BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2414


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          ASSEMBLY THIRD READING


          AB  
          2414 (Eduardo Garcia)


          As Amended  April 18, 2016


          Majority vote


           ------------------------------------------------------------------ 
          |Committee       |Votes|Ayes                  |Noes                |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Local           |7-1  |Eggman, Waldron,      |Linder              |
          |Government      |     |Alejo, Bonilla, Chiu, |                    |
          |                |     |Cooley, Gordon        |                    |
          |                |     |                      |                    |
          |----------------+-----+----------------------+--------------------|
          |Appropriations  |15-5 |Gonzalez, Bloom,      |Bigelow, Gallagher, |
          |                |     |Bonilla, Bonta,       |Jones, Obernolte,   |
          |                |     |Calderon, Chang,      |Wagner              |
          |                |     |Daly, Eggman, Eduardo |                    |
          |                |     |Garcia, McCarty,      |                    |
          |                |     |Holden, Quirk,        |                    |
          |                |     |Santiago, Weber, Wood |                    |
          |                |     |                      |                    |
          |                |     |                      |                    |
           ------------------------------------------------------------------ 


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









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          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 January 5, 2017, to file a  
            resolution of application with Riverside County Local Agency  
            Formation Commission (Riverside LAFCO), to initiate  
            proceedings by Riverside LAFCO for the expansion of the  
            District to include the East Coachella Valley region, as  
            specified pursuant to 5) below.  


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


          4)Requires the Riverside LAFCO proceeding to be deemed initiated  
            on the date the resolution of application is accepted for  
            filing.  Requires Riverside LAFCO to hold a hearing and  
            provide specified notice.  


          5)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.  


          6)Requires Riverside LAFCO to complete the proceeding and direct  
            the election no later than 150 days following receipt of the  
            completed resolution of application.  








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


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


          9)Requires Riverside LAFCO to order the expansion of the  
            District subject to a vote of the registered voters residing  
            within the territory to be annexed to the District at an  
            election following the completion of their proceedings.  


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


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


             a)   A majority of the voters within the territory proposed  
               to be annexed to the 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.  


          12)Requires the Board, 30 days after the expansion of the  
            District, to adopt a resolution to increase the number of  








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            board members from five to seven without the petition or  
            approval of the voters residing within the District.  


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


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


          15)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.  


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


          17)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.  


          18)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.  


          19)Finds and declares that a special law is necessary and  








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            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.  


          20)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:  According to the Assembly Appropriations  
          Committee:


          1)Potentially reimbursable one-time mandate costs, likely in the  
            range of $15,000 to $50,000, for the County to file the  
            required application with LAFCO and conduct an election.  


          2)Potentially reimbursable mandate costs to the District to  
            expand their Board by two members, should the annexation  
            process be successful.  These costs are minor and it is  
            unlikely the District would file a reimbursement claim with  
            the Commission on State Mandates.  


          3)No fiscal impact to the Riverside LAFCO.  The County would pay  
            the normal application fees that would cover the cost of  
            processing the proposal.  


          COMMENTS:  









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          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,  
            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 require 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, on or before January 5,  
            2017, to submit to Riverside LAFCO a resolution of application  
            to initiate LAFCO proceedings to expand the District's  
            boundaries to include the East Coachella Valley region.  This  
            bill requires Riverside LAFCO, within 150 days of receiving  
            the resolution of application, to complete specified  
            proceedings and direct the election for the expanded District.  
             


            Under this bill, the expanded District must include all  
            communities currently 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 the protest provision would not apply to the proposed  
            annexation.  The District would only be expanded, if supported  
            by a majority of voters within the territory proposed to be  
            annexed to the District and the number of voters required by  
            existing law for any necessary funding.  If the District is  
            expanded, this bill requires, within 30 days, 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  








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            in various medical and surgical specialties, a lack of urgent  
            care services, and a lack of transportation.  Solving the  
            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, including 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  








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            District is governed by a five-member Board elected at-large.   
            


          5)Policy Considerations.  The Legislature 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.  The  
               Legislature has seen an increasing number of bills seeking  
               to bypass the LAFCO process; therefore, they 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)  
               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  








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               healthcare district's principal act, the Legislature 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 Legislature 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.  


          6)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." 


          7)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  
            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."  










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          Analysis Prepared by:                                             
                          Misa Lennox / L. GOV. / (916) 319-3958  FN:  
          0002893