BILL ANALYSIS
------------------------------------------------------------
|SENATE RULES COMMITTEE | SB 1458|
|Office of Senate Floor Analyses | |
|1020 N Street, Suite 524 | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
------------------------------------------------------------
CONSENT
Bill No: SB 1458
Author: Cogdill (R)
Amended: As introduced
Vote: 27 - Urgency
SENATE LOCAL GOVERNMENT COMMITTEE : 5-0, 4/7/10
AYES: Cox, Aanestad, Kehoe, DeSaulnier, Price
SUBJECT : Hospital districts
SOURCE : Author
DIGEST : This bill repeals and reenacts provisions of
existing law relating to health care districts and
corresponding lines of credit.
ANALYSIS : 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], Chapter 554, Statutes of
CONTINUED
SB 1458
Page
2
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), Chapter 37, Statutes of 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 (1) established on or after January 1,
2010, and (2) 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.
This bill 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.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 4/13/10)
Association of California Healthcare District
Tri-City Healthcare District
SB 1458
Page
3
ARGUMENTS IN SUPPORT : According to the author's office,
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. This bill 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.
AGB:mw 4/14/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
**** END ****