BILL ANALYSIS Ó
AB 2737
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Date of Hearing: May 18, 2016
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Lorena Gonzalez, Chair
AB
2737 (Bonta) - As Amended April 11, 2016
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|Policy |Local Government |Vote:|7 - 0 |
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Urgency: No State Mandated Local Program: YesReimbursable:
Yes
SUMMARY:
This bill requires a "nonprovider healthcare district" to spend
at least 80% of its annual budget on community grants awarded to
organizations that provide direct health services, and prohibits
more than 20% of its annual budget to be spent on administrative
expenses. The bill contains parameters such that it only applies
to the Eden Township Healthcare District (District) in Alameda
County.
FISCAL EFFECT:
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Unknown costs to the District, likely minor, to comply with the
administrative requirements in the bill. Any costs are
potentially reimbursable, should the District choose to submit a
claim to the Commission on State Mandates and the Commission
determines the costs are reimbursable.
COMMENTS:
1)Purpose. According to the author, "The Eden Township
Healthcare District was established to serve the health needs
of Castro Valley, San Leandro, San Lorenzo, Hayward and other
nearby communities. At one point, Eden owned and operated a
hospital and provided direct healthcare services to the
community. Currently, Eden no longer owns or operates a
hospital and does not provide any direct health services to
the public. Aside from managing buildings they own, Eden
primarily serves as a grant making entity with the purpose of
providing grants to community non-profits to provide
healthcare services to the public. In 2013 and 2014, Eden
spent almost twice as much on salaries and benefits for its
three employees compared to what it gave out in community
grants for healthcare services. The basic foundation for a
healthcare district's existence is to provide healthcare
services to the community it serves. When that basic premise
is not being followed, rules need to be set in place for the
benefit of the community."
2)Background. The Eden Township Healthcare District was
established by the voters in 1948 to finance construction of
Eden Hospital, which opened in 1954. In 1998, the District
transferred all of the net operating assets and operations of
the hospital to Sutter Health. In 2004, the District
purchased San Leandro Hospital and leased it to Sutter Health.
In order to comply with seismic safety laws, the District
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entered into an agreement with Sutter Health to replace Eden
Medical Center. The 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.
Currently, the District provides grant funding to
health-related organizations through a Community Health Fund
and owns three office buildings, where it leases office space
to healthcare providers. The District does not receive any
property tax, special tax, or benefit assessments. The main
source of revenue is rental income. The District consists of
130 square miles and includes the City of San Leandro, most of
the City of Hayward, and the unincorporated areas of Castro
Valley and San Lorenzo, and is governed by a five-member board
of directors elected to four-year terms.
3)Amendment Needed. The District has committed to paying damages
claimed by Sutter Health, which was sued by the District. The
District currently owes $17 million on the court judgement and
pays $2 million annually. This payment does not appear to fit
into either side of the 80/20 requirement in the bill. It is
not clear that the District can comply with the bill as
written. Staff notes that failure to comply with this bill is
one of the criteria set forth in AB 2471 (Quirk), currently in
the Senate, necessary for dissolution of the District.
The Committee may wish to consider amending the bill to
clarify how the court judgment payment fits into the 80/20
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requirement.
4)Arguments in Support. According to the City of San Leandro,
"?one of the top priorities for the City of San Leandro is a
legislative solution to help address the financial
sustainability of San Leandro Hospital. With the resolution
of the six-year lawsuit between Eden Township Healthcare
District and Sutter regarding San Leandro Hospital, it is
imperative to activate Eden's obligation to the San Leandro
community and create a sustainable environment for the
hospital. The basic foundation for a healthcare district's
existence is to provide healthcare services. When a
healthcare district isn't following that basic premise, rules
need to be put in place. Fortunately, AB 2737 serves to
create an appropriate set of rules to address this issue."
5)Arguments in Opposition. According to the Association of
California Healthcare Districts, "While we can appreciate that
there may be local concerns about the level, type, and cost of
services provided, we assert that the best approach to
addressing those concerns is through engagement with the duly
elected trustees of the district. Statewide measures like AB
2737 have the effect of bypassing an important local discourse
and are likely to impose unintended consequences on other
local agencies not involved in the controversy."
6)Related Legislation.
a) AB 2471 (Quirk), awaiting referral in the Senate, would
require LAFCO to order the dissolution of the Eden Township
Healthcare District without an election, if the district
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meets specified criteria.
b) AB 72 (Bonta) of 2015, on the Senate Inactive File,
would have authorized the District, until January, 1 2026,
to impose special taxes within the District, subject to the
approval of two-thirds of the District's voters.
Analysis Prepared by:Jennifer Swenson / APPR. / (916)
319-2081