BILL ANALYSIS Ó
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
AB 1394 (Committee on Health)
Hearing Date: 6/27/2011 Amended: 6/14/2011
Consultant: Katie Johnson Policy Vote: Health 9-0
_________________________________________________________________
____
BILL SUMMARY: AB 1394 would make a variety of clarifying changes
to the California Health Facilities Financing Authority (CHFFA)
Act, including expanding the definition of health facilities,
projects, and not-for-profit entities that are eligible for
financing and expanding CHFFA's authority to participate in bond
exchange agreements.
_________________________________________________________________
____
Fiscal Impact (in thousands)
Major Provisions 2011-12 2012-13 2013-14 Fund
Potential increased likely minor, but potentially
significant, Special*
number of projects fully covered by fees charged to entities
*California Health Facilities Financing Authority Fund
_________________________________________________________________
____
STAFF COMMENTS:
The California Health Facilities Financing Authority (CHFFA) was
established in 1979; it provides financial assistance to public
and non-profit health care providers in California through loans
funded by the issuance of tax-exempt bonds. Its administrative
activities are funded by fees paid by participating health
institutions. CHFFA anticipates that this bill would streamline
its business practices and result in some efficiencies. It does
not anticipate any increased workload associated with this bill.
However, if this bill were to make participating health
institutions more likely to seek financing through CHFFA and
increase workload, costs would be fee-supported. CHFFA statute
permits it to charge participating health institutions the costs
of administering the authority. the California Health Facilities
Authority Fund is continuously appropriated.
AB 1394 (Committee on Health)
Page 1
To the extent this bill would increase the potential for new fee
revenue, there would be more funds available for CHFFA projects,
such as the HELP II Program.
This bill would, specifically,
1) Add entities that provide private educational services
to the definition of health facilities. CHFFA would then be
able to finance these types of facilities. CHFFA indicates
that this would clarify that those facilities are included
in their statute and would expedite the processing of
future applications.
2) Clarify that information system facilities or equipment
are included under the definition of health facilities;
information systems would join a list of facilities that
are operated in conjunction with a health facility, such as
a laboratory, laundry facility, and housing for staff.
3) Permit a health facility to undertake financing with
CHFFA through a "related nonprofit corporation" in addition
to its ability to seek financing as a sole facility. Many
major hospital systems operate as parent organizations and
run several campuses. This provision would permit a parent
organization to apply for financing on behalf of its
affiliates.
4) Allow CHFFA to enter into bond exchange agreements
(BEAs), in addition to the other types of agreements they
currently make. BEAs allow borrowers to alter various terms
and rates of their bonds in order to make conditions more
favorable to borrowers or acceptable to investors without
having to issue new bonds.
5) Permit CHFFA to pledge or grant security interests to
letters of credit providers and providers of liquidity
support. CHFFA must routinely do this in order to act as
the passive payment conduit.
6) Allow CHFFA to purchase its bonds with any moneys
available to the authority and to exchange bonds with its
bonds.
7) Clarify CHFFA's authority to refund bonds issued by
another conduit authority such as a joint powers authority,
a redevelopment agency, or a county. This provision would
enable CHFFA to refinance an applicant's debt from another
conduit authority.
8) Delete the term "borrower" and replace it with
"participating health institution."
AB 1394 (Committee on Health)
Page 2