Institutions eligible for CHEFA financing must be a Connecticut domiciled 501(c)(3) organization and provide direct services to the public. Types of these nonprofits include:
- Childcare providers.
- Cultural institutions, such as museums, theaters and zoos.
- Healthcare institutions, including hospitals, health centers and visiting nurses associations.
- Private institutions of higher education, i.e., colleges and universities, including the Connecticut State University System.
- Human services provider institutions, such as adult day care facilities, boys & girls clubs, community action agencies, social service agencies and YMCA/YWCAs.
- Private independent schools.
- Long-term care facilities, i.e., nursing homes, assisted living facilities and continuing care retirement facilities which are part of a hospital system or a continuum of care.
CHEFA can finance an institution’s capital projects and related costs, so long as the project is related to the tax-exempt purpose of that institution. These projects may consist of larger components such as acquisition, construction, renovation, furniture and equipment and other capital needs, as well as smaller elements including computers, telecommunications equipment and health care technology. Other eligible projects include refinancing outstanding taxable or tax-exempt debt, mortgages and loans.
Public Hearing Requirements
A TEFRA hearing is mandated by the IRS to provide a reasonable opportunity for interested individuals to express their views, either orally or in writing, on the issuance of bonds and the nature of the improvements and projects for which the bond funds will be allocated.
The TEFRA notice of public hearing must be published in the daily newspaper of the largest circulation in both the project and Authority locations at least 14 days prior to the hearing date. In addition, the TEFRA hearing date must be held prior to CHEFA Board approval.
Restrictions on Use of Funds
IRS regulations state that not more than 5% of net bond proceeds may be used for private business use or trade or business activity unrelated to the nonprofit purpose of the borrowing institution. An example of what may be considered private business use might be physician offices located within a hospital, or a bank branch within a university student center building.
Projects Which Are Considered Ineligible
Any project that is not related to the underlying tax-exempt purpose of that institution cannot be financed with tax-exempt funds. For example, any project that may produce unrelated taxable business income, including a related facility location, would be ineligible. If the unrelated taxable component is a portion of a larger tax-exempt project, the unrelated purpose can be structured as a taxable part of the financing. There are various thresholds of tax law that serve to optimize the amount of tax-exempt debt that can be funded for a particular project.
CHEFA cannot finance projects for any facility to be used for religious instruction or worship (for example chapels), or any facility used primarily by a school or department of divinity. Also, under its enabling legislation, CHEFA cannot finance working capital.
CHEFA Board Approval
For a public offering, CHEFA’s Board approval is typically a two-step process. Refunding issues may require only one CHEFA Board meeting for approval. For a private placement/direct bank purchase transaction, there is only one meeting for CHEFA approval.
The presentation to the Board at this initial meeting is for informational purposes and provides the Board with an opportunity to ask CHEFA staff any questions about the borrower, the financing structure and the project to be financed. There is no formal action taken at this first meeting.
CHEFA staff provides recommendation to the Board for approval and includes responses to any issues raised by the Board at the initial meeting.
Conditions that must be met prior to final approval by the CHEFA Board include: substantially final form of legal documents; results of the public hearing on the issuance of tax-exempt bonds (the TEFRA hearing); completion of the due diligence process by CHEFA Staff and its Bond and Special Counsel; and the finalization of the financing structure.
The institution is responsible for selection of its counsel, which should be familiar with CHEFA financings, and an investment banker (for a public offering) or a placement agent (for a private placement). The Authority can assist with the selection of the investment banker/placement agent if requested by the institution.
CHEFA will be responsible for selecting bond counsel, special counsel and its financial advisor. These firms are listed below. Institutions have the option of selecting their own financial advisor, in which case, the Authority will not assign one.
Day Pitney, LLP
Harris Beach, PLLC
Hawkins, Delafield & Wood LLP
Hinckley Allen & Snyder LLC
Pullman & Comley, LLC
Robinson + Cole LLP
Carmody & Torrance, LLP
McCarter & English, LLP
Shipman & Goodwin LLP
Acacia Financial Group, Inc.
Fairmount Capital Advisors, Inc.
Public Financial Management
Applying for Financing
The Authority does not have a formal application, but requires all prospective borrowers to submit a written request stating the institution’s intent to issue tax-exempt debt through the Authority. The request should include a description of the project to be financed, and the estimated amount to be financed. Upon receipt of the request for financing from the institution, CHEFA will send an application letter to be executed by the borrower.
The prospective borrower also submits payment with the commitment letter in the amount of $5,000 for the transaction which represents CHEFA’s up-front fee. This fee is non-refundable, regardless of whether the CHEFA Board approves the proposed issue or it fails to close for any reason.
All application materials and payment of the application fee must be received prior to the issue being presented to CHEFA’s Board for approval.