BILL ANALYSIS Ó
AB 1394
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Date of Hearing: April 6, 2011
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
AB 1394 (Committee on Health) - As Amended: March 23, 2011
Policy Committee: HealthVote:19-0
Urgency: No State Mandated Local Program:
No Reimbursable: No
SUMMARY
This bill makes a variety of technical, clarifying, and
non-controversial changes to statutes affecting the California
Health Facility Financing Authority (CHFFA). Specifically, this
bill:
1)Expands the categories of health facilities eligible for
financing under the Healthcare Expansion Loan Program (HELP).
2)Authorizes a participating health facility to undertake
directly, or through a related nonprofit corporation, the
financing and refinancing of a project.
3)Allows CHFFA to enter into bond exchange agreements
(commonplace financial arrangements that allow borrowers to
alter terms and rates of prior bonds without re-issuing
bonds).
4)Specifies when a default is likely to occur and what actually
constitutes a default.
5)Clarifies that participating health institutions, rather than
the physical buildings of health facilities, are the legal
organizations or entities eligible for financing.
6)Codifies existing practice by explicitly authorizing CHFFA to
perform activities necessary to act as a pass-through between
borrowers and banks and other financial institutions.
7)Clarifies that CHFFA is authorized to re-finance a borrower's
debt from other conduit financing providers.
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FISCAL EFFECT
1)Negligible direct state fiscal impact. Potential minor state
administrative savings, to the extent that these clarifying
changes reduce administrative workload in CHFFA and other
state agencies.
2)The State Treasurer's Office (STO) indicates that there is a
potential for greater fee revenue that would increase funding
available for other CHFFA projects, such as low-cost loans to
small and rural health centers, to the extent that these
technical changes allow CHFFA to compete more effectively in
the bond marketplace against Joint Powers Authorities and
other bond issuers.
COMMENTS
1) Rationale. This bill is sponsored by the STO to
modernize and update the statutes affecting CHFFA.
According to the STO, new types of health care facilities
that are consistent with the legislative intent of CHFFA's
statute have begun to seek funding for expansions in
response to changes to the delivery of health care services
in California. Additionally, a rapidly evolving health
facilities financing system has made various types of
economic agreements more widespread, and CHFFA has been
rendered less competitive due to the lack of explicit
statutory authorization to employ certain financial
arrangements. Finally, CHFFA's current statute does not
reflect the current organization of our health system; for
example, it does not allow parent health facilities, such
as a main hospital with multiple campuses, to easily apply
for financing on behalf of its affiliates. This bill
intends to enhance CHFFA's competitiveness in the bond
marketplace and make other technical changes that improve
its administrative efficiency.
2) CHHFA . CHFFA was created to be the state's vehicle for
providing financial assistance to public and non-profit
health care providers through loans funded by the issuance
of tax-exempt bonds. CHFFA finances a wide range of
providers and programs throughout the state through several
different programs. CHFFA's operations are financed
largely through charging borrowers small fees on bond
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sales. A portion of the fee revenue is used to support
programs such as the HELP program, which provide
inexpensive, fixed-rate loans to California's non-profit
small and rural health facilities that often have trouble
obtaining adequate financing for their capital needs.
In order to qualify for CHFFA financing, an institution
must be a public hospital, a private non-profit
corporation, or an association authorized by the laws of
California to provide or operate a health facility and
undertake the financing or refinancing of a project.
Proceeds from bond sales can be used for construction,
remodeling, land acquisition, and other capital projects,
and any savings from the issuance of tax-exempt bonds must
benefit the community via lower or contained costs for
health care services.
Analysis Prepared by : Lisa Murawski / APPR. / (916) 319-2081