BILL ANALYSIS �
SB 134
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Date of Hearing: June 29, 2011
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
SB 134 (Corbett) - As Amended: March 31, 2011
SENATE VOTE : 23-14
SUBJECT : Health care districts: transfers of assets.
SUMMARY : Requires healthcare districts to appraise the fair
market value of assets that they transfer to other corporations
for less than fair market value. Specifically, this bill :
1)Provides that, when a health care district (district)
transfers more than 50% of the district's assets at less than
fair market value to one or more nonprofit corporations, the
transfer is deemed to be for the benefit of the communities
served by the district only if the transfer agreement includes
the appraised fair market value of any asset transferred.
2)Requires that the appraised fair market value must come from
an independent consultant with expertise in methods of
appraisal and valuation and must be in accordance with
applicable governmental and industry standards for appraisal
and valuation.
3)Requires that the appraisal is performed within the six months
preceding the date on which the district approves the transfer
agreement.
4)Requires that a resolution to submit a proposed asset transfer
to a health care district's voters must identify the asset
proposed to be transferred, its appraised fair market value,
and the amount of consideration that the district is to
receive in exchange for the transfer.
EXISTING LAW :
1)Authorizes a district to transfer its assets, for the benefit
of the communities it serves, to one or more nonprofit
corporations at less than fair market value.
2)Specifies, for a transfer of 50% or more of a district's
assets to be deemed to benefit a district's communities, a
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district must:
a) Fully discuss the transfer agreement in at least five
properly noticed public meetings before the district
board's decision to transfer the assets;
b) Provide, in the transfer agreement, that the district
must approve all initial board members of the nonprofit
corporation and any subsequent board members as may be
specified in the transfer agreement;
c) Provide, in the transfer agreement, that specified
assets are to be transferred back to the district upon
termination of the transfer agreement;
d) Commit the nonprofit corporation, in the transfer
agreement, to operate and maintain the district's health
care facilities and its assets for the benefit of the
communities served by the district; and,
e) Require, in the transfer agreement, that any funds a
corporation receives from the district be used only for
specified activities that would further a valid public
purpose if undertaken directly by the district.
FISCAL EFFECT : None
COMMENTS :
1)California's 80 local health care districts are governed by
directly elected boards of directors. As hospitals, they face
market pressures to compete with other health care providers.
As local governments, they must follow the Ralph M. Brown Act,
the Public Records Act, the Political Reform Act, the public
contracting laws, and other statutory restrictions.
2)Responding to changes in health care delivery, public
hospitals explore economic and organizational alternatives,
including leasing or selling their assets to nonprofit
corporations or even to for-profit companies. If a local
health care district wants to transfer 50% or more of its
assets to any corporation, the transfer needs majority-voter
approval.
SB 134
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3)The Eden Township Healthcare District formed in 1948 to serve
the Alameda County communities of Castro Valley, Hayward, San
Leandro, and San Lorenzo. In 1954, the District opened Eden
Medical Center (EMC) hospital. In 1997, the District's voters
approved a merger agreement between the District and Sutter
Health. Under the 1997 agreement, the District sold EMC to
Sutter Health. In 2004, the District purchased San Leandro
Hospital and leased it to EMC to operate. In 2008, the
District entered into an agreement with Sutter Health to
replace EMC with a newly-constructed hospital that would
comply with the state's seismic safety law. The 2008
agreement also gave Sutter the option to purchase San Leandro
Hospital. The purchase option allowed Sutter to deduct
specified losses and capital expenditures from the hospital's
net book value and, if the deductions exceeded the net book
value, allowed Sutter to exercise its purchase option with no
balance due. The District and Sutter are currently litigating
the terms of the 2008 agreement.
4)In response to concerns about some recent transfers of assets
between health care districts and private corporations, SB 134
makes more information available to help district officials
and voters evaluate health care districts' proposed transfers
of assets to private corporations.
5)Support arguments: Supporters could argue that SB 134 gives
the public important information about the value of public
assets that a health care district prepares to sell or
transfer to corporations.
Opposition arguments: Opposition could argue that six months
in today's real estate market is a long time and the valuation
of the fair market value could change significantly in that
time so a shorter time period should occur between the
valuation and the transfer.
6)This bill was heard in the Health Committee on June 14, 2011,
and passed with a 13-5 vote.
REGISTERED SUPPORT / OPPOSITION :
Support
California Nurses Association
SB 134
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Opposition
None on file
Analysis Prepared by : Katie Kolitsos / L. GOV. / (916)
319-3958