districts and  
          corresponding lines of credit.

           ANALYSIS  :    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], Chapter 554, Statutes of  


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          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), Chapter 37, Statutes of 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 (1) established on or after January 1,  
          2010, and (2) 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.

          This bill 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.

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

           ARGUMENTS IN SUPPORT  :    According to the author's office,  
          health care districts confront a rapidly changing and  
          competitive marketplace.  In meeting these substantial  
          challenges, the districts need a variety of financing tools  


                                                               SB 1458

          to maintain their fiscal well-being.  This bill 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.

          AGB:mw  4/8/10   Senate Floor Analyses 


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