BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 644|
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UNFINISHED BUSINESS
Bill No: SB 644
Author: Hancock (D)
Amended: 8/29/11
Vote: 27 - Urgency
PRIOR VOTES NOT RELEVANT
ASSEMBLY FLOOR : 74-0, 9/1/11 - See last page for vote
SENATE GOVERNANCE & FINANCE COMMITTEE : 9-0, 9/2/11
AYES: Wolk, Huff, DeSaulnier, Fuller, Hancock, Hernandez,
Kehoe, La Malfa, Liu
SUBJECT : West Contra Costa
SOURCE : West Contra Costa Healthcare District
DIGEST : This bill requires all certificates of
participation executed and delivered by the West Contra
Costa Healthcare District between June 8, 2004, and
December 31, 2012, to be secured by a statutory lien on all
the revenues generated from a parcel tax passed by District
voters in 2004.
Assembly Amendments delete the Senate version of the bill
dealing with public works. This bill currently deals with
West Contra Costa Healthcare District certificates of
participation.
ANALYSIS :
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Existing law:
1. Defines "bonds" as any bonds, notes, bond anticipation
notes,
commercial paper, or other evidences of indebtedness, or
lease, installment purchase, or other agreements, or
certificates of participation therein, that are not
issued pursuant to statutory authority containing a
provision governing the perfection and priority of
pledges of collateral unless the provision provides that
this chapter shall govern.
2. Defines "pledge" as, and as used in any pledge document
shall be deemed to create, a grant of a lien on and a
security interest in and pledge of the collateral
referred to in a pledge document.
3. Requires a pledge of collateral by any public body to
secure, directly or indirectly, the payment of the
principal or redemption price of, or interest on, any
bonds, or any reimbursement or similar agreement with
any provider of credit enhancement for bonds, which is
issued by or entered into by a public body, to be valid
and binding in accordance with the terms of the pledge
document from the time the pledge is made for the
benefit of pledgees and successors thereto.
4. Requires the collateral to immediately be subject to the
pledge, and the pledges constitute a lien and security
interest which shall immediately attach to the
collateral and be effective, binding, and enforceable
against the pledgor, its successors, purchasers of the
collateral, creditors, and all others asserting the
rights therein, to the extent set forth, and in
accordance with, the pledge document irrespective of
whether those parties have notice of the pledge and
without the need for any physical delivery, recordation,
filing, or further act.
This bill:
1. Requires all certificates of participation executed and
delivered by the West Contra Costa Healthcare District
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(District) between June 8, 2004, and December 31, 2012,
to be secured by a statutory lien on all the revenues
generated from a parcel tax passed by District voters in
2004.
2. Requires the lien to arise automatically without the
need for any action or authorization by the District.
3. Specifies that the lien shall be valid and binding from
the time the certificates of participation are executed
and delivered.
4. Requires the parcel tax to be immediately subject to
this lien.
5. Requires the lien to immediately attach to the parcel
tax revenue and be effective, binding, and enforceable
against the District, its successors, purchasers of
those revenues, creditors, and all others asserting the
rights therein, irrespective of whether those parties
have notice of the lien.
6. Adds an urgency clause.
Comments
West Contra Costa Healthcare District operates Doctors
Medical Center (DMC) in San Pablo, California, serving a
disproportionately underprivileged community in the cities
of Richmond, El Cerrito, San Pablo, Pinole, Hercules and
portions of unincorporated Contra Costa County (County).
The District faces severe financial problems due to the
extremely high level of uninsured and underinsured
patients, most of whom access DMC through its emergency
room, which receives over 40,000 visits annually.
In June of 2004, the District passed a parcel tax that
produces just under $6,000,000 per year in revenues.
The District filed for relief under Chapter 9 bankruptcy in
2006, and emerged from bankruptcy thereafter. The plan of
reorganization under which the District emerged from
bankruptcy was based on a number of factors, including an
ongoing funding by California Medical Assistance Commission
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(CMAC) of $12,000,000 per year by means of
inter-governmental transfers.
As a result of a change in the rules governing allocation
of inter-governmental transfers by CMAC, funding for the
District declined by approximately $11,000,000 and the
District again finds itself on the financial brink.
The District has received a property tax advance of
approximately $10,000,000 from Contra Costa County which is
being repaid with 100 percent of the ad valorem tax
allocation to the District over the next three to four
years.
The District has determined that it will need to generate
an additional $10,000,000 in the immediate future in order
to sustain its operations or, in the alternative, meet all
of its financial obligations (largely to its employees in
the form of wages and benefits) in connection with an
orderly closure of DMC.
The District is optimistic that funding from a variety of
sources including CMAC, other regional health care
institutions, an additional parcel tax, and savings from
improving operating efficiencies will be sufficient to
insure the continuing operations of the District. Every
plan for continuing operations of the District includes an
infusion of $10,000,000 from new certificates of
participation (COPs) secured by the existing parcel tax and
there is no practical way for DMC to continue in existence
without the $10,000,000 financing.
In addition, the District desires to use the new COP
financing to accelerate the repayment of the County's
$10,000,000 property tax advance in order to free up the ad
valorem revenue for operations. The ad valorem property
tax revenue cannot be pledged to the COPs in the same
secure way that the parcel tax can be pledged, and
therefore it is more efficient from a financing perspective
to leverage the parcel tax for both the county obligations
and the $10,000,000 cash infusion. Finally, the financing
of the payment of the County's tax advance over a number of
years will increase overall cash flow for the District over
the critical next few years.
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This bill creates a statutory lien against the existing
parcel tax revenue which will provide underwriters
assurance that the District's pledge of a portion of its
parcel tax revenue to support the COPs cannot be set aside
by a bankruptcy court. According to the District's
financial the addition of a statutory lien against the
parcel tax is necessary to meet the demands of the market
place and give underwriter needed sureties; without this
the financing is unlikely to be successful. The District
needs to complete this financing this year, as otherwise it
is in danger of running out of cash and not being able to
meet its obligations to employees, vendors and other
creditors; thus the bill has an urgency clause.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 9/2/11)
West Contra Costa Healthcare District (source)
Association of California Healthcare Districts
California Chapter of the American College of Emergency
Physicians
California Labor Federation
California Nurses Association
Doctors Medical Center
ASSEMBLY FLOOR : 74-0, 9/1/11
AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall,
Bill Berryhill, Block, Blumenfield, Bradford, Brownley,
Buchanan, Butler, Charles Calderon, Campos, Carter,
Cedillo, Chesbro, Conway, Cook, Dickinson, Donnelly, Eng,
Feuer, Fong, Fuentes, Furutani, Beth Gaines, Galgiani,
Garrick, Gatto, Gordon, Grove, Hagman, Halderman, Hall,
Harkey, Hayashi, Roger Hernández, Hill, Huber, Hueso,
Huffman, Jeffries, Jones, Knight, Lara, Logue, Bonnie
Lowenthal, Ma, Mansoor, Miller, Mitchell, Monning,
Morrell, Nestande, Nielsen, Norby, Olsen, Pan, Perea, V.
Manuel Pérez, Portantino, Silva, Skinner, Solorio,
Swanson, Torres, Valadao, Wagner, Wieckowski, Williams,
Yamada, John A. Pérez
NO VOTE RECORDED: Bonilla, Davis, Fletcher, Gorell,
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Mendoza, Smyth
AGB:mw 9/2/11 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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