There has been much written and said about HEFA in the last year, and unfortunately far too little of it has been accurate. In fact, none of the publicity captured the mission of HEFA, nor did it examine our successes in delivering on the mandate granted to us by the Legislature.

For more than 40 years, HEFA has helped nonprofit institutions that serve Massachusetts — providing them the financing they need to deliver our internationally renowned health care, educate our college students, and serve the needy. We have provided this financing and reduced energy costs through our bond, pooled-loan and value lease programs, our PowerOptions purchasing consortium, and our AAA-rated money market fund with below-market management fees.

For the purposes of this hearing, my testimony will be limited to our tax-exempt bond financings. We have issued in excess of $38.3 billion and currently have over $16.3 billion outstanding.

The Legislature created HEFA for the sole purpose of helping Massachusetts nonprofits access tax-exempt financing at the least possible cost to accomplish their missions, and that is exactly what we do.

The nonprofit industry in Massachusetts contributes significantly to the welfare of its citizens, not just in terms of how large it is but, most importantly, in what services they provide to the people of the Commonwealth. Hospitals, colleges, universities, and cultural institutions are among the largest employers and most significant economic engines in the Commonwealth.

HEFA is the premiere source of tax-free bonds to community nonprofits in the Commonwealth. Last year alone, HEFA financed 63 projects for hospitals, colleges, and other nonprofit institutions across the Commonwealth that totaled more than $3.2 billion and saved them more than $600 million in debt service costs.

Over the last five years, we have saved nonprofits throughout the Commonwealth $2.5 billion in debt-service costs. That is $2.5 billion saved, not just financed. In many cases, these savings accrued to health care, educational, and cultural institutions in the very heart of your districts and their economies.

For example, just two weeks ago, HEFA completed a financing for the Kennedy Day School at Franciscan Hospital for Children, a school for disabled children. The $11 million HEFA bond allows the school to widen its hallways and renovate its classrooms to better serve its special student population, and it also allows the school to expand its services to more members of the surrounding Brighton community.

From the Berkshires to P-Town, large and small projects were funded at minimal expense because the Legislature recognized these needs and created HEFA to contribute to the viability and expansion of Massachusetts’ nonprofits. Because of HEFA assistance this year alone:

  • Community health centers, hammered by cuts in allocations during the recession, are now replacing decades-old leaking windows, improving patient access and safety, and upgrading medical equipment critical to treating their patients.
  • Stonehill College will welcome its largest-ever freshman class because HEFA financing helped build their dorms at the lowest possible cost of financing to house more students — students who, statistics show, will become lifetime Massachusetts residents, workers, and taxpayers.
  • Baystate Medical Center in Springfield is currently building “the hospital of the future” with $22 million in tax credits and $200 million in bond financing secured through HEFA. Not only will this state-of-the-art facility treat millions of underserved residents in western Massachusetts, but also this project will swell the ranks of construction and skilled new workers employed by one of Massachusetts’s major health care institutions.

These HEFA-facilitated projects all provided jobs for new workers or retained existing jobs in Massachusetts during a collapsing job market. Saving jobs is always just as important as creating jobs, but especially so in one of the most devastating recessions on record.

In Massachusetts, the Commonwealth’s 37,000 nonprofit institutions employ 14 percent of all workers. HEFA financing helps ensure that these employers of a 450,000-strong workforce are able to continue keeping our citizens healthy, educating our sons and daughters, cultivating future leaders, and providing services for our most vulnerable. In fact, of the 25 largest employers in Massachusetts, half come to HEFA for their project financing needs.

HEFA’s narrowly focused mission imbues its staff with one goal: Save money for nonprofit client borrowers. HEFA’s nonprofit clients will attest that their bottom lines were significantly improved, and their services commensurately expanded, by working with HEFA’s expert financing team. Among others, the CEO of Beth Israel Deaconess Medical Center has reported that $4 million in annual savings to the hospital — accrued as a result of HEFA financings and services — have reduced the number of hospital layoffs necessary during the recession and credit crisis.

And one of my favorite testimonials comes from the budget chief at Emerson Hospital, who said, “HEFA financing gives us the leverage to acquire tools that help improve patient outcomes.”

As you know, there is currently some limited overlap between HEFA and MassDevelopment. I have heard many different explanations of how and why it occurred. It happened around 1989, way before my time at HEFA. Since that time, nonprofit colleges and universities, as well as cultural institutions, have been able to choose between HEFA and MDFA as the issuer of bonds on their behalf.

Most colleges and universities have chosen an issuer of choice and consistently borrow through one issuer or the other. A handful of colleges and universities have used both issuers over time based on the requisite needs of particular projects. They, as well as certain cultural institutions, have used the dual authorization to negotiate discounted fees. As fiscally prudent nonprofits, they strive to conserve resources.

But the historical record shows that HEFA’s fee schedule has been consistently lower than that of MDFA. Therefore, many current MDFA client borrowers will benefit from HEFA’s lower costs.

The record also shows that HEFA’s efficiency and expertise lead to lower overhead and that keeps rates consistently low over long periods of time to meet the Commonwealth’s health care and educational financing needs. As reported this month by the Boston Business Journal, MassDevelopment’s operating budget per employee is $576,000. HEFA’s operating budget per employee is $230,000.

These savings pass directly to HEFA’s nonprofit clients, because HEFA’s only mission is to facilitate tax-exempt borrowing. When Massachusetts nonprofits spend less on fees to borrow, they have more resources available to spend on patient care, students and services.

We agree that fees should remain low for our nonprofit clients and are encouraged that the Senate President dealt with this directly in the legislation by prohibiting HEFA from raising its fees. We share Senate President Murray’s concerns and believe the proposed language will help us deliver on our important mission.

Before concluding, I would like to reiterate my introductory comments that HEFA is able and ready to take on the added responsibilities Senate Bill 2270 envisions for us. In fact, we are used to taking on more responsibilities. When the crisis in the credit markets occurred in 2008, HEFA’s expert staff took on the added responsibilities of refinancing $3 billion in auction rate bonds.

We are pleased with the draft legislation written by the Senate president and support her goals of streamlining quasi-public authorities and bringing oversight and a statewide coordination of effort to far-ranging missions.

HEFA’s sole mission has, for more than 40 years, been to provide low-cost, tax-exempt financing for the largest and smallest nonprofits in the Commonwealth to keep their costs low so they can better deliver on their important missions for the people of Massachusetts.

Further, we appreciate the recognition that HEFA — through low overhead, tax-exempt finance expertise, a focused mission, and a dedicated service orientation — is and will remain the low-cost issuer of tax-exempt bonds in Massachusetts. HEFA, with a long and proud history of operating transparently, not only welcomes continued legislative oversight, but already publishes an annual report, provides audited financial statements, and is routinely audited by the state auditor.

This farsighted legislation will ensure that the nonprofits that serve Massachusetts will be well served by HEFA’s mission-driven dedication into the future.

Caswell is executive director of the Massachusetts Health and Educational Facilities Authority. He delivered this testimony to the Legislature’s Committee on Economic Development and Emerging Technologies.