BILL ANALYSIS
SB 1458
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Date of Hearing: June 16, 2010
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
SB 1458 (Cogdill) - As Introduced: February 19, 2010
SENATE VOTE : 35-0
SUBJECT : Hospital districts.
SUMMARY : Clarifies provisions of existing law that authorize a
health care district (district) to enter into a line of credit
with a commercial lender for the sole purpose of consolidating
debt incurred before January 1, 2010. Specifically, this bill :
1)Clarifies provisions of existing law that authorize a district
to enter into a line of credit with a commercial lender for
the sole purpose of consolidating debt incurred before January
1, 2010.
2)Specifies that debt incurred for the consolidation must be
repaid within 20 years of the consolidation borrowing.
3)Specifies that the total amount of debt that a district may
have outstanding at any one time for the consolidation may not
exceed $2 million.
4)Contains an urgency clause.
EXISTING LAW :
1)Provides for the organization, incorporation and management of
ongoing operations
of districts.
2)Allows a district to issue a line of credit for up to 20 years
provided that the line of credit is established on or after
January 1, 2010, for the sole purpose of consolidating debt
created prior to January 1, 2010.
3)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 1458
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4)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.
5)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 80 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)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.
3)Last year, the Legislature passed SB 198 (Cogdill), Chapter
37, Statutes of 2009, which allows a district to issue a line
of credit for up to 20 years provided that the line of credit
is established on or after January 1, 2010, for the sole
purpose of consolidating debt created prior to January 1,
2010. Some district officials are concerned that the language
in SB 198 suggests that a district can borrow no more than $2
million total, under all of its lines of credit. Districts
SB 1458
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are requesting that the language be amended to clarify that
the $2 million limit applies only to a 20-year line of credit
for debt consolidation.
4)Support Arguments : This measure will clarify the process for
allowing district officials to reduce a district's annual debt
load by consolidating and refinancing current debts into a
long-term line of credit.
Opposition Arguments : None at this time.
REGISTERED SUPPORT / OPPOSITION :
Support
Association of CA Healthcare Districts
Tri-City Medical Center
Opposition
None on file
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958