Nonprofit organizations throughout the state of Wisconsin can now finance capital projects and refinance debts through bonds issued by the Wisconsin Health and Education Facilities Authority (WHEFA) that allow them to borrow funds at lower rates and exempt them from federal income taxes.
WHEFA, a governmental agency that administrates the issuing of bonds for nonprofits in Wisconsin, recently expanded its charter to serve all 501(c)3 nonprofit organizations in the state, regardless of focus areas or size.
The charter was expanded on July 1 and was established under Gov. Scott Walker’s 2013-2015 budget.
WHEFA was created in 1979 through Chapter 231 of the State Statute to assist nonprofit health care organizations, such as hospitals and health care systems, with the issuing of bonds. WHEFA expanded its finance services in 1987 to include private higher education institutions and continuing care facilities and in 2004 began serving private nonprofit K-12 schools. In 2009, the agency expanded its reach again to incorporate private nonprofit research institutions and health care IT projects.
Last fall, Dennis Reilly, executive director of WHEFA and one of four employees at the agency, began educating legislators about WHEFA and its mission and approached them about the need to extend the agency’s finance services to all nonprofits.
“In today’s economic environment, I think it’s important to allow all nonprofits access to my authority and low cost financing, and we’re just thrilled that this opportunity was included in the state budget and thrilled with the opportunity to work with all nonprofits in the state,” Reilly said.
Nonprofit organizations in need of financing to purchase equipment or to fund capital projects, such as facility renovations or construction, can work with WHEFA to connect with potential lenders. WHEFA also serves nonprofits needing to refinance existing debts.
While WHEFA issues bonds, the funding comes from a third party in the private or public market. WHEFA acts strictly as an administrator of a federal subsidy to issue bonds that are exempt from federal income tax.
“My authority is purely a conduit,” Reilly said. “I have no money to lend. The money comes from the private capital markets.”
The nonprofit organization borrowing the funds is responsible for paying back the principal and the interest over a period of time. There is no obligation to the state or WHEFA to pay back the loan, and there is no cost to the taxpayer.
Bonds issued to nonprofit organizations through WHEFA cover projects costing at least $1.5 to $2 million, Reilly said.
The average bond size the agency works with falls between $20 million and $30 million, but those dollar amounts are skewed since WHEFA has primarily been assisting larger health care systems that tend to borrow larger amounts of money, according to Reilly.
While nonprofit organizations can also gain access to bonds through cities, towns and villages, WHEFA streamlines the process for organizations and has the capacity to issue one series of bonds for nonprofit projects located in multiple jurisdictions.
“We have a high level of expertise when it comes to issuing bonds,” Reilly said. “We do approximately 25 to 30 bond issues every year where a local authority may only issue once or twice a year. This is what we do for a living, and we can provide that expertise and really make it an efficient plan of finance when a nonprofit needs to borrow money for a capital project or refinance their existing debt.”
WHEFA can also help nonprofit organizations ensure they’re complying with federal and state guidelines that outline what organizations can and can’t fund with bonds through assistance from bond council.
In servicing nonprofits, WHEFA charges a small annual fee – $62.50 per million dollars. For example, a bond issue worth $10 million would cost a nonprofit organization $625. The fee covers WHEFA’s operations so that there is no cost to taxpayers for its authority.
Reilly doesn’t anticipate having to hire any new staff members to accommodate the influx of nonprofits they will be serving. The agency’s last fiscal year, which ended on June 30th, marked its busiest year to date with the completion of 47 financings on the part of its four staff members.
Should WHEFA need to add to its staff, it will be able to absorb the additional cost with the service fees it currently collects from nonprofit clients.
WHEFA is a great starting point for nonprofit organizations wanting to explore the gamut of their funding options for capital projects and refinancing of debt, Reilly said.
“My mission is to provide nonprofits in the state with the best plan of finance that is available, and hopefully I can assist in that process,” Reilly said.
Reilly can be reached at dennis@whefa.com.
