SAN FRANCISCO — The board of the California Health Facilities Financing Authority has voted to reduce its issuance fees as it battles to remain competitive with other conduit issuers.
The CHFFA, which operates under the California State Treasurer’s Office, voted on Thursday to reduce issuance fees by 2.5 basis points to 0.05% of the aggregate amount issued by private, nonprofit hospitals with revenues of $2.5 million or more, which make up most of the authority’s business.
It will also lower its annual administration fee by 0.25 basis points to 0.0175% of outstanding bonds.
The authority’s board also agreed to axe the $500 application fees for new borrowers and eliminate the resolution fee of the same amount, as well as reduce the issuance fee cap to $100,000 from $300,000.
The CHFFA is lowering its rates to make it more competitive in the marketplace of conduit bond issuers, said Tom Dresslar, spokesman for Treasurer Bill Lockyer, who chairs the CHFFA board.
The agency was created by the state in 1979 to be its conduit for tax-exempt bond financing of public or private nonprofit hospitals.
The authority also provides low-cost loans to the state’s small or rural nonprofit health care facilities and hospitals from revenues raised as a conduit.
Among the CHFFA’s competitors are the California Statewide Communities Development Authority and the California Municipal Financing Authority, which also provide tax-exempt financing for qualified health care providers.
Both of those conduits operate as joint-powers authorities that are run by private consultants.
The arrangement in which private firms operate the public authorities has drawn criticism from Lockyer, directed primarily at the largest of the two, the CSCDA.
CSCDA and CMFA officials argue that they provide a valuable competitive option that works to the benefit of hospital and other borrowers.
The sparring among the California conduits has spread into the Legislature.
The Treasurer’s Office is sponsoring a bill targeted at the two conduits that would change how they select and pay private contractors.
The CHFFA issued $2.56 billion of debt in 2011, according to Thomson Reuters.
The CSCDA, which issues debt across all municipal sectors, issued $735.7 million.
Since 2007, the CHFFA has issued $11 billion of tax-exempt bonds for nonprofit hospitals, according to the Treasurer’s Office.
Joint-powers authorities operate under provisions in California state law designed to foster intergovernmental cooperation.
Hospitals in California also can issue bonds through other conduits, such as local governments.
In August, Lockyer testified to California’s Joint Legislative Audit Committee in favor of an audit of the CSCDA and the CMFA.
The committee narrowly approved the audit request, which ended up including the CHFFA.
The Bureau of State Audits estimates a July release date.