BILL ANALYSIS
SB 198
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Date of Hearing: June 17, 2009
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Anna Marie Caballero, Chair
SB 198 (Cogdill) - As Amended: April 29, 2009
SENATE VOTE : 38-0
SUBJECT : Health care districts: John C. Fremont Health Care
District.
SUMMARY : Extends the repayment period for local health care
districts' lines of credit from five years to 20 years provided
that the line of credit is established on or after January 1,
2010, for the sole purpose of consolidating past debt.
Specifically, this bill :
1)Extends the repayment period for districts' lines of credit
from five years to 20 years provided that the line of credit
is:
a) Established on or after January 1, 2010; and
b) Established for the sole purpose of consolidating debts
incurred by a district prior to January 1, 2010.
2)Imposes a $2 million limit on the total amount of debt a
district can have outstanding at any one time under the line
of credit.
EXISTING LAW :
1)Provides for the organization, incorporation and management of
ongoing operations of health care districts.
2)Authorizes a district, with a 4/5 vote of the district's
board, to issue securitized limited obligation notes (SLONs)
and borrow up to $2 million to be paid back from designated
revenues, over 10 years.
3)Authorizes districts to enter into a secured line of credit
with a commercial lender, as specified, and requires any money
borrowed under this line of credit to be repaid within five
years from each separate borrowing or draw.
SB 198
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4)Allows a district, when authorized by a resolution adopted by
a majority of the board
of directors, to issue negotiable promissory notes, which are
debts that are not backed by a guaranteed source of revenue,
to acquire funds for any district purposes, if the notes are
repaid within ten years, and the aggregate value of a
district's notes outstanding at any one time does not exceed
85% of all estimated income and revenue for the current fiscal
year.
FISCAL EFFECT : None
COMMENTS :
1)Today in California there are 72 health care districts around
the state and 45 of those districts still operate hospitals.
Many of those hospitals serve rural communities. Any
additional funding or ability to obtain credit may enable a
hospital or a health care district to survive through tough
times and continue to serve communities that would otherwise
have no easy access to health services.
2)The John C. Fremont Health Care District (District), the
sponsor of this measure, operates a hospital, skilled nursing
facility, hospice, and three clinics that provide vital
medical services in Mariposa County. District officials want
to reduce the District's annual debt load by consolidating and
refinancing its current debts into a long-term line of credit.
3)Health care districts confront a rapidly changing and
competitive marketplace. In meeting these substantial
challenges, the districts need a variety of financing tools to
maintain their fiscal well-being. By allowing health care
districts to consolidate up to $2 million in debt into a
credit line that can be repaid over 20 years, SB 198 enacts a
narrow expansion of health care districts' existing borrowing
powers. Using a 20-year line of credit, the John C. Fremont
Health Care District will be able to lower its annual debt
load, which will make more funds available to pay for the
vital medical services that the District provides to residents
and visitors in Mariposa County.
SB 198
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REGISTERED SUPPORT / OPPOSITION :
Support
John C. Fremont Heath Care District [SPONSOR]
Association of California Healthcare Districts
Opposition
None on file
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958