AB1862 - Health care districts: transfers of assets.

Amended IN Assembly April 08, 2026 CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION Assembly Bill No. 1862 Introduced by Assembly Member Boerner February 11, 2026 An act to add Chapter 8.5 (commencing with Section 4490) to Division 5 of Title 1 of the Government Code, relating to state government. An act to amend Section 32121 of the Health and Safety Code, relating to health care districts. LEGISLATIVE COUNSEL'S DIGEST AB 1862, as amended, Boerner. Use of Taxpayer Funds Act. Health care districts: transfers of assets. Existing law, the Local Health Care District Law, provides for the organization, incorporation, and management of health care districts. Existing law authorizes local health care districts to exercise specified powers, including transferring, at fair market value, any part of its assets to one or more corporations to operate and maintain the assets, as specified, and defines “transfer” for these purposes to mean the transfer of ownership of the assets of a district. This bill would prohibit a health care district from entering into a transfer agreement that allows a private party to the agreement to prohibit, restrict, or otherwise place conditions upon the health care district’s expenditure of taxpayer funds. Existing law generally regulates public works and public purchases, including prohibiting a state agency, as defined, from entering into any contract for the purchase of supplies, equipment, or services from any person who is, among other things, in violation of any order or resolution not subject to review promulgated by the State Air Resources Board or an air pollution control district. This bill would prohibit a public entity from entering into any contract, lease, grant agreement, joint venture, partnership, or other arrangement with a private party that, among other things, grants the private party the right to restrict or condition the use, allocation, or disbursement of taxpayer funds collected or received by the public entity. The bill would make any provision of a contract, lease, grant agreement, joint venture, partnership, or other arrangement that takes effect or commences on or after January 1, 2027, that is in violation of that provision void and unenforceable. The bill would specify that nothing in its provisions are to be construed to prohibit a public entity from entering into a contract, lease agreement, grant agreement, joint venture, partnership, or other arrangement with a private party that, among other things, grants the private party the right to determine, restrict, or condition the use, allocation, or disbursement of nontaxpayer funds, provided that the authority does not extend in any way to taxpayer funds collected or received by the public entity. The bill would define various terms for its purposes. The bill would include findings that changes proposed by this bill address a matter of statewide concern rather than a municipal affair and, therefore, apply to all cities, including charter cities. Digest Key Vote: MAJORITY Appropriation: NO Fiscal Committee: YES NO Local Program: NO Bill Text The people of the State of California do enact as follows: SECTION 1. Section 32121 of the Health and Safety Code is amended to read: 32121. Each local health care district shall have and may exercise all of the following powers: (a) To have and use a corporate seal and alter it at its pleasure. (b) To sue and be sued in all courts and places and in all actions and proceedings whatever. (c) To purchase, receive, have, take, hold, lease, use, and enjoy property of every kind and description within and without the limits of the district, and to control, dispose of, convey, and encumber the same and create a leasehold interest in the same for the benefit of the district. (d) To exercise the right of eminent domain for the purpose of acquiring real or personal property of every kind necessary to the exercise of any of the powers of the district. (e) To establish one or more trusts for the benefit of the district, to administer any trust declared or created for the benefit of the district, to designate one or more trustees for trusts created by the district, to receive by gift, devise, or bequest, and hold in trust or otherwise, property, including corporate securities of all kinds, situated in this state or elsewhere, and where not otherwise provided, dispose of the same for the benefit of the district. (f) To employ legal counsel to advise the board of directors in all matters pertaining to the business of the district, to perform the functions in respect to the legal affairs of the district as the board may direct, and to call upon the district attorney of the county in which the greater part of the land in the district is situated for legal advice and assistance in all matters concerning the district, except that if that county has a county counsel, the directors may call upon the county counsel for legal advice and assistance. (g) To employ any officers and employees, including architects and consultants, the board of directors deems necessary to carry on properly the business of the district. (h) To prescribe the duties and powers of the health care facility administrator, secretary, and other officers and employees of any health care facilities of the district, to establish offices as may be appropriate and to appoint board members or employees to those offices, and to determine the number of, and appoint, all officers and employees and to fix their compensation. The officers and employees shall hold their offices or positions at the pleasure of the boards of directors. (i) To do any and all things that an individual might do that are necessary for, and to the advantage of, a health care facility and a nurses’ training school, or a child care facility for the benefit of employees of the health care facility or residents of the district. (j) (1) To establish, maintain, maintain, and operate, or provide assistance in the operation of, one or more health facilities or health services, including, but not limited to, outpatient programs, services, and facilities; retirement programs, services, and facilities; chemical dependency programs, services, and facilities; or other health care programs, services, and facilities and activities at any location within or without the district for the benefit of the district and the people served by the district. “Health (2) “Health care facilities,” as used in this subdivision, means those facilities defined in subdivision (b) of Section 32000.1 and specifically includes freestanding chemical dependency recovery units. “Health facilities,” as used in this subdivision, may also include those facilities defined in subdivision (d) of Section 15432 of the Government Code. (k) To do any and all other acts and things necessary to carry out this division. (l) To acquire, maintain, and operate ambulances or ambulance services within and without the district. (m) To establish, maintain, and operate, or provide assistance in the operation of, free clinics, diagnostic and testing centers, health education programs, wellness and prevention programs, rehabilitation, aftercare, and any other health care services provider, groups, and organizations that are necessary for the maintenance of good physical and mental health in the communities served by the district. (n) To establish and operate in cooperation with its medical staff a coinsurance plan between the hospital health care district and the members of its attending medical staff. (o) To establish, maintain, and carry on its activities through one or more corporations, joint ventures, or partnerships for the benefit of the health care district. (p) (1) To transfer, at fair market value, any part of its assets to one or more corporations to operate and maintain the assets. A transfer pursuant to this paragraph shall be deemed to be at fair market value if an independent consultant, with expertise in methods of appraisal and valuation and in accordance with applicable governmental and industry standards for appraisal and valuation, determines that fair and reasonable consideration is to be received by the district for the transferred district assets. Before the district transfers, pursuant to this paragraph, 50 percent or more of the district’s assets to one or more corporations, in sum or by increment, the elected board shall, by resolution, submit to the voters of the district a measure proposing the transfer. The measure shall be placed on the ballot of a special election held upon the request of the district or the ballot of the next regularly scheduled election occurring at least 88 days after the resolution of the board. If a majority of the voters voting on the measure vote in its favor, the transfer shall be approved. The campaign disclosure requirements applicable to local measures provided under Chapter 4 (commencing with Section 84100) of Title 9 of the Government Code shall apply to this election. (2) To transfer, for the benefit of the communities served by the district, in the absence of adequate consideration, any part of the assets of the district, including, without limitation, real property, equipment, and other fixed assets, current assets, and cash, relating to the operation of the district’s health care facilities to one or more nonprofit corporations to operate and maintain the assets. (A) A transfer of 50 percent or more of the district’s assets, in sum or by increment, pursuant to this paragraph shall be deemed to be for the benefit of the communities served by the district only if all of the following occur: (i) The transfer agreement and all arrangements necessary thereto are fully discussed in advance of the district board decision to transfer the assets of the district in at least five properly noticed open and public meetings in compliance with Section 32106 and the Ralph M. Brown Act (Chapter 9 (commencing with Section 54950) of Part 1 of Division 2 of Title 5 of the Government Code). (ii) The transfer agreement provides that the hospital health care district shall approve all initial board members of the nonprofit corporation and any subsequent board members as may be specified in the transfer agreement. (iii) The transfer agreement provides that all assets transferred to the nonprofit corporation, and all assets accumulated by the corporation during the term of the transfer agreement arising out of, or from, the operation of the transferred assets, are to be transferred back to the district upon termination of the transfer agreement, including any extension of the transfer agreement. (iv) The transfer agreement commits the nonprofit corporation to operate and maintain the district’s health care facilities and its assets for the benefit of the communities served by the district. (v) The transfer agreement requires that any funds received from the district at the outset of the agreement or any time thereafter during the term of the agreement be used only to reduce district indebtedness, to acquire needed equipment for the district health care facilities, to operate, maintain, and make needed capital improvements to the district’s health care facilities, to provide supplemental health care services or facilities for the communities served by the district, or to conduct other activities that would further a valid public purpose if undertaken directly by the district. (vi) The transfer agreement includes the appraised fair market value, from an independent consultant with expertise in methods of appraisal and valuation and in accordance with applicable governmental and industry standards for appraisal and valuation, of any asset transferred pursuant to this paragraph. (vii) The appraisal that is used to determine the fair market value that is included within the transfer agreement is performed within the six months preceding the date on which the district approves the transfer agreement. (B) A transfer of 10 percent or more but less than 50 percent of the district’s assets, in sum or by increment, pursuant to this paragraph shall be deemed to be for the benefit of the communities served by the district only if both of the following occur: (i) The transfer agreement and all arrangements necessary thereto are fully discussed in advance of the district board decision to transfer the assets of the district in at least two properly noticed open and public meetings in compliance with Section 32106 and the Ralph M. Brown Act (Chapter 9 (commencing with Section 54950) of Part 1 of Division 2 of Title 5 of the Government Code). (ii) The transfer agreement meets all of the requirements of clauses (iii) to (v), inclusive, of subparagraph (A). (C) Before the district transfers, pursuant to this paragraph, 50 percent or more of the district’s assets to one or more nonprofit corporations, in sum or by increment, the elected board shall, by resolution, submit to the voters of the district a measure proposing the transfer. The resolution shall identify the asset proposed to be transferred, its appraised fair market value, and the full consideration that the district is to receive in exchange for the transfer. The appraisal shall be performed by an independent consultant with expertise in methods of appraisal and valuation and in accordance with applicable governmental and industry standards for appraisal and valuation within the six months preceding the date on which the district approves the resolution. The measure shall be placed on the ballot of a special election held upon the request of the district or the ballot of the next regularly scheduled election occurring at least 88 days after the resolution of the board. If a majority of the voters voting on the measure vote in its favor, the transfer shall be approved. The campaign disclosure requirements applicable to local measures provided under Chapter 4 (commencing with Section 84100) of Title 9 of the Government Code shall apply to this election. (D) Notwithstanding the other provisions of this paragraph, a hospital health care district shall not transfer any portion of its assets to a private nonprofit organization that is owned or controlled by a religious creed, church, or sectarian denomination in the absence of adequate consideration. (3) If the district board has previously transferred less than 50 percent of the district’s assets pursuant to this subdivision, before any additional assets are transferred, the board shall hold a public hearing and shall make a public determination that the additional assets to be transferred will not, in combination with any assets previously transferred, equal 50 percent or more of the total assets of the district. (4) The amendments to this subdivision made during the 1991–92 Regular Session, the amendments made to this subdivision and to Section 32126 made during the 1993–94 Regular Session, and the amendments made to this subdivision during the 2011–12 Regular Session, shall only apply to trans [Text truncated for display. Full text available on Congress.gov.]