BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
------------------------------------------------------------------
|Bill No: |AB 72 |Hearing | 9/10/15 |
| | |Date: | |
|----------+---------------------------------+-----------+---------|
|Author: |Bonta |Tax Levy: |No |
|----------+---------------------------------+-----------+---------|
|Version: |9/9/15 |Fiscal: |No |
------------------------------------------------------------------
-----------------------------------------------------------------
|Consultant|Weinberger |
|: | |
-----------------------------------------------------------------
EDEN TOWNSHIP HEALTHCARE DISTRICT: SPECIAL TAXES:
AUTHORIZATION
Allows the Eden Township Healthcare District to impose special
taxes.
Background and Existing Law
The Eden Township Healthcare District (ETHD) formed in 1948 to
serve the Alameda County communities of Castro Valley, Hayward,
San Leandro, and San Lorenzo. In 1954, ETHD opened Eden Medical
Center (EMC) hospital. In 1997, ETHD's voters approved a merger
agreement between ETHD and Sutter Health, which allowed the ETHD
to sell EMC to Sutter Health. In 2004, the ETHD purchased San
Leandro Hospital and leased it to EMC to operate. In 2008, ETHD
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. On December 21, 2011,
an appellate court ruled in favor of Sutter in litigation over
the terms of the 2008 agreement. On October 31, 2013, Sutter
transferred San Leandro Hospital to the Alameda Health System,
the public health authority that operates Alameda County's
health care system.
San Leandro Hospital is a 93-bed facility that provides a wide
AB 72 (Bonta) 9/9/15 Page 2
of ?
range of medical services, including 24-hour emergency services,
critical care, a full complement of skilled surgeons,
rehabilitation services, and ancillary services to a population
of 265,000 people. St. Rose Hospital is a 150-bed independent
community hospital in Hayward, which provides a range of
services including cardiology, emergency, diagnostics, and
women's services to residents of Hayward and the surrounding
community. Both San Leandro Hospital and St. Rose Hospital are
located within ETHD's jurisdictional boundaries.
Some Alameda County officials are concerned that fiscal
challenges confronting San Leandro Hospital and St. Rose
Hospital threaten their ability to continue providing vital
health care services to their surrounding communities. As
officials struggle to find additional financial support for
those two hospitals, ETHD is considering seeking voter-approval
of a parcel tax to generate some of that additional funding.
However, state law allows a health care district to impose
special taxes, with two-thirds voter approval, only if the
district owns and operates its own hospitals (AB 3596, Hauser,
Chapter 1345, Statutes of 1988). Because ETHD no longer owns
and operates its former hospitals, it cannot impose special
taxes under current law. ETHD officials want the Legislature to
allow the district to impose special taxes regardless of whether
it owns or operates a hospital.
Proposed Law
Assembly Bill 72 allows the Eden Township Healthcare District,
until January 1, 2026, to impose special taxes within the
district, pursuant to procedures established in state law.
AB 72 requires the district's board of directors to determine
the basis and nature of a special tax and its manner of
collection.
AB 72 defines "special taxes," for purposes of the bill's
provisions, as special taxes that apply uniformly to all
taxpayers or all real property within the district.
AB 72 (Bonta) 9/9/15 Page 3
of ?
This bill declares the Legislature's intent that funds from a
tax enacted pursuant to this section must be used to support the
purposes of the district, including support of nonprofit and
public hospitals and other health care providers in the
communities served by the district.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . The 1988 statute authorizing local
health care districts to impose parcel taxes within a district's
boundaries taxes limited the special tax power only to those
districts that own and operate a hospital. Despite having
recently owned San Leandro Hospital, ETHD is prohibited by state
law from imposing a parcel tax to support that hospital, which
provides vital medical services, including emergency room care,
to district residents. ETHD has provided financial support from
its existing revenues to St. Rose hospital, but is prohibited
from imposing a parcel tax to help keep that hospital open. AB
72 would give ETHD the same taxing authority that state law
already grants to many other local health care districts. This
bill does not require ETHD to seek approval for a parcel tax and
leaves the ultimate decision in the hand of district voters, who
must approve any proposed parcel tax by a two-thirds vote. AB
72 simply provides ETHD officials with another tool to use to
support hospitals and health facilities that serve district
residents and are confronting severe fiscal challenges.
2. Revenues and responsibilities . Principles of efficient
public administration suggest that the power to raise revenues
should be exercised by the same governing body that has the
responsibility for deciding how those revenues are going to be
spent. AB 72 allows parcel taxes for the support of community
hospitals to be imposed by local governments that are not
directly responsible for those hospitals. If Alameda County
officials want to use parcel tax revenues to support San Leandro
Hospital, why not amend state law to allow Alameda County or
Alameda Health System to impose the parcel tax, rather than
having the revenues pass through ETHD? Or, alternatively, why
AB 72 (Bonta) 9/9/15 Page 4
of ?
can't Alameda County impose parcel taxes within a county service
area established specifically to support San Leandro Hospital?
3. Precedent . ETHD is not the only health care district that
continues to exist without actually owning or operating a
hospital. Enacting AB 72 may invite similar requests from some
of the dozens of other healthcare districts throughout
California that do not own or operate hospitals. The continued
operation of these healthcare districts without hospitals raises
broader policy questions about the need for such districts, and
whether they should be dissolved or merged into other local
governments. AB 72 appears to move in a different direction by
establishing a precedent that those districts should be granted
the power to collect new voter-approved taxes.
4. Good intentions . AB 72 declares the Legislature's intent to
limit the purposes for which ETHD can spend revenues from parcel
taxes imposed pursuant to the bill's provisions. However, this
statement of intent, which directs that the district must spend
parcel tax revenues "to support the purposes of the district,"
may be too broad to have any practical effect on the district's
use of revenues. ETHD faces its own fiscal challenges,
including more than $40 million in outstanding bank loans and
more than $17 million in obligations resulting from the legal
dispute with Sutter Health. Repaying existing indebtedness or
paying for ongoing district expenses appear to be allowable uses
for the parcel tax revenues under the bill's current language.
The Committee may wish to consider whether AB 72 should more
narrowly declare the legislature's intent that ETHD must use
parcel tax revenues only to support nonprofit and public
hospitals and other health care providers in the communities
served by the district.
5. Urgency . Regular statutes take effect on January 1
following their enactment; bills passed in 2014 take effect on
January 1, 2015. The California Constitution allows bills with
urgency clauses to take effect immediately if they're needed for
the public peace, health, and safety. AB 72 contains an urgency
clause declaring that it is necessary for its provisions to go
into effect immediately to ensure that residents of the Eden
Township Healthcare District have continued access to critical
health care services.
6. Special legislation . The California Constitution prohibits
AB 72 (Bonta) 9/9/15 Page 5
of ?
special legislation when a general law can apply (Article IV,
§16). AB 72 contains findings and declarations explaining the
need for legislation that applies only to the Eden Township
Healthcare District.
7. Legislative history . As passed by the Assembly, AB 72
contained provisions requiring the Department of Health Care
Services to submit an application to the federal government for
a waiver of federal law, to allow the state to make changes to
the operation of the Medi-Cal program. The Senate Governance &
Finance Committee never heard that version of the bill. The
September 4 amendments deleted AB 72's contents and inserted the
current language relating to the ETHD's parcel tax powers.
Because the new version of the bill falls within the Senate
Governance & Finance Committee's policy jurisdiction, the Senate
Rules Committee referred the bill to the Governance & Finance
Committee for a hearing.
Assembly Actions
Not relevant to the September 9, 2015 version of the bill
Support and
Opposition (9/9/15)
Support : Association of California Healthcare Districts
Opposition : Howard Jarvis Taxpayers Association.
-- END --