BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2414


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          Date of Hearing:  April 13, 2016 


                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT


                           Susan Talamantes Eggman, Chair


          AB 2414  
          (Eduardo Garcia) - As Introduced February 19, 2016


          SUBJECT:  Desert Healthcare District.


          SUMMARY:  Establishes an annexation process for the Desert  
          Healthcare District (District).  Specifically, this bill:   


          1)Establishes an annexation process for the District to include  
            the East Coachella Valley region, and provides a new  
            governance structure for the District's Board of Directors  
            (Board) if the District is expanded pursuant to the process  
            established by this bill.  


          2)Requires the Riverside County Board of Supervisors (Board of  
            Supervisors), on or before 15 days after the effective date of  
            this bill, to file a resolution of application with Riverside  
            County Local Agency Formation Commission (Riverside LAFCO), to  
            initiate a comprehensive review and recommendation by  
            Riverside LAFCO for the expansion of the District to include  
            the East Coachella Valley region, as specified pursuant to 7),  
            below.  


          3)Requires the Board of Supervisors to pay any fees associated  
            with the resolution of application.  








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          4)Requires Riverside LAFCO, in consultation with the Board of  
            Supervisors, the Board, Riverside County Auditor-Controller,  
            local entities affected by the expansion, and other relevant  
            stakeholders, to conduct and complete an analysis of the  
            funding sources available to the expanded District.  


          5)Provides that the financial analysis completed pursuant to  
            this bill is not binding with respect to the final funding  
            allocated to the District, if it is expanded pursuant to this  
            bill.  


          6)Requires the review and recommendation of Riverside LAFCO to  
            include a recommendation of the boundaries of the expanded  
            District.  


          7)Requires the expanded District to include all communities  
            currently served by the District as of the date the resolution  
            of application is filed.  Requires the expanded District to  
            also include, but not be limited to, the communities of Indian  
            Wells, La Quinta, Indio, and Coachella, and the unincorporated  
            areas of Bermuda Dunes, Mecca, Thermal, Oasis, North Shore,  
            and Vista Santa Rosa.  


          8)Requires Riverside LAFCO to complete the review on or before  
            August 1, 2016.  


          9)Prohibits the resolution of application, filed by the Board of  
            Supervisors, from being subject to any protest proceedings. 


          10)Prohibits Riverside LAFCO from disapproving the resolution of  
            application.  








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          11)Requires Riverside LAFCO, if a funding source sufficient to  
            support the operations of the expanded District is identified,  
            to order the expansion of the District subject to a vote of  
            the registered voters residing within the boundaries of the  
            proposed expanded District at an election following the  
            completion of their review.  


          12)Requires Riverside LAFCO to direct the Board of Supervisors  
            to direct county officials to conduct the election for the  
            District's expansion and any necessary funding source that  
            requires voter approval on the ballot at the next countywide  
            election.  


          13)Requires the District to be expanded in accordance with this  
            bill, if the following occur:


             a)   A majority of the voters within the boundaries of the  
               expanded district vote in favor 


             of the expansion; and,
             b)   A number of voters required under applicable law to  
               approve any necessary funding source that requires voter  
               approval vote in favor of that funding source.  


          14)Requires the Board, no later than December 1, 2016, to adopt  
            a resolution to increase the number of board members from five  
            to seven without the petition or approval of the voters  
            residing within the District.  


          15)Requires the Board's resolution to be effective on the date  
            of, and subject to any conditions specified in the resolution.  








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          16)Requires the Board to appoint two additional Board members  
            that are registered voters and residents of the territory  
            annexed pursuant to this bill.  


          17)Requires the Board, upon appointment, to designate by lot one  
            appointed member to leave office when their successor takes  
            office, pursuant to the Uniform District Election Law, and one  
            appointed member to leave office two years thereafter.  


          18)Requires a vacancy to be filled pursuant to existing law  
            which provides an appointment process for the Board.  


          19)Provides that the increase to the membership of the Board and  
            appointment of two new members only becomes operative if the  
            District is expanded in accordance with the annexation process  
            established by this bill.  


          20)Exempts the expansion of the District from the  
            Cortese-Knox-Hertzberg Local Government Reorganization Act  
            (Act), except as specified in this bill.  Provides that the  
            Act applies to any other change of organization or  
            reorganization, following the reorganization of the District  
            pursuant to this bill.  


          21)Exempts the District from the formation process established  
            in the Local Healthcare District Law and authorizes the  
            District to be expanded in accordance with this bill.   
            Provides that all other provisions of the Local Healthcare  
            District Law apply to the District following its  
            reorganization, except as specified in this bill.  









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          22)Contains an urgency clause in order to improve the provision  
            of healthcare services and access to healthcare services by  
            the residents of the Coachella Valley region as soon as  
            possible.  


          23)Finds and declares that a special law is necessary and  
            general law cannot be made applicable because of the unique  
            community needs in Riverside County that would be served by  
            the expansion of the District to include the entire Coachella  
            Valley region, including the limited access in the eastern  
            Coachella Valley to healthcare services by an underserved  
            population that suffers from a higher than average prevalence  
            of preventable disease.  


          24)Provides that, if the Commission on State Mandates determines  
            that this bill contains costs mandated by the state,  
            reimbursement to local agencies and school districts for those  
            costs shall be made, pursuant to current laws governing state  
            mandated local costs.  


          FISCAL EFFECT:  This bill is keyed fiscal.  


          COMMENTS:  


          1)LAFCO Law.  LAFCOs are responsible for coordinating logical  
            and timely changes in local governmental boundaries,  
            conducting special studies that review ways to reorganize,  
            simplify, and streamline governmental structures, and  
            preparing a sphere of influence for each city and special  
            district within each county.  The courts refer to LAFCOs as  
            the Legislature's "watchdog" over local boundary changes.  The  
            Act establishes procedures for local government changes of  
            organization, including city incorporations,  








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            disincorporations, city and special district consolidations,  
            and annexations to a city or special district.  LAFCOs  
            regulate boundary changes through the approval or denial of  
            proposals by other public agencies or individuals for these  
            procedures.  



            The Act prescribes a process for the inclusion or addition of  
            territory to a district (district annexation), which is  
            similar to most boundary changes that requires numerous steps:  
             


            a) application to LAFCO, by petition or resolution; b) noticed  
            public hearing, testimony, 
            and approval or disapproval by LAFCO in which they can impose  
            terms and conditions; 
            c) additional public hearing for protests (if more than 25% of  
            voters file protest, the LAFCO must order an election on the  
            proposed annexation, and if more than 50% of voters protest  
            then the LAFCO must terminate the proceedings); d) an  
            election, if there were significant protests; and, e) LAFCO  
            staff files documents to complete the annexation.  
            


            In the past several years the Legislature has established a  
            modified LAFCO process or exempted specified requirements in  
            the LAFCO process for the formation of several special  
            districts following a history of failed attempts at the local  
            level including AB 2453 (Achadjian), Chapter 350, Statutes of  
            2014, for the creation of the Paso Robles Water District, and  
            AB 3 (Williams), Chapter 548, Statutes of 2015, for the  
            formation of the Isla Vista Community Services District.  












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          2)Bill Summary.  This bill establishes an annexation process for  
            the District to include the East Coachella Valley region that  
            is exempt from the statutes that govern the usual process  
            under LAFCO for district annexations.  This bill requires the  
            Riverside County Board of Supervisors, within 15 days after  
            the effective date of this bill, to submit to Riverside LAFCO  
            a resolution of application to initiate a comprehensive review  
            and recommendation of LAFCO to expand the District's  
            boundaries to include the East Coachella Valley region.  This  
            bill requires Riverside LAFCO, by August 1, 2016, to complete  
            an analysis of the funding available to the expanded District  
            and to recommend the boundaries of the expanded District.  


            Under this bill, the expanded District must include all  
            communities current served by the District and the communities  
            of Indian Wells, La Quinta, Indio, Coachella, and the  
            unincorporated area of Bermuda Dunes, Mecca, Thermal Oasis,  
            North Shore, and Vista Santa Rosa.  Riverside LAFCO would not  
            have the usual power to disapprove the application and protest  
            provision would not apply to the proposed annexation.  The  
            District would only be expanded if supported by a majority of  
            voters within the boundaries of the expanded district and the  
            number of voters required by existing law for any necessary  
            funding.  If the District is expanded, this bill requires the  
            five-member Board to appoint two new Board members who are  
            residents and registered voters in the area annexed to the  
            District.  This bill is author-sponsored.  


          3)Author's Statement.  According to the author, "Currently,  
            there are significant barriers preventing Eastern Coachella  
            Valley residents' access to health care providers and  
            services.  This has been well-documented by numerous  
            stakeholders in the region.  Some of the barriers include  
            shortages in the number of primary care providers, shortages  
            in various medical and surgical specialties, a lack of urgent  
            care services, and a lack of transportation.  Solving the  








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            persistent barriers has proven to be challenging.  Even with  
            expanded Medicaid or commercial insurance coverage for  
            eligible residents through the Affordable Care Act, industry  
            analysts remain concerned that the number and capacity of  
            providers will prove inadequate to meet demand.  Eastern  
            Coachella Valley stakeholders and I believe that expanding the  
            current healthcare district is best to address these  
            persistent needs.  Pointing to the impact and success of the  
            Desert Healthcare District in addressing the health needs of  
            its current constituency."  



          4)Desert Healthcare District.  The District was created in 1948  
            to provide healthcare services to residents in the Coachella  
            Valley within a 457 square mile area that includes Palm  
            Springs, Desert Hot Springs, Cathedral City, Thousand Palms,  
            Rancho Mirage, Mountain Center, San Gorgonio, and the area of  
            Palm Desert west of Cook Street.  The District built and began  
            operating Desert Hospital, which is now known as Desert  
            Regional Medical Center.  Since 1986, the District's Board had  
            leased hospital operations to medical facility providers.  In  
            1997, the Board voted to lease the hospital to Tenet Health  
            Systems for a 30-year period.  The District continues to own  
            the lease and other assets includes the Las Palmas Medical  
            Plaza, while Tenant runs the operations of the 387-bed acute  
            care hospital.  


            According to the District, with an operating budget of roughly  
            $9 million, the District allocates more than $3 million each  
            year on grants and other programs.  The District has adopted a  
            grant program to invest in non-profits and public agencies  
            whose activities and programs improve the health and wellbeing  
            of District residents.  The District is funded by property tax  
            paid by the residents of the District, revenue for working  
            capital for the hospital in the event the lease with Tenet is  
            terminated, and rental income from the medical plaza.  The  
            District is governed by a five-member Board elected at-large.   








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          5)Committee Amendments.  The Committee may wish to consider the  
            following:


             a)   Timeline.  In order to provide more time at the local  
               level for the annexation process established by this bill,  
               the Committee may wish to ask the author to remove the  
               urgency clause from this bill.  Additionally, the Committee  
               may wish to ask the author to provide more time for  
               Riverside County to submit the resolution of application  
               and to Riverside LAFCO to produce the review required by  
               this bill.  The author may wish to consider further  
               examining the timelines once a funding source is identified  
               in the bill.  


             b)   Election.  This bill requires that an election be held  
               on both the expansion of the District's boundaries and on  
               the necessary funding.  Current law for district  
               annexations provides discretion to LAFCOs to order the  
               election only within the territory ordered to be annexed or  
               both within the territory ordered to be annexed and within  
               the existing district.  In order to ensure that the voters  
               in the area proposed for annexation who will be paying for  
               the proposed funding are the ones voting, the Committee may  
               wish to require the election to be held only within the  
               territory proposed for annexation.  


             c)   LAFCO Requirements.  Under this bill, Riverside LAFCO  
               would need to propose the boundaries of the expanded  
               district and identify a funding source.  The Committee may  
               wish to remove these requirements on LAFCO, and instead,  
               require the resolution of application for the proposed  
               annexation to identify a source of funding and include the  
               proposed area for annexation consistent with the expanded  








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               boundaries identified by this bill.  Riverside LAFCO may  
               include additional areas to the proposed territory for  
               annexation.  


               The Committee may also wish to ask the author to include in  
               the annexation process a LAFCO hearing to receive  
               objections or evidence regarding the resolution of  
               application.  These changes would more closely align the  
               annexation process established by this bill with the  
               process under LAFCO law.  


          6)Policy Considerations.  The Committee may wish to consider the  
            following:


             a)   Limiting LAFCO Powers.  The Legislature has delegated  
               the power to control local boundaries to the 58 LAFCOs.   
               This bill places several requirements on LAFCO, but does  
               not allow for the usual annexation process to occur.  This  
               Committee has seen an increasing number of bills seeking to  
               bypass the LAFCO process, therefore, the Committee may wish  
               to consider if prohibiting LAFCO from disapproving the  
               application is taking away one of the fundamental powers  
               the Legislature has tasked LAFCOs with.  


               The author may wish to consider allowing LAFCO to  
               disapprove the application based on findings by the LAFCO  
               that there is an insufficient source of funding, which  
               would be consistent with the author's goal of ensuring  
               adequate funding for the expanded District.   


             b)   Healthcare Districts and LAFCO.  The relationship  
               between LAFCOs and healthcare districts is unique in  
               comparison to other special districts.  The Local Hospital  
               District Law (now called the Local Healthcare District Law)  








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               and the formation of some healthcare districts predate the  
               Knox Nisbet Act, which created LAFCOs and formalized the  
               process for establishing a hospital district.  As a  
               consequence of the ambiguity in current law, the District  
               has experienced past issues with allegations of grant  
               recipients providing service outside of the boundaries of  
               the District and within the communities identified for  
               potential annexation by this bill.  Due to the unique  
               nature of healthcare services and the long history of  
               healthcare district's principal act, the Committee may wish  
               to consider, beyond the scope of this individual bill, if  
               there is a need to more clearly define the relationship  
               between LAFCOs and healthcare districts, and undertake a  
               closer examination of healthcare district's service  
               boundaries.  


             c)   Applicant.  The Committee may wish to consider if  
               Riverside County is the best applicant to begin the  
               annexation process established by this bill.  The District  
               may have a better sense of the services and funding  
               necessary to support the expanded District and may  
               therefore be the best applicant.  


          7)Arguments in Support.  The Borrego Community Health Foundation  
            argues, "The [District] has a long history of acknowledged  
            success in serving [their] residents.  [The District's]  
            leaders are acutely aware of and are sympathetic to health  
            disparities in the East Coachella Valley and have collaborated  
            with other agencies to provide services within the limitation  
            of their fiduciary obligations to the District's residents.   
            Expanding the current District will take away their limitation  
            to help end the healthcare disparities that currently exist." 


          8)Arguments in Opposition.  Riverside LAFCO argues, "Annexation  
            of the eastern Coachella Valley communities has been a topic  
            of discussion at times over the past two decades, but has not  








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            been pursued, likely since no existing revenues would be  
            available to fund services to the expanded area.  Annexation  
            under the normal process could have been initiated at any time  
            and still can be.  In addition to the elimination of virtually  
            all LAFCO discretionary authority, the timeframes set out in  
            the bill are unrealistic and carry unfunded mandates for local  
            agencies."  


          9)Urgency Clause.  This bill contains an urgency clause and  
            requires a two-thirds vote on the Assembly floor.  


          REGISTERED SUPPORT / OPPOSITION:




          Support


          Borrego Community Health Foundation


          Clinicas De Salud Del Pueblo


          Comite Civico del Valle


          Inland Congregations United for Change


          La Union Hace La Fuerza




          Opposition








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          California Association of Local Agency Formation Commissions


          Riverside County Local Agency Formation Commission




          Analysis Prepared by:Misa Lennox / L. GOV. / (916) 319-3958