BILL ANALYSIS
SB 198
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SENATE THIRD READING
SB 198 (Cogdill)
As Amended April 29, 2009
Majority vote
SENATE VOTE :38-0
LOCAL GOVERNMENT 7-0
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|Ayes:|Caballero, Knight, | | |
| |Arambula, Davis, Duvall, | | |
| |Krekorian, Skinner | | |
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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 established:
a) On or after January 1, 2010; and,
b) 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.
SB 198
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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.
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 10 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 : 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.
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.
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, this bill enacts a narrow
expansion of health care districts' existing borrowing powers.
Using a 20-year line of credit, the 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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Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958
FN: 0001571