FAQs - The Hospitals & Higher Education Facilities Authority of Philadelphia

What is the Hospital and Higher Education Facilities Authority of Philadelphia?

The Hospitals and Higher Education Facilities Authority of Philadelphia (“the Authority”) was created in 1974 as “The Hospitals Authority” under the Municipality Authorities Acts of 1945 to offer non-profit hospitals a low interest, long-term borrowing vehicle for capital construction and improvements through tax-exempt municipal bonds.

The present name of the agency was adopted in 1983, when City Council approved an ordinance to allow the tax-free financing of construction and renovation for secondary and higher educational facilities. Recent ordinances permit tax-free bond issues for the financing of nursing and rehabilitative facilities, short-term amortized equipment purchase, and working capital.

What kinds of institutions can apply to the Authority for tax-exempt financing?

  • Not for profit, nonsectarian hospital facilities, including teaching hospitals;
  • private, not for profit, nonsectarian colleges and universities, State-related universities, community colleges and secondary schools;
  • health centers for persons with mental retardation who are eligible for intermediate care and rehabilitative services;
  • and state-licensed long-term care nursing facilities providing health care services to the community.
  • Religious-affiliated institutions are welcomed to apply, if their service to the community is nonsectarian.

Can the Authority finance projects outside if Philadelphia?

Yes, the Authority can finance projects anywhere in Pennsylvania.

Why is tax-free financing an attractive option for the non-profit borrower?

The interest rate on tax-exempt financing is substantially reduced, making the Authority financing an attractive alternative to commercial borrowing.

What kinds of financing methods are available?

A public offering of tax-free municipal bonds is available for various amounts of capital. Private placement or pool financing can be arranged for moderate to small capital needs.

How are the bonds secured?

Tax-free financing may involve a loan agreement or the more traditional lease procedure. The borrower may pledge revenues (in excess of operating costs) and other covenants to pay debt service on the bonds.

Does the Authority then control the institution’s operation?

Definitely not.  The autonomy of the institution remains intact. The borrower remains solely responsible for the facility’s operation and management.

How does an institution apply to the Authority for financing?

The Authority strongly urges interested institutions to contact the Authority for preliminary discussions before engaging any outside professional or attempting a formal application. An institution may have a variety of needs — new construction, renovation of existing spaces, equipment purchases and/or refinancing of outstanding loans, et cetera — which can be included on a single bond issue.

By an early determination of the nature of the project and its individual components, the Authority guides suitable applicants successfully through the tax-exempt bond issue process without undue expenditures of time or cost.

Formal application requirements are as follows:

  • A brief description of the project on a form provided by the Authority;
  • a resolution by the governing board of the institution making the application;
  • a Save and Hold Harmless Agreement indemnifying Authority members and staff;
  • the payment of fees. A schedule of fees is available from the Authority.

Why does the Authority charge a fee for its services?

The fee-for-service policy enables the agency to remain private, non-profit and self-sufficient, operating at no cost to the taxpayers. Fees are established through an analysis of the projected costs of operating the Authority, and are competitive with the fees of comparable Authorities.

Does the Authority become involved in the construction of the facility?

The Authority does not intrude upon the design or construction of a facility. It does insist that there be a fixed stated price for the completed project so that a specific amount of financing can be requested for the bond issue

The average construction project takes two or three years. How can the institution pay interest on the bonds before the project is producing revenue?

Interest payable during construction is capitalized, becoming part of the bond issue. It is set aside in a fund for the Trustee to make payments during construction.

Are the requirements for refinancing the same as for new financing?

In the case of a refinancing, the conditions are the same, but the procedure may vary depending on the nature of the project. 

Who are the members of the Authority Board, and how are they selected?

The members of the Authority are its Chairman and members of its Board of Directors. They are nominated by the Mayor and appointed by the City Council to serve a term of five years.

It’s a competitive environment, and this is a long-term undertaking. Will the Authority understand what our institution needs to maintain market share?

The Authority researches trends affecting the present and future of health care and education in the region. The Authority’s professional staff works continually to advance the Authority’s mandates. Its mission is to serve its clients quickly, responsively and effectively. Because the Authority’s approach is long-term and comprehensive, many clients return to us for additional financing, to take advantage of new offerings, or for refinancing. We’re there for the institution, both in times of expansion, and when challenges are present.

On balance, why should our institution choose The Hospitals and Higher Education Facilities Authority of Philadelphia?

We are a convenient resource for low-cost tax-free financing within our community, and are among the nation’s leading health care bond issuers in terms of dollar volume. The Hospitals and Higher Education Facilities Authority of Philadelphia is thoroughly committed to the longevity and success of the City and its vital institutions throughout the region. The City of Philadelphia has long been home to a number of outstanding private secondary and higher educational institutions. With its renowned hospitals, medical and nursing schools and the growth of global research and development companies within its region, Philadelphia is fast gaining stature as an international health care center.