Amended in Assembly April 26, 2016

Amended in Assembly March 28, 2016

Amended in Assembly March 18, 2016

California Legislature—2015–16 Regular Session

Assembly BillNo. 2104


Introduced by Assembly Member Dababneh

February 17, 2016


An act to amend Section 15432begin delete ofend deletebegin insert of, and to add and repeal Section 15438.3 of,end insert the Government Code, and to amend Sections 129005, 129010, 129020, 129090, and 129173begin delete ofend deletebegin insert of, and to add and repeal Section 129107 of,end insert the Health and Safety Code, relating to health facilities, and making an appropriation therefor.

LEGISLATIVE COUNSEL’S DIGEST

AB 2104, as amended, Dababneh. California Health Facilities Financing Authority Act: California Health Facility Construction Loan Insurance Law.

The California Health Facilities Financing Authority Act authorizes the California Health Facilities Financing Authority to, among other things, make loans from the continuously appropriated California Health Facilities Financing Authority Fund to participating health institutions, as defined, for financing or refinancing the acquisition, construction, or remodeling of health facilities.

This bill would expand the program to include for-profit skilled nursingbegin delete facilities when at least 60% of their patients are Medi-Cal beneficiariesend deletebegin insert facilitiesend insert by adding those entities to the definition of “participating health institutions.”begin insert The bill would, until January 1, 2024, require the authority to provide funding to skilled nursing facilities in a specified order of priority, including by requiring skilled nursing facilities for which at least 95% of their patients are Medi-Cal beneficiaries to be given first priority.end insert Because this bill would expand the purposes for which a continuously appropriated fund may be used, it would make an appropriation.

Existing law establishes the California Health Facility Construction Loan Insurance Law to provide, without cost to the state, an insurance program for health facility construction, improvement, and expansion loans in order to stimulate the flow of private capital into health facilities construction, improvement, and expansion and in order to rationally meet the need for new, expanded, and modernized public and nonprofit health facilities necessary to protect the health of all the people of this state. Existing law establishes the Health Facility Construction Loan Insurance Fund in the State Treasury, to be continuously appropriated to carry out the provisions and administrative costs of the insurance program. Under existing law, political subdivisions, as defined, and nonprofit corporations are authorized to apply for state insurance of needed construction, improvement, or expansion loans for construction, remodeling, or acquisition of health facilities, as provided, and applicants are required to pay an application fee not to exceed $500, which is deposited into the fund.

This bill would expand the program to include for-profit corporations that operate skilled nursingbegin delete facilities when at least 60% of their patients are Medi-Cal beneficiariesend deletebegin insert facilitiesend insert by, among other things, adding those entities to the definition of “health facilities” and making those entities eligible to apply for the insurance program.begin insert The bill would, until January 1, 2024, require loan insurance to be granted to skilled nursing facilities in a specified order of priority, including by requiring skilled nursing facilities for which at least 95% of their patients are Medi-Cal beneficiaries to be given first priority.end insert Because this bill would add a new source of revenue and expand the purposes for which a continuously appropriated fund may be used, it would make an appropriation.

Vote: majority. Appropriation: yes. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

P2    1

SECTION 1.  

Section 15432 of the Government Code is
2amended to read:

P3    1

15432.  

As used in this part, the following words and terms
2shall have the following meanings, unless the context clearly
3indicates or requires another or different meaning or intent:

4(a) “Act” means the California Health Facilities Financing
5Authority Act.

6(b) “Authority” means the California Health Facilities Financing
7Authority created by this part or any board, body, commission,
8department, or officer succeeding to the principal functions thereof
9or to which the powers conferred upon the authority by this part
10shall be given by law.

11(c) “Cost,” as applied to a project or portion of a project financed
12under this part, means and includes all or any part of the cost of
13construction and acquisition of all lands, structures, real or personal
14property, rights, rights-of-way, franchises, easements, and interests
15acquired or used for a project, the cost of demolishing or removing
16any buildings or structures on land so acquired, including the cost
17of acquiring any lands to which those buildings or structures may
18be moved, the cost of all machinery and equipment, financing
19charges, interest prior to, during, and for a period not to exceed
20the later of one year or one year following completion of
21construction, as determined by the authority, the cost of insurance
22during construction, the cost of funding or financing noncapital
23expenses, reserves for principal and interest and for extensions,
24enlargements, additions, replacements, renovations and
25improvements, the cost of engineering, service contracts,
26reasonable financial and legal services, plans, specifications,
27studies, surveys, estimates, administrative expenses, and other
28expenses of funding or financing, that are necessary or incident to
29determining the feasibility of constructing any project, or that are
30incident to the construction, acquisition, or financing of any project.

31(d) “Health facility” means a facility, place, or building that is
32licensed, accredited, or certified and organized, maintained, and
33operated for the diagnosis, care, prevention, and treatment of
34human illness, or physical, mental, or developmental disability,
35including convalescence and rehabilitation and including care
36during and after pregnancy, or for any one or more of these
37purposes, for one or more persons, and includes, but is not limited
38to, all of the following types:

39(1) A general acute care hospital that is a health facility having
40a duly constituted governing body with overall administrative and
P4    1professional responsibility and an organized medical staff that
2provides 24-hour inpatient care, including the following basic
3services: medical, nursing, surgical, anesthesia, laboratory,
4radiology, pharmacy, and dietary services.

5(2) An acute psychiatric hospital that is a health facility having
6a duly constituted governing body with overall administrative and
7professional responsibility and an organized medical staff that
8provides 24-hour inpatient care for mentally disordered,
9incompetent, or other patients referred to in Division 5
10(commencing with Section 5000) or Division 6 (commencing with
11Section 6000) of the Welfare and Institutions Code, including the
12following basic services: medical, nursing, rehabilitative,
13pharmacy, and dietary services.

14(3) A skilled nursing facility that is a health facility that provides
15the following basic services: skilled nursing care and supportive
16care to patients whose primary need is for availability or skilled
17nursing care on an extended basis.

18(4) An intermediate care facility that is a health facility that
19provides the following basic services: inpatient care to ambulatory
20or semiambulatory patients who havebegin insert aend insert recurring need for skilled
21nursing supervision and need supportive care, but who do not
22require availability or continuous skilled nursing care.

23(5) A special health care facility that is a health facility having
24a duly constituted governing body with overall administrative and
25professional responsibility and an organized medical or dental staff
26that provides inpatient or outpatient, acute or nonacute care,
27including, but not limited to, medical, nursing, rehabilitation,
28dental, or maternity.

29(6) A clinic that is operated by a tax-exempt nonprofit
30corporation that is licensed pursuant to Section 1204 or 1204.1 of
31the Health and Safety Code or a clinic exempt from licensure
32pursuant to subdivision (b) or (c) of Section 1206 of the Health
33and Safety Code.

34(7) An adult day health center that is a facility, as defined under
35subdivision (b) of Section 1570.7 of the Health and Safety Code,
36that provides adult day health care, as defined under subdivision
37(a) of Section 1570.7 of the Health and Safety Code.

38(8) A facility owned or operated by a local jurisdiction for the
39provision of county health services.

P5    1(9) A multilevel facility is an institutional arrangement where
2a residential facility for the elderly is operated as a part of, or in
3conjunction with, an intermediate care facility, a skilled nursing
4facility, or a general acute care hospital. “Elderly,” for the purposes
5of this paragraph, means a person 62 years of age or older.

6(10) A child day care facility operated in conjunction with a
7health facility. A child day care facility is a facility, as defined in
8Section 1596.750 of the Health and Safety Code. For purposes of
9this paragraph, “child” means a minor from birth to 18 years of
10age.

11(11) An intermediate care facility/developmentally disabled
12habilitative that is a health facility, as defined under subdivision
13(e) of Section 1250 of the Health and Safety Code.

14(12) An intermediate care facility/developmentally
15disabled-nursing that is a health facility, as defined under
16subdivision (h) of Section 1250 of the Health and Safety Code.

17(13) A community care facility that is a facility, as defined under
18subdivision (a) of Section 1502 of the Health and Safety Code,
19that provides care, habilitation, rehabilitation, or treatment services
20to developmentally disabled or mentally impaired persons.

21(14) A nonprofit community care facility, as defined in
22subdivision (a) of Section 1502 of the Health and Safety Code,
23other than a facility that, as defined in that subdivision, is a
24residential facility for the elderly, a foster family agency, a foster
25family home, a full service adoption agency, or a noncustodial
26adoption agency.

27(15) A nonprofit accredited community work activity program,
28as specified in subdivision (e) of Section 4851 and Section 4856
29of the Welfare and Institutions Code.

30(16) A community mental health center, as defined in paragraph
31(3) of subdivision (b) of Section 5667 of the Welfare and
32Institutions Code.

33(17) A nonprofit speech and hearing center, as defined in Section
341201.5 of the Health and Safety Code.

35(18) A blood bank, as defined in Section 1600.2 of the Health
36and Safety Code, licensed pursuant to Section 1602.5 of the Health
37and Safety Code, and exempt from federal income taxation
38pursuant to Section 501(c)(3) of the Internal Revenue Code.

39(19) A residential facility for persons with developmental
40disabilities, as defined in Sections 4688.5 and 4688.6 of the
P6    1Welfare and Institutions Code, which includes, but is not limited
2to, a community care facility licensed pursuant to Section 1502 of
3the Health and Safety Code and a family teaching home as defined
4in Section 4689.1 of the Welfare and Institutions Code.

5(20) A nonpublic school that provides educational services in
6conjunction with a health facility, as defined in paragraphs (1) to
7(19), inclusive, that otherwise qualifies for financing pursuant to
8this part, if the nonpublic school is certified pursuant to Sections
956366 and 56366.1 of the Education Code as meeting standards
10relating to the required special education and specified related
11services and facilities for individuals with physical, mental, or
12developmental disabilities.

13“Health facility” includes a clinic that is described in subdivision
14(l) of Section 1206 of the Health and Safety Code.

15“Health facility” includes information systems equipment and
16the following facilities, if the equipment and facility is operated
17in conjunction with or to support the services provided in one or
18more of the facilities specified in paragraphs (1) to (20), inclusive,
19of this subdivision: a laboratory, laundry, a nurses or interns
20residence, housing for staff or employees and their families or
21patients or relatives of patients, a physicians’ facility, an
22administration building, a research facility, a maintenance, storage,
23or utility facility, an information systems facility, all structures or
24facilities related to any of the foregoing facilities or required or
25useful for the operation of a health facility and the necessary and
26usual attendant and related facilities and equipment, and parking
27and supportive service facilities or structures required or useful
28for the orderly conduct of the health facility.

29“Health facility” does not include any institution, place, or
30building used or to be used primarily for sectarian instruction or
31study or as a place for devotional activities or religious worship.

32(e) “Participating health institution” means a city, city and
33county, or county, a district hospital, or a private nonprofit
34corporation or association, or a limited liability company whose
35sole member is a nonprofit corporation or association authorized
36by the laws of this state to provide or operate a health facility or
37a nonprofit corporation that controls or manages, is controlled or
38managed by, is under common control or management with, or is
39affiliated with any of the foregoing, or a for-profit skilled nursing
40begin delete facility when at least 60 percent of its patients are Medi-Cal
P7    1beneficiaries,end delete
begin insert facility,end insert and that, pursuant to this part, undertakes
2the financing or refinancing of the construction or acquisition of
3a project or of working capital as provided in this part.
4“Participating health institution” also includes, for purposes of the
5California Health Facilities Revenue Bonds (UCSF-Stanford Health
6Care) 1998 Series A, the Regents of the University of California.

7(f) “Project” means construction, expansion, remodeling,
8renovation, furnishing, or equipping, or funding, financing, or
9refinancing of a health facility or acquisition of a health facility
10to be financed or refinanced with funds provided in whole or in
11part pursuant to this part. “Project” may include reimbursement
12for the costs of construction, expansion, remodeling, renovation,
13furnishing, or equipping, or funding, financing, or refinancing of
14a health facility or acquisition of a health facility. “Project” may
15include any combination of one or more of the foregoing
16undertaken jointly by any participating health institution with one
17or more other participating health institutions.

18(g) “Revenue bond” or “bond” means a bond, warrant, note,
19lease, or installment sale obligation that is evidenced by a
20certificate of participation or other evidence of indebtedness issued
21by the authority.

22(h) “Working capital” means moneys to be used by, or on behalf
23of, a participating health institution to pay or prepay maintenance
24or operation expenses or any other costs that would be treated as
25an expense item, under generally accepted accounting principles,
26in connection with the ownership or operation of a health facility,
27including, but not limited to, reserves for maintenance or operation
28expenses, interest for not to exceed one year on any loan for
29working capital made pursuant to this part, and reserves for debt
30service with respect to, and any costs necessary or incidental to,
31that financing.

32begin insert

begin insertSEC. 2.end insert  

end insert

begin insertSection 15438.3 is added to the end insertbegin insertGovernment Codeend insertbegin insert, to
33read:end insert

begin insert
34

begin insert15438.3.end insert  

(a) When providing funding to for-profit skilled
35nursing facilities, the authority shall provide funding in the
36following order of priority:

37
(1) To skilled nursing facilities for which at least 95 percent of
38their patients are Medi-Cal beneficiaries.

39
(2) To skilled nursing facilities that will construct a new facility
40or increase bed capacity at an existing facility.

P8    1
(3) If funding is available and all skilled nursing facilities
2described in paragraphs (1) and (2) have been provided funding,
3to skilled nursing facilities for which at least 65 percent of their
4patients are Medi-Cal beneficiaries.

5
(b) The authority shall document the number of skilled nursing
6facilities funded pursuant to subdivision (a) and how access to
7skilled nursing facility services has increased for Medi-Cal
8beneficiaries as a result of that funding. The authority shall include
9this information when complying with its existing data collection
10and reporting requirements, if any.

11
(c) This section shall remain in effect only until January 1, 2024,
12and as of that date is repealed, unless a later enacted statute, that
13is enacted before January 1, 2024, deletes or extends that date.

end insert
14

begin deleteSEC. 2.end delete
15
begin insertSEC. 3.end insert  

Section 129005 of the Health and Safety Code is
16amended to read:

17

129005.  

The purpose of this chapter is to provide, without cost
18to the state, an insurance program for health facility construction,
19improvement, and expansion loans in order to stimulate the flow
20of private capital into health facilities construction, improvement,
21and expansion and in order to rationally meet the need for new,
22expanded, and modernized public, eligible for-profit, and nonprofit
23health facilities necessary to protect the health of all the people of
24this state. The provisions of this chapter are to be liberally
25construed to achieve this purpose.

26

begin deleteSEC. 3.end delete
27
begin insertSEC. 4.end insert  

Section 129010 of the Health and Safety Code is
28amended to read:

29

129010.  

Unless the context otherwise requires, the definitions
30in this section govern the construction of this chapter and of Section
3132127.2.

32(a) “Bondholder” means the legal owner of a bond or other
33evidence of indebtedness issued by a political subdivision or a
34nonprofit corporation.

35(b) “Borrower” means a political subdivision or nonprofit
36corporation that has secured or intends to secure a loan for the
37construction of a health facility.

38(c) “Construction, improvement, or expansion” or “construction,
39improvement, and expansion” includes construction of new
40buildings, expansion, modernization, renovation, remodeling and
P9    1alteration of existing buildings, acquisition of existing buildings
2or health facilities, and initial or additional equipping of any of
3these buildings.

4In connection therewith, “construction, improvement, or
5expansion” or “construction, improvement, and expansion”
6includes the cost of construction or acquisition of all structures,
7including parking facilities, real or personal property, rights,
8rights-of-way, the cost of demolishing or removing any buildings
9or structures on land so acquired, including the cost of acquiring
10any land where the buildings or structures may be moved, the cost
11of all machinery and equipment, financing charges, interest (prior
12to, during, and for a period after completion of the construction),
13provisions for working capital, reserves for principal and interest
14and for extensions, enlargements, additions, replacements,
15renovations and improvements, cost of engineering, financial and
16legal services, plans, specifications, studies, surveys, estimates of
17cost and of revenues, administrative expenses, expenses necessary
18or incident to determining the feasibility or practicability of
19constructing or incident to the construction; or the financing of the
20construction or acquisition.

21(d) “Committee” means the Advisory Loan Insurance
22Committee.

23(e) “Debenture” means any form of written evidence of
24indebtedness issued by the State Treasurer pursuant to this chapter,
25as authorized by Section 4 of Article XVI of the California
26Constitution.

27(f) “Fund” means the Health Facility Construction Loan
28Insurance Fund.

29(g) “Health facility” means any facility providing or designed
30to provide services for the acute, convalescent, and chronically ill
31and impaired, including, but not limited to, public health centers,
32community mental health centers, facilities for the developmentally
33disabled, nonprofit community care facilities that provide care,
34habilitation, rehabilitation or treatment to developmentally disabled
35persons, facilities for the treatment of chemical dependency,
36including a community care facility, licensed pursuant to Chapter
373 (commencing with Section 1500) of Division 2, a clinic, as
38defined pursuant to Chapter 1 (commencing with Section 1200)
39of Division 2, an alcoholism recovery facility, defined pursuant
40to former Section 11834.11, and a structure located adjacent or
P10   1attached to another type of health facility and that is used for
2storage of materials used in the treatment of chemical dependency,
3and general tuberculosis, mental, and other types of hospitals and
4related facilities, such as laboratories, outpatient departments,
5extended care, nurses’ home and training facilities, offices and
6central service facilities operated in connection with hospitals,
7diagnostic or treatment centers, extended care facilities, nursing
8homes, and rehabilitation facilities. “Health facility” also means
9an adult day health center and a multilevel facility. Except for
10facilities for the developmentally disabled, facilities for the
11treatment of chemical dependency, or a multilevel facility, or as
12otherwise provided in this subdivision, “health facility” does not
13include any institution furnishing primarily domiciliary care.

14“Health facility” also means accredited nonprofit work activity
15programs as defined in subdivision (e) of Section 4851 of the
16Welfare and Institutions Code, and nonprofit community care
17facilities as defined in Section 1502, excluding foster family homes,
18foster family agencies, adoption agencies, and residential care
19facilities for the elderly.

20Unless the context dictates otherwise, “health facility” includes
21a political subdivision of the state or nonprofit corporation that
22operates a facility included within the definition set forth in this
23subdivision.

24Unless the context dictates otherwise, “health facility” includes
25a for-profit corporation that operates a skilled nursing begin delete facility when
26at least 60 percent of its patients are Medi-Cal beneficiaries.end delete

27
begin insert facility.end insert

28(h) “Office” means the Office of Statewide Health Planning and
29Development.

30(i) “Lender” means the provider of a loan and its successors and
31assigns.

32(j) “Loan” means money or credit advanced for the costs of
33construction or expansion of the health facility, and includes both
34initial loans and loans secured upon refinancing and may include
35both interim, or short-term loans, and long-term loans. A duly
36authorized bond or bond issue, or an installment sale agreement,
37may constitute a “loan.”

38(k) “Maturity date” means the date that the loan indebtedness
39would be extinguished if paid in accordance with periodic
40 payments provided for by the terms of the loan.

P11   1(l) “Mortgage” means a first mortgage on real estate. “Mortgage”
2includes a first deed of trust.

3(m) “Mortgagee” includes a lender whose loan is secured by a
4mortgage. “Mortgagee” includes a beneficiary of a deed of trust.

5(n) “Mortgagor” includes a borrower, a loan to whom is secured
6by a mortgage, and the trustor of a deed of trust.

7(o) “Nonprofit corporation” means any corporation formed
8under or subject to the Nonprofit Public Benefit Corporation Law
9(Part 2 (commencing with Section 5110) of Division 2 of Title 1
10of the Corporations Code) that is organized for the purpose of
11owning and operating a health facility and that also meets the
12requirements of Section 501(c)(3) of the Internal Revenue Code.

13(p) “Political subdivision” means any city, county, joint powers
14entity, local hospital district, or the California Health Facilities
15Authority.

16(q) “Project property” means the real property where the health
17facility is, or is to be, constructed, improved, or expanded, and
18also means the health facility and the initial equipment in that
19health facility.

20(r) “Public health facility” means any health facility that is or
21will be constructed for and operated and maintained by any city,
22county, or local hospital district.

23(s) “Adult day health center” means a facility defined under
24subdivision (b) of Section 1570.7, that provides adult day health
25care, as defined under subdivision (a) of Section 1570.7.

26(t) “Multilevel facility” means an institutional arrangement
27where a residential facility for the elderly is operated as a part of,
28or in conjunction with, an intermediate care facility, a skilled
29nursing facility, or a general acute care hospital. “Elderly,” for the
30purposes of this subdivision, means a person 60 years of age or
31older.

32(u) “State plan” means the plan described in Section 129020.

33

begin deleteSEC. 4.end delete
34
begin insertSEC. 5.end insert  

Section 129020 of the Health and Safety Code is
35amended to read:

36

129020.  

(a) The office shall implement the loan insurance
37program for the construction, improvement, and expansion of
38public, eligible for-profit, and nonprofit corporation health facilities
39so that, in conjunction with all other existing facilities, the
P12   1necessary physical facilities for furnishing adequate health facility
2services will be available to all the people of the state.

3(b) Every odd-numbered year the office shall develop a state
4plan for use under this chapter. The plan shall include an overview
5of the changes in the health care industry, an overview of the
6financial status of the fund and the loan insurance program
7implemented by the office, a statement of the guiding principles
8of the loan insurance program, an evaluation of the program’s
9success in meeting its mission as outlined in Section 129005, a
10discussion of administrative, procedural, or statutory changes that
11may be needed to improve management of program risks or to
12ensure the program effectively addresses the health needs of
13Californians, and the priority needs to be addressed by the loan
14insurance program.

15(c) The health facility construction loan insurance program shall
16provide for health facility distribution throughout the state in a
17manner that will make all types of health facility services
18reasonably accessible to all persons in the state according to the
19state plan.

20

begin deleteSEC. 5.end delete
21
begin insertSEC. 6.end insert  

Section 129090 of the Health and Safety Code is
22amended to read:

23

129090.  

(a) Pursuant to this chapter, political subdivisions,
24eligible for-profit corporations, and nonprofit corporations may
25apply for state insurance of needed construction, improvement, or
26expansion loans for construction, remodeling, or acquisition of
27health facilities to be or already owned, established, and operated
28by them as provided in this chapter. Applications shall be submitted
29to the office by the nonprofit corporation, eligible for-profit
30corporation, or political subdivision authorized to construct and
31operate a health facility.

32(b) Each application shall conform to the requirements of the
33office, shall be submitted in the manner and form prescribed by
34the office, and shall be accompanied by an application fee of
35one-half of 1 percent of the amount of the loan applied for, but in
36no case shall the application fee exceed five hundred dollars ($500).
37The fees shall be deposited by the office in the fund and used to
38defray the office’s expenditures in the administration of this
39chapter.

P13   1begin insert

begin insertSEC. 7.end insert  

end insert

begin insertSection 129107 is added to the end insertbegin insertHealth and Safety Codeend insertbegin insert,
2to read:end insert

begin insert
3

begin insert129107.end insert  

(a) When insuring loans for for-profit skilled nursing
4facilities, the office shall grant loan insurance in the following
5order of priority:

6
(1) To skilled nursing facilities for which at least 95 percent of
7their patients are Medi-Cal beneficiaries.

8
(2) To skilled nursing facilities that will construct a new facility
9or increase bed capacity at an existing facility.

10
(3) If funding is available and all skilled nursing facilities
11described in paragraphs (1) and (2) have been granted loan
12insurance, to skilled nursing facilities for which at least 65 percent
13of their patients are Medi-Cal beneficiaries.

14
(b) The office shall document the number of skilled nursing
15facilities granted insurance pursuant to subdivision (a) and how
16access to skilled nursing facility services has increased for
17Medi-Cal beneficiaries as a result of those grants. The office shall
18include this information in the annual reports required pursuant
19to Section 129045.

20
(c) This section shall remain in effect only until January 1, 2024,
21and as of that date is repealed, unless a later enacted statute, that
22is enacted before January 1, 2024, deletes or extends that date.

end insert
23

begin deleteSEC. 6.end delete
24
begin insertSEC. 8.end insert  

Section 129173 of the Health and Safety Code is
25amended to read:

26

129173.  

(a) In fulfilling the purposes of this article, as set forth
27in Section 129005, and upon making a determination that the
28financial status of a borrower may jeopardize a borrower’s ability
29to fulfill its obligations under any insured loan transaction so as
30to threaten the economic interest of the office in the borrower or
31to jeopardize the borrower’s ability to continue to provide needed
32health care services in its community, including, but not limited
33to, a declaration of default under any contract related to the
34transaction, the borrower missing any payment to its lender, or the
35borrower’s accounts payable exceeding three months, the office
36may assume or direct managerial or financial control of the
37borrower in any or all of the following ways:

38(1) The office may supervise and prescribe the activities of the
39borrower in the manner and under the terms and conditions as the
40office may stipulate in any contract with the borrower.

P14   1(2) Notwithstanding the provisions of the articles of
2incorporation or other documents of organization of a nonprofit
3corporation borrower, this control may be exercised through the
4removal and appointment by the office of members of the
5governing body of the borrower sufficient so that the new members
6constitute a voting majority of the governing body.

7(3) In the event the borrower is a nonprofit corporation, an
8eligible for-profit corporation, or a political subdivision, the office
9may request the Secretary of the California Health and Human
10Services Agency to appoint a trustee. The trustee shall have full
11and complete authority of the borrower over the insured project,
12including all property on which the office holds a security interest.
13A trustee shall not be appointed unless approved by the office. A
14trustee appointed by the secretary pursuant to this subdivision may
15exercise all the powers of the officers and directors of the borrower,
16including the filing of a petition for bankruptcy. An action at law
17or in equity shall not be maintained by any party against the office
18or a trustee by reason of their exercising the powers of the officers
19and directors of a borrower pursuant to the direction of, or with
20the approval of, the secretary.

21(4) The office may institute any action or proceeding, or the
22office may request the Attorney General to institute any action or
23proceeding against any borrower, to obtain injunctive or other
24equitable relief, including the appointment of a receiver for the
25borrower or the borrower’s assets, in the superior court in and for
26the county in which the assets or a substantial portion of the assets
27are located. The proceeding under this section for injunctive relief
28shall conform with the requirements of Chapter 3 (commencing
29with Section 525) of Title 7 of Part 2 of the Code of Civil
30Procedure, except that the office shall not be required to allege
31facts necessary to show lack of adequate remedy at law, or to show
32 irreparable loss or damage. Injunctive relief may compel the
33borrower, its officers, agents, or employees to perform each and
34every provision contained in any regulatory agreement, contract
35of insurance, or any other loan closing document to which the
36borrower is a party, or any obligation imposed on the borrower by
37law, and require the carrying out of any and all covenants and
38agreements and the fulfillment of all duties imposed on the
39borrower by law or those documents.

P15   1A receiver may be appointed pursuant to Chapter 5 (commencing
2with Section 564) of Title 7 of Part 2 of the Code of Civil
3Procedure. In cooperation with the Attorney General, the office
4shall develop and maintain a list of receivers who have
5demonstrated experience both in the health care field and as a
6receiver. Upon a proper showing, the court shall grant the relief
7provided by law and requested by the office or the Attorney
8General. No receiver shall be appointed unless approved by the
9office. The office shall establish reporting requirements for
10receivers to ensure that the office is fully apprised of all costs
11incurred and progress made by the receiver. A receiver appointed
12by the superior court pursuant to this subdivision and Section 564
13of the Code of Civil Procedure may, with the approval of the court,
14exercise all of the powers of the officers and directors of the
15borrower, including the filing of a petition for bankruptcy. An
16action at law or in equity shall not be maintained by any party
17against the office, the Attorney General, or a receiver by reason
18of their exercising the powers of the officers and directors of a
19borrower pursuant to the order of, or with the approval of, the
20superior court.

21(5) The borrower shall inform the office in advance of all
22meetings of its governing body. The borrower shall not exclude
23the office from attending any meeting of the borrower’s governing
24body.

25(b) Other than the loan insured under this chapter, the office
26shall not be liable for any debt of a borrower, or to a borrower, as
27a result of the office asserting its legal remedies against a borrower
28insured under this chapter.

29(c) It is the intent of the Legislature that this section is remedial
30in nature, and is applicable retroactively to any health facility
31construction loans in existence at the time of its enactment, to the
32extent that the application of this section does not unlawfully impair
33existing contract rights.



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