Date: October 7, By

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1 Boston Community Capital Calvert Foundation Capital Link Community Reinvestment Fund, USA Enterprise Community Investment Enterprise Community Loan Fund Housing Partnership Network IFF Local Initiatives Support Corporation Low Income Investment Fund Mercy Loan Fund NCB Capital Impact Nonprofit Finance Fund Opportunity Finance Network Partners for the Common Good Policy Link Primary Care Development Corporation The Reinvestment Fund Virginia Community Loan Fund Date: October 7, 2013 By Mr. Jim Macrae Associate Administrator for Primary Health Care Health Resources and Services Administration U.S. Department of Health and Human Services 5600 Fishers Lane Rockville, MD RE: Suggestions for upcoming Capital Development Program grant cycle to encourage outside investment in community health center expansion. Dear Mr. Macrae: We understand that HRSA intends to make available $30 - $50 million in capital grants to health centers in late 2013/early The undersigned members of the Lenders Coalition for Community Health Centers (LCCHC) are writing to make recommendations that could enable HRSA to leverage nongovernmental capital sources and support a greater number of critical capital projects. The Lenders Coalition for Community Health Centers consists of nonprofit organizations designated by the U.S. Treasury Department as Community Development Financial Institutions (CDFIs) and their affiliates who are actively involved with financing health center capital projects. We support initiatives that create opportunities for FQHC/CDFI collaboration to meet the important goals of health center expansion. Together, our organizations have provided financing and support to hundreds of health center expansion projects totaling well over $1 billion. Expanding health centers to meet the goals of the Affordable Care Act is expected to require more than $10 billion in additional capital. With the demand for capital far outstripping HRSA s available capital funds for community health center expansion now and in the foreseeable future, using available funds to leverage private sector investment will be critical to meeting the health care needs of millions of patients. Outside investment has other benefits, as well. In particular, it can add to HRSA s due diligence to ensure health center financial health and sustainability. For instance, CDFIs underwriting and ongoing monitoring of health center loans Public Ledger Building, 620 Chestnut Street, Suite 572, Philadelphia, PA

2 can help keep projects on track, identify problems early, and can enable collaboration with HRSA and other parties to correct issues when necessary. We recommend that HRSA implement one or both of the following in connection with the next capital grant funding cycle: 1. Incentivize leverage in scoring capital grant applications: While supplemental capital grant and loan funding was encouraged and documented in past funding rounds, it did not factor into the scoring of applications. We propose that HRSA specifically award points to applications that can show funding commitments (grants and/or term sheets for loans) from non-hrsa sources to leverage HRSA grants. To be meaningful, the scoring criteria would need to substantially favor applicants that show leverage. Greater amounts of leverage would likewise earn an applicant more points. (For example: 2 points might be awarded for applications that had 25-50% outside investment; 4 points for 51-99% leverage; 6 points for %, 8 points for 200% or more.) 2. Pilot program for CDFI Investment in Community Health Centers: Increasingly, CDFIs are working to fill capital needs for health center expansion. A program funded by the Department of Treasury and administered by the Opportunity Finance Network (the CDFI membership association) is working to build CDFIs capacity to finance health center expansion. We are proposing that HRSA use some of its remaining capital funding to launch a pilot program to encourage CDFI investment in health center expansion. Under this scenario, HRSA could allocate a portion of funds to CDFIs with proven capability to leverage and administer public funding. Those CDFIs would then make funds available as subordinated debt for health center projects that would then be matched with senior loans from other CDFIs. As you know the Kresge Foundation has previously expressed interest in providing capital alongside HRSA for this type of demonstration project, which would further augment the pool of capital available through this pilot effort as well. The program could be evaluated to determine its impact in terms of leverage, number and size of projects financed, health center access to capital, geographic distribution, and other factors. If it is deemed successful, this pilot could inform future efforts and policies in this area. A program like this is not without precedent. The Department of Education operates a Credit Enhancement for Charter School Facilities program that allocates funds to CDFIs for the purpose of helping them make loans to construct and expand charter schools. Through FY 2012, $242 million of DOE funds were appropriated and awarded, supporting or enabling $2.71 billion in total financing for charter school facilities. This is over 10 times leverage. The program has suffered very few losses. Only $1.21 million, or less than six tenths of one percent of all funds awarded, were lost to default since its inception in FY

3 Thank you for the opportunity to propose these recommendations. We hope you will consider these and other initiatives to encourage outside investment in health center expansion, and look forward to discussing these with you in person or by conference call. Please do not hesitate to contact Allison Coleman by telephone ( x 298) or (acoleman@caplink.org) or other members of the LCCHC if you have any questions or comments. Sincerely, Lenders Coalition for Community Health Centers (LCCHC) Members: Elyse D. Cherry, Chief Executive Officer Boston Community Capital Allison Coleman, Chief Executive Officer Capital Link Frank Altman, President & CEO Community Reinvestment Fund, USA Lori Chatman, President Enterprise Community Loan Fund, Inc. Tom Bledsoe, President and CEO Housing Partnership Network 3

4 Joe Neri, CEO IFF Emily Chen, Program Director, Health Center Financing Local Initiatives Support Corporation Nancy O. Andrews, President & CEO Low Income Investment Fund Julie Gould, President Mercy Loan Fund Scott Sporte, Chief Lending Officer NCB Capital Impact 4

5 Antony Bugg-Levine, CEO Nonprofit Finance Fund Mark Pinsky, President & CEO Opportunity Finance Network Jeannine Jacokes, Chief Executive Officer Partners for the Common Good Tom Manning Tom Manning, Managing Director Primary Care Development Corporation Don Hinkle-Brown, CEO The Reinvestment Fund 5

6 6 Lenders Coalition for Community Health Centers