BILL ANALYSIS                                                                                                                                                                                                    Ó

          |SENATE RULES COMMITTEE            |                         AB 72|
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                                   THIRD READING 

          Bill No:  AB 72
          Author:   Bonta (D), et al.
          Amended:  9/9/15 in Senate
          Vote:     27  - Urgency


           SENATE GOVERNANCE & FIN. COMMITTEE:  4-3, 9/10/15 (pursuant to  
            Senate Rule 29.10)
           AYES:  Beall, Hernandez, Lara, Pavley
           NOES:  Hertzberg, Nguyen, Moorlach

           SUBJECT:   Eden Township Healthcare District: special taxes:  

          SOURCE:    Author
          DIGEST:   This bill allows the Eden Township Healthcare District  
          (ETHD) to impose special taxes.

          Senate Floor Amendments of 9/4/15 delete this bill's contents  
          and instead insert current language allowing the ETHD to impose  
          special taxes pursuant to specified provisions of state law.

          Existing law:

          1)Defines a "special tax" as any tax imposed for specific  
            purposes, including a tax imposed for specific purposes, which  
            is placed into a general fund.


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          2)Prohibits a local government from imposing, extending, or  
            increasing any special tax unless and until that tax is  
            submitted to the electorate and approved by a two-thirds vote.

          3)Allows a hospital district established pursuant to state law  
            whose hospitals are wholly owned and are operated by the  
            district to impose special taxes, pursuant to specified  
            provisions of state law. 

          4)Requires that a hospital district's board of directors must  
            determine the basis and nature of any special tax and its  
            manner of collection.

          5)Requires that special taxes imposed by a hospital district  
            must apply uniformly to all taxpayers or all real property  
            within the hospital district.

          This bill:

          1)Allows the ETHD, until January 1, 2026, to impose special  
            taxes within the district pursuant to the procedures required  
            by state law.

          2)Requires ETHD's board of directors to determine the basis and  
            nature of a special tax and its manner of collection.

          3)Requires that special taxes imposed by the ETHD must apply  
            uniformly to all taxpayers or all real property within the  

          4)Declares the Legislature's intent that funds from a tax  
            enacted pursuant to this section must be used to support the  
            purposes of the ETHD, including support of nonprofit and  
            public hospitals and other health care providers in the  
            communities served by the district.


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          5)Contains a finding and declaration explaining the need for  
            legislation that applies only to the ETHD.

          The 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  
          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  


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          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.


          Purpose of this 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.   
          This bill gives 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.  This  
          bill 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.

          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.  This bill 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  
          can't Alameda County impose parcel taxes within a county service  
          area established specifically to support San Leandro Hospital?

          Precedent.  ETHD is not the only health care district that  
          continues to exist without actually owning or operating a  


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          hospital.  Enacting this bill 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.  This bill 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.

          Good intentions.  This bill declares the Legislature's intent to  
          limit the purposes for which ETHD can spend revenues from parcel  
          taxes imposed pursuant to this 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 this bill's current language.   
          Legislators may wish to consider whether this bill 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.

          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:NoLocal:    No

          SUPPORT:   (Verified9/10/15)

          Association of California Healthcare Districts

          OPPOSITION:   (Verified9/10/15)

          Howard Jarvis Taxpayer's Association


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          ARGUMENTS IN SUPPORT:     Supporters argue that this bill allows  
          ETHD to provide vitally-needed financial support to hospitals  
          that serve district residents by seeking voter approval of a  
          parcel tax measure.

          ARGUMENTS IN OPPOSITION:     Opponents question whether a  
          hospital district that doesn't operate its own hospital should  
          have authority to impose special taxes and argue that ETHD may  
          use parcel tax revenues to pay its own substantial debts.

          ASSEMBLY FLOOR:  78-0, 4/23/15
          AYES:  Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,  
            Bonilla, Bonta, Brough, Brown, Burke, Calderon, Chang, Chau,  
            Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly,  
            Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina  
            Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,  
            Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,  
            Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,  
            Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,  
            Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,  
            Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez,  
            Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner,  
            Waldron, Weber, Wilk, Williams, Wood, Atkins
          NO VOTE RECORDED:  Campos, Salas

          Prepared by:Brian Weinberger / GOV. & F. / (916) 651-4119
          9/10/15 23:15:34

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