BILL ANALYSIS Ó
AB 582
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 582 (Levine and Chesbro)
As Amended February 24, 2014
2/3 vote. Urgency
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|ASSEMBLY: | |(May 29, 2013) |SENATE: |34-0 |(April 10, |
| | | | | |2014) |
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(vote not relevant)
Original Committee Reference: HEALTH
SUMMARY : Enacts a statutory lien to secure certificates of
participation issued by the Palm Drive Healthcare District.
The Senate amendments delete the Assembly version of this bill,
and instead:
1)Require all certificates of participation (COPs) executed and
delivered by the Palm Drive Healthcare District (District)
between January 1, 2005, and December 31, 2014, including COPs
executed and delivered or revenue bonds issued before 2035 to
refund the revenue bonds or COPs, to be secured by a statutory
lien on all of the revenue generated from parcel taxes levied
pursuant to Measure W, approved by the voters on November 2,
2004.
2)Require the lien to arise automatically without the need for
any action or authorization by the District.
3)Specify that the lien shall be valid and binding from the time
the COPs are executed and delivered or the revenue bonds are
issued.
4)Require the parcel tax to be immediately subject to this lien.
5)Require the lien to immediately attach to the parcel tax
revenue to 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.
AB 582
Page 2
6)Contain an urgency clause.
7)Find and declare that a special statute is necessary because
of the unique circumstances applicable only to the District.
8)Find and declare that in order to enable the District to
complete its financing, meet its obligations to employees,
vendors, and other creditors in a timely manner it is
necessary for this act to take effect immediately.
EXISTING LAW :
1)Defines "bonds" as any bonds, note, bond anticipation notes,
commercial paper, or other evidences of indebtedness, or
lease, installment purchase, or other agreements, or COPs
therein, that are not issued pursuant to a 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.
AB 582
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AS PASSED BY THE ASSEMBLY , this bill established, until January
1, 2019, complex rehabilitation technology, such as power
wheelchairs, specialized wheelchair electronics, and nonstandard
manual wheelchairs as a separate benefit, instead of a component
of the durable medical equipment benefit in the Medi-Cal
program.
FISCAL EFFECT : None
COMMENTS : This bill enacts a statutory lien to secure COPs
issued by the District. This bill is author-sponsored.
The District was formed in 2000 to prevent the closure of the
Palm Drive Hospital in Sebastopol (Sonoma County). The District
owns and operates Palm Drive Hospital, which provides essential
inpatient, outpatient, and emergency services to residents in
western Sonoma County. In November 2004, more than 69% of
district voters approved Measure W, allowing the District to
impose a parcel tax that generates nearly $4 million in annual
revenues. In 2005, the District issued revenue bonds secured by
the parcel tax. In 2007, the District filed for bankruptcy
protection. The bankruptcy court subsequently approved a plan
of adjustment that required the District to sell COPs and use
the proceeds to satisfy its obligations under the plan and
finance other specified expenses. The District issued $11
million in COPs in 2010, allowing it to exit from bankruptcy.
According to the author, "The interest rate on those outstanding
bonds is nearly 5% and 7.5% respectively. With the statutory
lien that this bill would put in place it is estimated that the
District will save over $6.5 million on the interest payments
over the life of the existing bonds, because this will allow the
District to refinance its existing bonds at what is estimated to
be a 4% interest rate. It is important to point out that the
change in law made in the bill does not create a new tax or
increase existing taxes. This bill puts in place the necessary
assurances that lenders are requiring for the district to
refinance the existing bonds allowing the savings on interest to
go to paying for care instead of to Wall Street."
According to the District's financial advisor and attorneys
absent strengthening of the security of the debt, the capital
markets will not readily accept an offering by the District to
provide for refinancing of its existing debt.
AB 582
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This bill is substantially similar to SB 644 (Hancock), Chapter
742, Statutes of 2011, which required all COPs 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 the District voters in 2004. The Legislature may wish
to consider if other public agencies that have recently emerged
from bankruptcy will also come to the Legislature for a
statutory lien, and if a more comprehensive policy is needed.
Arguments in support. Supporters argue that this bill will
allow the District to refinance its existing debt at a lower
interest rate which will lessen the hospital's current financial
burdens.
Arguments in opposition. Opposition may argue that even with
the statutory lien the District could still find issuing the
COPs difficult.
This bill was substantially amended in the Senate and the
Assembly-approved provisions of this bill were deleted. The
subject matter of this bill, as amended in the Senate, has not
been heard in any Assembly policy committee this legislative
session.
Analysis Prepared by : Misa Yokoi-Shelton / L. GOV. / (916)
319-3958
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