Massachusetts Health and Educational Facilities Authority

Massachusetts Health and Educational Facilities Authority
Name	Massachusetts Health and Educational Facilities Authority
Native name	MHFA
Formation	1966
Headquarters	Boston, Massachusetts
Leader title	Chair

Massachusetts Health and Educational Facilities Authority is a state-level public instrumentality created to assist Massachusetts nonprofit health care and higher education institutions with capital financing through tax-exempt and taxable revenue bonds. It operates alongside agencies such as the Massachusetts Development Finance Agency, Massachusetts Port Authority, Massachusetts School Building Authority, Massachusetts Convention Center Authority, and state entities like the Executive Office of Health and Human Services (Massachusetts), coordinating with regional fiscal institutions including the Boston Redevelopment Authority and municipal authorities such as the City of Boston. The Authority serves a role comparable to other issuers such as the New York State Urban Development Corporation, California Infrastructure and Economic Development Bank, and the Illinois Finance Authority.

History

The Authority was established in the mid-20th century amid broader trends seen in the postwar United States financing environment dominated by entities like the Federal Housing Administration, Public Health Service, and programs enshrined by the Hill-Burton Act. Its formation followed precedents in states such as New Jersey and New York where bodies like the New Jersey Economic Development Authority and New York State Dormitory Authority provided municipal bond financing for hospitals and colleges. Early transactions involved prominent institutions including Massachusetts General Hospital, Brigham and Women's Hospital, Tufts University, Boston University, Harvard University, and the University of Massachusetts system. Over decades the Authority adapted to regulatory changes initiated by federal statutes such as the Tax Reform Act of 1986 and decisions by bodies like the Internal Revenue Service and the United States Department of the Treasury. Major financial crises including the Savings and Loan crisis and the 2008 financial crisis influenced its approach to credit enhancement and underwriting standards, driving coordination with credit agencies such as Moody's Investors Service, Standard & Poor's, and Fitch Ratings.

Structure and Governance

The Authority's board composition and governance model mirror practices used by quasi-public issuers like the New Jersey Health Care Facilities Financing Authority and the California Health Facilities Financing Authority. Appointments typically involve officials drawn from statewide offices including the Governor of Massachusetts and executive cabinets such as the Massachusetts Secretary of Administration and Finance. Legal counsel and compliance functions work with firms and regulators such as the Securities and Exchange Commission, Massachusetts Office of the Attorney General, and municipal law practices familiar with bond counsel like Ballard Spahr, Nixon Peabody, and specialized underwriters connected to banks such as Bank of America, J.P. Morgan Chase, and Wells Fargo. Operational units include finance, legal, underwriting, compliance, and project review teams that interact with statewide actors like the Massachusetts Department of Public Health and academic administrators from institutions including the Massachusetts Institute of Technology and Boston College.

Powers and Functions

The Authority exercises powers analogous to those of issuers like the Dormitory Authority of the State of New York and the Pennsylvania Economic Development Authority, including issuing revenue bonds, providing credit assistance, and approving financing for capital projects at hospitals such as Dana–Farber Cancer Institute and colleges like Northeastern University. Its statutory authority stems from state enabling legislation and intersects with federal tax law administered by the Internal Revenue Service and capital markets regulated by the Securities and Exchange Commission. It can structure deals using interest rate swaps popularized by counterparties such as Goldman Sachs and Citigroup, and coordinate with municipal entities including the Metropolitan Area Planning Council for regional projects. The Authority also engages with philanthropic and research funding partners like the Gordon and Betty Moore Foundation, Kresge Foundation, and federal research agencies including the National Institutes of Health when projects have research components.

Financing Mechanisms

Common financing tools include tax-exempt revenue bonds, taxable bonds, conduit financing, and moral obligation pledges similar to mechanisms used by the California Infrastructure Bank and the New Jersey Educational Facilities Authority. Underwriting and placement involve national investment banks and municipal advisors such as Goldman Sachs, Morgan Stanley, Barclays, Piper Sandler, and municipal advisors registered with the Municipal Securities Rulemaking Board. Credit enhancement options have included bond insurance from firms like Assured Guaranty and liquidity provided by banks such as Citigroup and Bank of America. Structured products have sometimes used hedging counterparties like Societe Generale and Deutsche Bank; fiscal stress periods involved coordination with programs such as the Troubled Asset Relief Program and state budget offices. Tax compliance and arbitrage issues brought oversight from the United States Treasury and rulings from the Tax Court of the United States.

Major Projects and Impact

The Authority financed major capital campaigns, expansions, and facility replacements for health systems like Partners HealthCare (now Mass General Brigham), community hospitals such as Beth Israel Deaconess Medical Center, and educational campuses for institutions including Wellesley College, Amherst College, and the University of Massachusetts Boston. Projects included construction and renovation of research facilities aligning with federal grant activity from the National Science Foundation and clinical infrastructure funded by the Agency for Healthcare Research and Quality. Investment supported workforce training programs connected to labor partners such as the Massachusetts Nurses Association and workforce development boards. Economic analyses by state planning entities like the Massachusetts Budget and Policy Center and academic studies published through the Harvard Kennedy School have tracked job creation, civic benefits, and regional healthcare capacity increases attributable to Authority financings.

Criticism and Controversies

Critiques mirror those leveled at similar issuers including debates over public subsidy of nonprofit institutions seen in coverage by outlets such as the Boston Globe, The New York Times, and policy groups like the Citizens Budget Commission. Contentious topics included use of tax-exempt bonds for projects with private benefit, disclosure practices scrutinized by the Securities and Exchange Commission and the Massachusetts Office of the Attorney General, and counterparty risks from derivatives trades that echoed controversies involving municipalities such as Jefferson County, Alabama. Labor disputes at financed facilities sometimes involved unions like the Service Employees International Union and the American Federation of Teachers. Calls for reform referenced models from the New York State Comptroller and recommendations from think tanks like the Urban Institute and the Brookings Institution on transparency, cost-benefit analysis, and community impact assessments.

Category:Massachusetts public authorities