BILL ANALYSIS
SENATE LOCAL GOVERNMENT COMMITTEE
Senator Dave Cox, Chair
BILL NO: SB 1458 HEARING: 4/7/10
AUTHOR: Cogdill FISCAL: No
VERSION: 2/19/10 CONSULTANT:
Weinberger
HEALTHCARE DISTRICTS' BORROWING (URGENCY)
Background and Existing Law
California's 80 local health care districts find themselves
pulled in two different directions. As operators of
hospitals, they must survive by competing with
profit-oriented companies. As public agencies, they must
adhere to the state laws which require specific procedures
and which impose limits on their activities. The districts
must be aggressive in securing financing.
A local health care district may enter into a line of
credit with a commercial lender that is secured by the
accounts receivable or other intangible assets of the
district, including anticipated tax revenues, and
thereafter borrow funds against the line of credit for any
district purpose (SB 776, Runner, 2005). The district must
repay the money borrowed within five years from each
separate borrowing or draw upon the line of credit. A
district may enter into a new and separate line of credit
to repay a previous line of credit.
SB 198 (Cogdill, 2009) extended 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, and
Established for the sole purpose of consolidating
debts incurred by a district prior to January 1, 2010.
The Cogdill bill imposed a $2 million limit on the total
amount of debt a district can have outstanding at any one
time under the line of credit.
Some hospital district officials are concerned that the
language in last year's Cogdill bill suggests that a
district can borrow no more than $2 million total, under
all of its lines of credit. They want the Legislature to
clarify that the $2 million limit applies only to a 20-year
line of credit for debt consolidation.
SB 1458 -- 2/19/10 -- Page 2
Proposed Law
Senate Bill 1458 repeals and reenacts nearly identical
language into a paragraph that is separate from statutory
provisions authorizing health care districts to enter into
five year lines of credit. The new paragraph authorizes a
health care district to enter into a line of credit with a
commercial lender for the sole purpose of consolidating
debt incurred before January 1, 2010. Debt incurred under
that paragraph must be repaid within 20 years of the
consolidation borrowing. The total amount of debt that a
district may have outstanding at any one time under that
paragraph may not exceed $2 million.
Comment
Let's be clear . 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. SB
1458 clarifies the language enacted by last year's SB 198.
By clarifying this provision, SB 1458 helps health care
districts to refinance their current debts, thereby
reducing their annual debt loads and keeping more of their
funds available to pay for vital medical services.
Support and Opposition (4/1/10)
Support : Unknown.
Opposition : Unknown.
SB 1458 -- 2/19/10 -- Page 3