BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 134|
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THIRD READING
Bill No: SB 134
Author: Corbett (D)
Amended: 3/9/11
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 5-3, 3/16/11
AYES: Wolk, DeSaulnier, Hancock, Hernandez, Liu
NOES: Huff, Fuller, La Malfa
NO VOTE RECORDED: Kehoe
SUBJECT : Health care districts: transfers of assets
SOURCE : Author
DIGEST : This bill provides that, when a health care
district transfers more than 50 percent of the district's
assets at less than fair market value to one or more
nonprofit corporations, the transfer is deemed to be for
the benefit of the communities served by the district only
if the transfer agreement includes the appraised fair
market value of any asset transferred.
ANALYSIS : Existing law authorizes a health care district
to transfer its assets, for the benefit of the communities
it serves, to one or more nonprofit corporations at less
than fair market value. For a transfer of 50 percent or
more of a district's assets to be deemed to benefit a
district's communities, a district must meet specified
conditions.
CONTINUED
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This bill provides that, when a health care district
transfers more than 50 percent of the district's assets at
less than fair market value to one or more nonprofit
corporations, the transfer is deemed to be for the benefit
of the communities served by the district only if the
transfer agreement includes the appraised fair market value
of any asset transferred.
This bill requires that the appraised fair market value
must come from an independent consultant with expertise in
methods of appraisal and valuation and must be in
accordance with applicable governmental and industry
standards for appraisal and valuation. This bill also
requires that a resolution to submit a proposed asset
transfer to a health care district's voters must identify
the asset proposed to be transferred, its appraised fair
market value, and the amount of consideration that the
district is to receive in exchange for the transfer.
Background
The Eden Township Healthcare District (District) formed in
1948 to serve the Alameda County communities of Castro
Valley, Hayward, San Leandro, and San Lorenzo. In 1954,
the District opened Eden Medical Center (EMC) hospital. In
1997, the District's voters approved a merger agreement
between the District and Sutter Health. Under the 1997
agreement, the District sold EMC to Sutter Health. In
2004, the District purchased San Leandro Hospital and
leased it to EMC to operate. In 2008, the District entered
into an agreement with Sutter Health to replace EMC with a
newly-constructed hospital that would comply with the
state's seismic- safety law. The 2008 agreement also gave
Sutter the option to purchase San Leandro Hospital. The
purchase option allowed Sutter to deduct specified losses
and capital expenditures from the hospital's net book value
and, if the deductions exceeded the net book value, allowed
Sutter to exercise its purchase option with no balance due.
The District and Sutter are currently litigating the terms
of the 2008 agreement.
In response to concerns about transfers of publicly-owned
assets for significantly less than fair market value, some
elected officials want the state to require health care
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districts to appraise the fair market value of their assets
before transferring those assets for less than fair market
value.
Comments
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.
Responding to changes in health care delivery, public
hospitals explore economic and organizational alternatives,
including leasing or selling their assets to nonprofit
corporations or even to for-profit companies. If a local
health care district wants to transfer 50 percent or more
of its assets to any corporation, the transfer needs
majority-voter approval (SB 1771 ÝRussell & Kopp], Chapter
1359, Statutes of 1992).
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 3/16/11)
Association of California Healthcare Districts
AGB:do 3/17/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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