Montana Facility Finance Authority
The Montana Facility Finance Authority (MFFA) was created by the 1983 Legislature to assist health care facilities in containing future health care costs. This is accomplished by issuing revenue bonds or notes to finance or refinance buildings and capital equipment at low-cost, tax-exempt interest rates. The MFFA is governed by a seven member quasi-judicial board appointed by the Governor. Only 501(c)(3) health care organizations (not-for-profit, tax-exempt) are eligible to receive funding from the MFFA. Examples of eligible facilities include hospitals, clinics, nursing homes, centers for the developmentally disabled and pre-release centers. A loan may not exceed the total cost or appraised value of the facility being financed.
Application procedures for the five loan programs available are outlined in statute and rule. Information considered includes eligibility, management and creditworthiness of the borrower, as well as the eligibility of the project and its financial feasibility.
The MFFA has five loan programs described below.
- Pooled Loan Program
- Stand Alone Program
- Master Loan Program
- Private Placement Program
- Direct Loan Program
Pooled Loan Program
The purpose of the Pooled Loan Program is to loan funds to eligible health care facilities for construction/reconstruction, equipment purchases and to refinance existing debt. The program also provides single-source, low-cost financing for community provider capital improvements. Community providers are any not-for-profit, tax-exempt facilities contracting with the State of Montana to provide care and services for mental illness or developmental disabilities. Financing can continue for the life of the program, which runs through 2020. The program recycles funds by using loan principal repayments to finance new projects. Pooled loan interest rates are variable and averaged 5 percent in fiscal year 2000.
Stand Alone Program
The Stand Alone Program provides a means for individual health care facilities to access the bond market. The programs is only applicable to projects of $2 million and up. Each bond issue is for a single project. Interest rates are set at the same rate as the bond issue. A trustee handles loans for this program. Cities and counties have authority to issue bonds, but the MFFA may be able to structure the bond issue at a lower cost. The MFFA approves everything concerning the project. The MFFA negotiates fees and interest on behalf of the borrower. The borrower pays interest and other associated costs.
Master Loan Program
The Master Loan Program provides low cost, fixed rate financing to eligible health facilities that have capital financing needs between $1 million and $5 million. Thought this program, the Authority issues a series of bonds to meet the needs of a collective group of facilities that have investment grade credit characteristics but do not have credit ratings. The program enables the participants to share the initial financing costs and to achieve an "A" bond rating. Bond proceeds may be used to finance new construction projects, refinance outstanding bonds, acquire real property, purchase equipment and in certain cases, reimburse the borrower for prior capital expenditures.
Private Placement Program
The Private Placement Program involves the issuance of a bond or note being sold directly to a limited number investors to provide financing for eligible health care facilities. A private placement is generally advisable under certain circumstances as it generally reduces underwriting and bond issuance expenses by minimizing the initial cost and time involved in marketing the debt. It is usually a less costly method of financing projects another $3,000,000. Private Placements have been placed by the Authority or by a local municipality, with the Authority providing financial consultant services to the pertinent parties.
Direct Loan Program
The Direct Loan Program provides short-term loans of $100,000 or less to eligible facilities for construction, renovation or acquisition, equipment purchases, and the refinancing of outstanding debt. Maximum loan terms of five years or less are secured by a pledge of the equipment or real property being financed with the loan proceeds or other acceptable collateral.
