BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
Senator Dave Cox, Chair
BILL NO: AB 2731 HEARING: 6/9/10
AUTHOR: Arambula FISCAL: No
VERSION: 4/8/10 CONSULTANT:
Weinberger
HEALTH CARE DISTRICTS' BORROWING
Background and Existing Law
California's 80 local health care districts are governed by
directly elected boards of directors. As hospitals, they
face market pressures to compete with other health care
providers. As local governments, they must follow the
Brown Act, the Public Records Act, the Political Reform
Act, the public contracting laws, and other statutory
restrictions.
Health care districts can borrow money, issue debt, and use
their assets as collateral for federal mortgage insurance
loans, federal loans, or federally insured loans issued
under the National Housing Act for construction,
reconstruction, or the initial equipping of facilities.
Districts cannot use their tax revenues to pay for the
principal, interest, insurance premiums, inspection fees,
and other financing costs.
The United States Department of Agriculture (USDA) offers
financial help for rural health care facilities and
essential equipment through the Community Facilities
program authorized by the federal Consolidated Farm and
Rural Development Act, commonly known as the Con Act. The
USDA's Community Facilities program offers financing as
loans, both direct and guaranteed, and grants to eligible
participants in rural areas.
Although health care districts can secure loans issued
under the federal National Housing Act (SB 776, Runner,
2005), state law does not mention loans or grants issued
pursuant to the federal Con Act. Health care district
officials want to clarify their authority to secure those
federal loans.
Proposed Law
AB 2731 -- 4/8/10 -- Page 2
To secure federal loans or grants or guaranteed loans
issued under the federal Consolidated Farm and Rural
Development Act for financing or refinancing the
construction of new health facilities, the expansion,
modernization, renovation, remodeling, or alteration of
existing health facilities, and the initial equipping of
those health facilities, Assembly Bill 2731 authorizes a
health care district's board of directors to either:
Borrow money or issue bonds, in addition to other
financing methods, or
Execute, in favor of the United States, appropriate
federal agency, or federally designated mortgagor,
first mortgages, first deeds of trust, or other
necessary security interests as the federal government
may reasonably require with respect to a health
facility project property as security for that
insurance.
Comment
Vital financing for vital facilities . Health care
districts provide vital health services to residents in
many rural communities. Faced with a rapidly changing and
competitive marketplace, state budget cuts, and the recent
recession, health care districts confront severe fiscal
challenges. As a result, districts need a variety of
financing tools to remain solvent. By authorizing health
care districts to use federal financing available through
the USDA's Community Facilities program, AB 2731 helps
rural health care districts maintain financial
sustainability, thereby ensuring that residents in rural
communities retain access to much-needed medical care.
Assembly Actions
Assembly Health Committee:19-0
Assembly Floor: 76-0
Support and Opposition (6/3/10)
Support : Association of California Healthcare Districts,
California Hospital Association, California State Rural
AB 2731 -- 4/8/10 -- Page 3
Health Association.
Opposition : Unknown.