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California Health Facilities Financing

Introduction

The California Health Facilities Financing Authority (CHFFA) was established in 1979 and operates pursuant to the California Health Facilities Financing Authority Act in the California Government Code Sections 15430-15462.5.

CHFFA was created to be the State's vehicle for providing financial assistance to public and non-profit health care providers in our State through loans funded by the issuance of tax-exempt bonds. Since the bond program’s inception, CHFFA has issued approximately $45 billion for 275 health institutions.

The law specifically provides that bonds issued under this Act shall not be a debt, liability, or claim on the faith and credit or the taxing power of the State of California, or any of its political subdivisions. The full faith and credit of the participating institution is normally pledged to the payment of the bonds.

Eligibility

In order to meet the requirements for CHFFA bond financing, an institution must meet the following criteria:

  • Be a public hospital, or a private non-profit health facility (See Section 15432 (d) of the California Government Code for full list of eligible facilities)
  • Have been operating for a minimum of three years prior to submitting an application for financing and provide three years of audited financial statements
  • Have revenue or collateral sufficient to cover debt service on the proposed financing

Should you have questions on eligibility, contact CHFFA at (916) 653-2799.

In addition to initial eligibility, the Authority requires borrowers to comply with its Bond Issuance Guidelines per bond rating category and provide loan security provisions and bond covenants that correspond with its rating.
Savings resulting from issuance of tax-exempt bonds for borrowers must be transferred to the consuming public via lower or contained costs for delivery of health services.

Applicants must be approved by a resolution of the Authority Members at a regularly scheduled public meeting.

Uses of Funds

Proceeds from CHFFA financings may be used for the following project related costs:

  • Construction
  • Remodeling and renovation
  • Land acquisition (as part of the proposed project)
  • Acquisition of existing health facilities
  • Purchase or lease of equipment
  • Refinancing or refunding of prior debt
  • Working capital for start-up facilities
  • Costs of bond issuance, feasibility studies & reimbursement of prior expenses

Application and Approval Process

Submitted applications are thoroughly reviewed by the Authority. The borrower may select the following personnel, subject to approval by the STO:

  • A qualified financial advisor, or investment banker, with experience in preparing municipal bond offerings.
  • Bond counsel
  • Trustee to act as a depository and record keeper for the required bond reserve, redemption, and other funds.

A complete list of these approved companies can be found at http://www.treasurer.ca.gov/bonds/.

The Authority utilizes the services of the following:

  • Financial Analyst (FA) – The FA assists with evaluating creditworthiness of Authority applicants:
    • TAP International, Inc.
  • Municipal Advisors (MA) - The MA assists with evaluating the security and covenant packages offered by tax-exempt borrowers. The MA also assists with the tax-exempt bond sale process.
    • KNN Public Finance, LLC
    • Fieldman, Rolapp & Associates, Inc.

Upon a finding by the Authority that the application is in good order and the institution is in a position to meet the financial obligations of a bond issue, a CHFFA meeting is scheduled for approval of the financing. The bond issue is then scheduled for either public or private sale. Typically, within thirty days of the bond sale, a closing takes place at which time the transaction is completed.