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 established the Tax-Exempt Equipment Financing Program to provide health facilities with access to tax-exempt fixed rate financing for their equipment purchases.
The law specifically provides that notes 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 notes.
Eligibility
In order to meet the requirements for CHFFA financing, an Applicant 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; and
- 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.
Uses of Funds
Applicants may use funds for qualifying equipment purchases of $500,000 or more. The maturity of the notes must be related to the useful life of the equipment to be financed. Notes issued through the program will be collateralized by the equipment that is purchased.
Applicants may use the note proceeds to purchase or reimburse all types of qualifying equipment, including, but not limited to:
- Medical and diagnostic equipment
- Computers
- Telecommunications equipment
Proceeds may also be used to finance minor equipment installation costs.
Additionally, CHFFA requires all debt instruments comply with its Bond Issuance Guidelines per bond rating category and provide loan security provisions and covenants that correspond with its rating. Savings resulting from the issuance of tax-exempt notes for borrowers must be transferred to the consuming public via lower or contained costs for delivery of health services.
Application and Approval Process
Applications are accepted on an ongoing basis and are thoroughly reviewed by CHFFA staff and its legal counsel.
For the Tax-Exempt Equipment Financing Program, an Applicant may have identified certain parties prior to submitting an application, such as a Financial Advisor, Bond Counsel, Purchaser, Placement Agent, and/or Trustee (note: Bond Counsel must be included in the STO financing pool). If an Applicant has not identified certain parties, CHFFA and its Municipal Advisor may assist in the selection process
Upon a finding by CHFFA staff that the application is in good order and the Applicant is in a position to meet the financial obligations of the equipment note issue, a CHFFA meeting is scheduled for approval of the financing by the Authority. The note issue is then scheduled for private sale. Typically, within thirty days of the note issuance, a closing takes place at which time the transaction is completed.
Program Fees
CHFFA offers a competitive fee structure as follows:
- $500 non-refundable application fee
- One-time initial fee equal to .05 percent of the aggregate amount of the issuance
- $400 annual administrative fee
CHFFA 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
- Public Financial Management