WILLIAM DONALD SCHAEFER, Governor                         S.B. 607

(3)      A TRANSFERRING HEALTH MAINTENANCE ORGANIZATION MAY
FILE NEW CONTRACT FORMS WITH THE COMMISSIONER ON OR BEFORE THE
EFFECTIVE DATE OF THE TRANSFER, OR MAY USE ANY EXISTING CONTRACT FORM
PREVIOUSLY FILED WITH THE COMMISSIONER WITH APPROPRIATE ENDORSEMENTS
IF ALLOWED BY AND UNDER SUCH CONDITIONS AS APPROVED BY THE
COMMISSIONER.

(4)      A        FOREIGN        HEALTH        MAINTENANCE        ORGANIZATION
TRANSFERRING ITS DOMICILE TO ANOTHER STATE SHALL NOTIFY THE
COMMISSIONER OF THE DETAILS OF THE PROPOSED TRANSFER, AND SHALL FILE
PROMPTLY ANY RESULTING AMENDMENTS TO CORPORATE DOCUMENTS AND
OTHER ITEMS ON FILE WITH THE COMMISSIONER.

SECTION 2. AND BE IT FURTHER ENACTED, That this Act shall take effect
October July 1, 1993.

May 27, 1993

The Honorable Thomas V. Mike Miller, Jr.

President of the Senate

State House

Annapolis, Maryland 21401

Dear Mr. President:

In accordance with Article II, Section 17 of the Maryland Constitution, I have today
vetoed Senate Bill 607.

This bill would provide that a recorded covenant or deed restriction that prohibits or
restricts commercial or business activity in general, but does not expressly apply to family
day care homes, may not be construed to prohibit or restrict the establishment or
operation of family day care homes. It would further provide that the operation of a
family day care home would be considered a residential activity for purposes of construing
such covenants or restrictions. If signed into law, the bill would apply retroactively to all
recorded covenants and restrictions in deeds.

Unfortunately, despite the salutary purpose of Senate Bill 607, which was to enhance
opportunities for access to family day care in the State, the bill as enacted by the General
Assembly would have serious unintended consequences. The bill could have a profoundly
negative impact on a major State residential loan program and the obligations of a State
agency to a large number of bondholders.

The Community Development Administration (CDA) of the Department of Housing and
Community Development has financed more than 35,000 single family homes in Maryland
through a very large tax-exempt revenue bond program that is governed by the United
States Internal Revenue Code. I have been advised by the Office of the Attorney General
that the Internal Revenue Code restricts business use of bond-financed residences and
treats family day care as a business use. Consequently, the recorded deeds for CDA's
bond-financed homes restrict business use in order to maintain CDA compliance with the
Internal Revenue Code and thereby the tax-exempt status of the revenue bonds. These

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