BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 2414 |Hearing |6/22/16 |
| | |Date: | |
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|Author: |Eduardo Garcia |Tax Levy: |No |
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|Version: |4/18/16 |Fiscal: |Yes |
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|Consultant|Weinberger |
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Desert Healthcare District
Establishes an annexation process to expand the Desert
Healthcare District's boundaries that is exempt from some
statutes that generally govern district annexations.
Background
The Cortese-Knox-Hertzberg Act controls how local officials
change the boundaries of cities and special districts, putting
local agency formation commissions (LAFCOs) in charge of the
proceedings. LAFCOs' boundary decisions must be consistent with
spheres of influence (SOIs) that LAFCOs adopt to show the future
boundaries and service areas of the cities and special
districts. Before LAFCOs can adopt their spheres of influence,
they must prepare municipal service reviews (MSRs) which analyze
population growth, public facilities, and service demands.
LAFCOs may also conduct special studies of local governments.
Most boundary changes begin when a city or special district
applies to LAFCO, or when registered voters or landowners file
petitions with a LAFCO. In limited circumstances, LAFCO can
initiate some special district boundary changes: consolidations,
dissolutions, mergers, subsidiary districts, or reorganizations
(AB 1335, Gotch, 1993). Boundary changes, including
annexations, require four (sometimes five) steps:
First, there must be a completed application to LAFCO,
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including a petition or resolution, an environmental review
document, and a property tax exchange agreement between the
county and the district.
Second, LAFCO must hold a noticed public hearing, take
testimony, and may approve the proposed annexation. LAFCO
may impose terms and conditions relating to revenues and
other considerations. If LAFCO disapproves, the proposed
annexation stops.
Third, LAFCO must hold another public hearing to measure
protests.
Fourth, if there was sufficient protest, an election
must occur. A successful annexation requires
majority-voter approval.
Finally, LAFCO's staff files formal documents to
complete the annexation.
The Desert Healthcare 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 Tenet 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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Some public officials want to expand the District's boundaries
to provide services in communities within the Eastern Coachella
Valley that lack adequate access to health care.
Proposed Law
Assembly Bill 2414 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, if the District is expanded pursuant to the process
established by this bill.
AB 2414 requires the Riverside County Board of Supervisors, on
or before January 5, 2017, to file a resolution of application
with Riverside LAFCO, to initiate proceedings by Riverside LAFCO
for the expansion of the District to include the East Coachella
Valley region. The Board of Supervisors must pay any fees
associated with the resolution of application.
AB 2414 requires the Riverside LAFCO proceeding to be deemed
initiated on the date the resolution of application is accepted
for filing. Riverside LAFCO must hold a hearing and provide
specified notice.
AB 2414 requires the expanded District to include all
communities currently served by the District as of the date the
resolution of application is filed and 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.
AB 2414 requires Riverside LAFCO to complete the proceeding and
direct the election no later than 150 days following receipt of
the completed resolution of application.
AB 2414 prohibits the resolution of application, filed by the
Board of Supervisors, from being subject to any protest
proceedings and prohibits Riverside LAFCO from disapproving the
resolution of application.
AB 2414 requires Riverside LAFCO to order the expansion of the
District subject to a vote of the registered voters residing
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within the territory to be annexed to the District at an
election following the completion of their proceedings.
Riverside LAFCO must 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.
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AB 2414 requires the District to be expanded in accordance with
this bill, if the following occur:
A majority of the voters within the territory proposed
to be annexed to the District vote in favor of the
expansion; and,
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.
AB 2414 requires the District's board, 30 days after the
expansion of the District, 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. The
Board's resolution must be effective on the date of, and subject
to any conditions specified in the resolution.
AB 2414 requires the Board to appoint two additional Board
members that are registered voters and residents of the
territory annexed pursuant to this bill.
AB 2414 specifies the manner in which the new board members'
term must be staggered and requires a vacancy to be filled
pursuant to existing law which provides an appointment process
for the Board.
AB 2414 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.
AB 2414 exempts the expansion of the District from the
Cortese-Knox-Hertzberg Local Government Reorganization Act,
except as specified in this bill. The bill provides that the
Act applies to any other change of organization or
reorganization, following the reorganization of the District
pursuant to this bill.
State Revenue Impact
No estimate.
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Comments
1. Purpose of the bill . AB 2414 responds to significant
barriers that impede Eastern Coachella Valley residents' access
to health care providers and services. 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
these 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. Expanding
Desert Healthcare District will help to address the persistent
needs in these underserved communities.
2. LAFCO and local control . State law makes LAFCOs responsible
for encouraging orderly formation and development of local
agencies based on local conditions and circumstances. The local
officials who sit on the Riverside County LAFCO, not 120
legislators from throughout California, are in the best position
to evaluate the local conditions and circumstances that should
determine the governance of the Desert Healthcare District.
Some complex issues surrounding the District's expansion, such
as what revenues will be available to pay for services in the
expanded territory, are left unanswered by AB 2414. The bill
requires that the vote to expand the District must also seek
voter approval of "any necessary funding source," but does not
specify what local entity will determine whether a funding
source is "necessary." Mandating that voters should decide
whether to approve the District's expansion without ensuring
that adequate revenues will be available could result in voters
becoming disillusioned if the expanded District lacks the
resources to fulfill public needs and expectations. Having a
public discussion among local stakeholders about these complex
issues is one of the many advantages of the LAFCO reorganization
process. The Committee may wish to consider amending AB 2414 to
require that LAFCO must approve a proposed revenue source to
support the District's expansion.
3. Precedent . AB 2414 is one of several bills that the
Legislature has considered in recent years that limit the
discretion and authority that state law generally grant to
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LAFCOs over boundary changes and reorganizations. For example,
AB 1232 (Huffman, 2010) allowed for the consolidation of the
Sewerage Agency of Southern Marin and its member districts,
after notice and hearing, but without protest hearings, AB 2453
(Achadjian, 2014) established a special process for forming the
Paso Robles Water District, and AB 3 (Williams, 2015) created a
special process for forming the Isla Vista Community Services
District. Continuing to enact special legislation circumventing
the LAFCO process for individual local government boundary
changes and reorganizations may set a precedent that invites
regular legislative involvement in all manner of disputes over
local service delivery and boundary issues.
4. Expansion ? Like several other local healthcare districts
throughout California, the Desert Healthcare District no longer
owns or operates a hospital and does not provide any direct
health care services to its residents. Instead, the District
relies largely on property tax revenues to make grants to
support health care-related activities. According to its most
recent audited financial report, the District spent $4.2 million
- or 55% of its annual revenues - on grants while spending $2.7
million - or 35% of its annual revenues - on administrative
costs. In the past two years, the District has faced criticism
for making grants to a foundation that allegedly spent some of
the funds on programs that benefitted communities outside of the
District's boundaries. The District has also experienced some
recent governance issues, including being sued by one of its own
board members and subsequently having its chief executive
officer resign. Expanding a healthcare district that no longer
performs its original functions and is the focus of questions
about its governance and spending decisions may not be the best
way to address the undeniable and important health care needs of
communities in the Eastern Coachella Valley.
5. Mandate . The California Constitution requires the state to
reimburse local governments for the costs of new or expanded
state mandated local programs. Because AB 2414 imposes
additional duties on Riverside County officials, Legislative
Counsel says that it imposes a new state mandate. AB 2414
requires the state to reimburse local agencies if the Commission
on State Mandates determines that the bill imposes a
reimbursable mandate.
6. Special legislation . The California Constitution prohibits
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special legislation when a general law can apply (Article IV,
§16). AB2414 contains findings and declarations explaining the
need for legislation that applies only to the Desert Health Care
District.
Assembly Actions
Assembly Local Government Committee: 7-1
Assembly Appropriations Committee:15-5
Assembly Floor: 50-25
Support and
Opposition (6/16/16)
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 : California Association of Local Agency Formation
Commissions; Riverside County Local Agency Formation Commission.
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