THIRD READING  

Bill No: AB 1095

Author: Eduardo Garcia (D)

Amended: 4/8/19 in Assembly

Vote: 21

SENATE GOVERNANCE & FIN. COMMITTEE: 5-0, 6/19/19

AYES: McGuire, Beall, Hertzberg, Hurtado, Wiener

NO VOTE RECORDED: Moorlach, Nielsen

ASSEMBLY FLOOR: 76-0, 5/9/19 (Consent) - See last page for vote

SUBJECT: Desert Healthcare District

SOURCE: Author

DIGEST:

This bill alters the terms of office for Desert Healthcare District (District) board members that the District board appointed when the District expanded to permit them to participate in upcoming elections.

ANALYSIS:

Existing law:

1. Establishes an annexation process to expand the District’s boundaries that exempts it from state statutes that generally govern district annexations, and provides a new district governance structure if such an annexation took place (AB 2414, Eduardo Garcia, Chapter 416, Statutes of 2016).
2. Requires, specifically, the District:
   1. Adopt a resolution increasing the number of board members from five to seven.
   2. Appoint the two new members.
   3. Designate one appointed member by lot to leave office when a successor takes office and one to leave office two years thereafter.
   4. Divide its newly expanded boundaries into seven voting districts and elect board members by these districts to four-year terms beginning with the first district election after January 1, 2020.

This bill:

1. Deletes existing law requiring one of two new District board appointees to leave office when a successor takes office, as specified, and one appointee to leave office two years thereafter.
2. Requires, instead, one of the two new District board appointees to have an initial term of office from the date of appointment until the last Friday in December after the general district election that occurs in 2020, and one to have an initial term of office from the date of appointment until the last Friday in December after the general district election that occurs in 2022.

Background

Desert Healthcare District. The District was created in 1948 to provide healthcare services to residents in the Coachella Valley within a 457 square mile area. The District built and began operating Desert Hospital, which is now known as Desert Regional Medical Center. Since 1986, the District's board had leased hospital operations to medical facility providers. The District no longer owns or operates its own hospital. The District has adopted a grant program to invest in non-profits and public agencies whose activities and programs improve the health and wellbeing of District residents.

District voters approved the District’s expansion in November 2018. As a result, the District’s board appointed two new board members on January 15, 2019. The District is currently going through the process of dividing its newly expanded boundaries in preparation of its first scheduled election with the new boundaries in 2020 where voters will elect four board members. Voters will elect the remaining three in 2022. One of two appointed members will have to vacate their seat in the first election and the other in the second election.

Comments

1. Purpose of this bill. According to the author, “The current law mandated the board to designate one appointee for an initial term of office for two years and the other appointee to have an initial term of office of four years. It additionally prohibited said appointees from seeking election subsequent to the conclusion of their respective terms. This measure seeks to rectify the phrasing of that provision and allow the appointees the ability to seek election following their appointment.”
2. Moving forward. The reason the District sought to expand was to cover the Eastern Coachella Valley, which is a historically underserved community with limited access to health care services. While the District appears to have followed the process laid out in AB 2414, the District has experienced some recent governance issues; including lawsuits brought by one of its own board members, and the subsequent resignation of its chief executive officer. According to its most recent audited financial report, the District spent 39% of its annual revenues on administrative costs in the last fiscal year and operated at a loss. In the past few years, the District has faced criticism for making grants to a foundation that allegedly spent some of the funds on programs that benefitted communities outside of the District’s boundaries. Some of the grants that the board allegedly spent outside of the initial district boundaries served the underserved Eastern Coachella Valley. The two new board members hail from the newly expanded portion of the District and do not appear to have been present for some of the District’s governance and fiscal challenges.

FISCAL EFFECT: Appropriation: No Fiscal Com.: No Local: No

SUPPORT: (Verified 6/26/19)

City of Indian Wells

OPPOSITION: (Verified 6/26/19)

None received

ASSEMBLY FLOOR: 76-0, 5/9/19

AYES: Aguiar-Curry, Bauer-Kahan, Berman, Bigelow, Bloom, Boerner Horvath, Bonta, Brough, Burke, Calderon, Carrillo, Cervantes, Chau, Chiu, Choi, Chu, Cooley, Cooper, Cunningham, Daly, Diep, Eggman, Flora, Fong, Frazier, Friedman, Gabriel, Gallagher, Cristina Garcia, Eduardo Garcia, Gipson, Gloria, Gonzalez, Gray, Grayson, Holden, Irwin, Jones-Sawyer, Kalra, Kamlager-Dove, Kiley, Lackey, Levine, Limón, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Muratsuchi, Nazarian, Obernolte, O'Donnell, Patterson, Petrie-Norris, Quirk, Quirk-Silva, Ramos, Reyes, Luz Rivas, Robert Rivas, Rodriguez, Blanca Rubio, Salas, Santiago, Smith, Mark Stone, Ting, Waldron, Weber, Wicks, Wood, Rendon

NO VOTE RECORDED: Arambula, Chen, Dahle, Voepel

Prepared by: Jonathan Peterson / GOV. & F. / (916) 651-4119

6/26/19 15:44:15

**** END ****

SENATE COMMITTEE ON GOVERNANCE AND FINANCE

Senator Mike McGuire, Chair

2019 - 2020 Regular

Desert Healthcare District

Alters the terms of office for Desert Healthcare District board members that the district board appointed when the district expanded to permit them to participate in upcoming elections.

Background

Desert Healthcare District. The Desert Healthcare District was created in 1948 to provide healthcare services to residents in the Coachella Valley within a 457 square mile area that includes Palm Springs, Desert Hot Springs, Cathedral City, Thousand Palms, Rancho Mirage, Mountain Center, San Gorgonio, and the area of Palm Desert west of Cook Street. The District built and began operating Desert Hospital, which is now known as Desert Regional Medical Center. Since 1986, the District's Board had leased hospital operations to medical facility providers. In 1997, the Board voted to lease the hospital to Tenet Health Systems for a 30-year period. The District continues to own the lease and other assets, including the Las Palmas Medical Plaza, while Tenet runs the operations of the 387-bed acute care hospital. The District no longer owns or operates its own hospital.

With an operating budget of roughly $9 million, the District allocates more than $3 million each year on grants and other programs. The District has adopted a grant program to invest in non-profits and public agencies whose activities and programs improve the health and wellbeing of District residents. The District is funded by property taxes paid by the residents of the District, revenue for working capital for the hospital in the event the lease with Tenet is terminated, and rental income from the medical plaza. A five-member Board elected at-large governed the district until 2016 when the Legislature enacted AB 2414 (Eduardo Garcia, 2016).

AB 2414 established an annexation process to expand the District’s boundaries that exempts it from some statutes that generally govern district annexations, and provided a new district governance structure if such an annexation took place. Specifically, the bill required the District to do the following if voters approved an annexation:

• Adopt a resolution increasing the number of board members from five to seven.
• Appoint the two new members.
• Designate one appointed member by lot to leave office when a successor takes office and one to leave office two years thereafter.
• Divide its newly expanded boundaries into seven voting districts and elect board members by these districts to four-year terms beginning with the first district election after January 1, 2020.

District voters approved the District’s expansion in November 2018. As a result, the district’s board appointed two new board members on January 15, 2019. The district is currently going through the process of dividing its newly expanded boundaries in preparation of its first scheduled election with the new boundaries in 2020 where voters will elect four board members. Voters will elect the remaining three in 2022. One of two appointed members will have to vacate their seat in the first election and the other in the second election.

The author wants to allow these newly appointed members to run for reelection.

Proposed Law

Assembly Bill 1095 removes the existing requirement that one of the two newly appointed board members has to leave office after the 2020 election, and for the other appointee to leave office after the 2022 election.

AB 1095 establishes the initial term of office for one of the appointed members as starting from the date of appointment to the last Friday in December after the 2020 district election. Additionally, it establishes the initial term of office for the second appointed board member from the date of appointment until the last Friday in December after the 2022 district election. The bill removes the language requiring these appointed members to leave office after the initial term of office.

State Revenue Impact

No estimate.

Comments

1. Purpose of the bill. According to the author, “The current law mandated the board to designate one appointee for an initial term of office for two years and the other appointee to have an initial term of office of four years. It additionally prohibited said appointees from seeking election subsequent to the conclusion of their respective terms. This measure seeks to rectify the phrasing of that provision and allow the appointees the ability to seek election following their appointment.”

2. Governance challenges. AB 2414, which allowed the expansion of the District, was not enacted without controversy. The bill allowed the district to circumvent the typical process for individual local government boundary changes governed by Local Agency Formation Commissions. While the district appears to have followed the process laid out in AB 2414, it is seeking to allow the newly appointed members to run for reelection, which AB 2414 specifically did not allow. The District has experienced some recent governance issues; including lawsuits brought by one of its own board members, and the subsequent resignation of its chief executive officer (CEO). In June 2018, the new board voted not to renew the contract of the replacement CEO, and the Chief Financial Officer is serving as the temporary CEO until the Board finds a replacement. The Committee may wish to consider whether the board has sufficiently addressed these governance challenges before making further changes to the board.

3. Financial challenges. Like several other local healthcare districts throughout California, the Desert Healthcare District no longer owns or operates a hospital and does not provide any direct health care services to its residents. Instead, the District relies largely on property tax revenues to make grants to support health care-related activities. According to its most recent audited financial report, the District spent $5.1 million – or 65% of its annual revenues – on grants while spending $3.1 million – or 39% of its annual revenues – on administrative costs in the last fiscal year. However, the District only generated $7.8 million in revenue and operated at a loss. In the past few years, the District has faced criticism for making grants to a foundation that allegedly spent some of the funds on programs that benefitted communities outside of the District’s boundaries. The Committee may wish to consider whether further changes to the board are appropriate given the recent financial challenges the District has faced.

4. Moving forward. The reason the District sought to expand was to cover the Eastern Coachella Valley, which is a historically underserved community with limited access to health care services. Some of the grants that the Board allegedly spent outside of the initial district boundaries served this community. The two new board members, who hail from the newly expanded portion of the district and do not appear to have been present for some of the district’s governance and fiscal challenges, bring a different voice to the existing board. In spring 2019, the Board President resigned because she moved out of the district. The Board appointed a third member to take her seat. Unlike the two members added because of the expansion, this third member can run for election. Starting in 2020, the District will elect members based on newly created district boundaries. While the newly expanded areas will have representation on the Board regardless of whether or not these existing members can run for reelection, the Committee may wish to consider whether these two new board members should have the opportunity to make their case to the voters.

5. Special legislation. Section 16 of Article 4 of the California Constitution prohibits special legislation when a general law can apply. AB 1095 contains findings and declarations explaining the need for legislation that applies only to the Desert Healthcare District.

Assembly Actions

Assembly Local Government Committee: 8-0

Assembly Floor: 76-0

Support and Opposition

(6/14/19)

Support: City of Indian Wells.

Opposition: Unknown.

-- END --

Date of Hearing: May 1, 2019

ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT

Cecilia Aguiar-Curry, Chair

ABPCA Bill Id:AB 1095 (

Author:Eduardo Garcia) – As Amended Ver:April 8, 2019

SUBJECT: Desert Healthcare District.

SUMMARY: Alters the terms of office for Desert Healthcare District (District) board members who were appointed when the district expanded, in order to permit them to participate in subsequent elections. Specifically, this bill:

1. Deletes existing law requiring one of two new District board appointees to leave office when a successor takes office, as specified, and one appointee to leave office two years thereafter.
2. Requires, instead, one of the two new District board appointees to have an initial term of office from the date of appointment until the last Friday in December after the general district election that occurs in 2020, and one to have an initial term of office from the date of appointment until the last Friday in December after the general district election that occurs in 2022.

FISCAL EFFECT: None

COMMENTS:

1. Background. AB 2414 (Eduardo Garcia), Chapter 416, Statutes of 2016, established an annexation process for the District to include the East Coachella Valley region. Among its provisions, AB 2414 required the District to follow certain procedures with regard to new board members if the annexation was approved by voters. The District’s Board of Directors was to adopt a resolution increasing the number of board members from five to seven, appoint the two new members, and designate by lot one appointed member to leave office when a successor takes office and one to leave office two years thereafter.

In addition, AB 2414 required the District to divide its newly-expanded boundaries into seven voting districts and elect board members by these districts beginning with the first district election after January 1, 2020. The bill further provided that board members in office as of January 1, 2020, are to be elected by the new voting districts at the expiration of their terms of office and thereafter.

Voters approved the District’s expansion in November of last year. Consequently, the Board complied with the provisions of AB 2414 and appointed two new board members on January 15 of this year. In addition, the District began the redistricting process mandated by
AB 2414 and expects to complete that process by the end of this year. District board members are presently elected to four-year terms on a staggered schedule every two years. The District reports that four board members will be elected using the newly-drawn districts in 2020, and the remaining three will be elected using the newly-drawn districts in 2022. Elected board members take office in December following the November election.

Because the new board members were appointed pursuant to the provisions of AB 2414, they must leave office after their designated time periods, whether they would like to run for election or not. This bill is intended to allow these newly-appointed board members to run for office once their initial appointed terms expire.

1. Bill Summary and Author's Statement. According to the author, “The current law mandated the board to designate one appointee for an initial term of office for two years and the other appointee to have an initial term of office of four years. It additionally prohibited said appointees from seeking election subsequent to the conclusion of their respective terms. This measure seeks to rectify the phrasing of that provision and allow the appointees the ability to seek election following their appointment.”

This bill deletes existing law requiring one of the two new board appointees to leave office when a successor takes office, and one appointee to leave office two years thereafter. Instead, this bill clarifies that one of the two new board appointees shall have an initial term of office from the date of appointment until the last Friday in December after the general district election that occurs in 2020, and one to have an initial term of office from the date of appointment until the last Friday in December after the general district election that occurs in 2022.

This bill is sponsored by the author.

1. Arguments in Support. None on file.
2. Arguments in Opposition. None on file.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file

Opposition

None on file

Analysis Prepared by: Angela Mapp / L. GOV. / (916) 319-3958