College building bonding authority could add health care facilities to portfolio

The Higher Education Facilities Authority doesn’t come up in Capitol conversations very often. That’s because it’s an entity that doesn’t require much legislative action.

Created in 1971, it doesn’t handle any state money. It’s strictly a conduit for financing or refinancing large-scale capital projects for the state’s nonprofit private colleges and universities, allowing them to access tax-exempt municipal bonds deemed to have a broader public benefit.

But its responsibilities may see a growth spurt.

Sponsored by Rep. Kristin Bahner (DFL-Maple Grove), HF355 would empower the authority to also provide capital financing to nonprofit health care organizations. The bill would also raise the authority’s current $1.3 billion cap on aggregate outstanding bond amounts to $4 billion, allocating $1.75 billion to fund higher education projects and $2.25 billion to fund health care projects.

On Thursday, there was no dissent when the House Higher Education Finance and Policy Committee referred the bill to the House Health Finance and Policy Committee by a voice vote.

“This state agency takes its authority from the state,” Bahner said. “But it is fully funded, meaning all costs for administration and staffing are paid for out of fees generated by their work. And there is no – I repeat, no – cost to the state.”

Rep. Joe McDonald (R-Delano) likes that part, but Rep. Ginny Klevorn (DFL-Plymouth) expressed concern that some health care projects that start in the nonprofit sector end up in the possession of private equity real estate investment trusts.

“None of the transactions we have ever done allow for that kind of transfer to occur,” said Barry Fick, executive director of the Minnesota Higher Education Facilities Authority. “Because of the tax exemption we have, if there were to be a transfer such as that, the tax exemption would be lost.”

Rep. Nathan Coulter (DFL-Bloomington) can envision other nonprofits, such as food shelves, seeking similar bonding assistance from the agency. Fick replied that Wisconsin has a similar agency that deals with higher education, health care and all nonprofit organizations.

“I think it’s best for us to look at a graduated expansion, get that expertise and then possibly come back in a year or two,” Fick said.