STATE OF CONNECTICUT HEALTH AND EDUCATIONAL FACILITIES AUTHORITY. Minutes of Authority Board Meeting September 12, 2006

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1 STATE OF CONNECTICUT HEALTH AND EDUCATIONAL FACILITIES AUTHORITY Minutes of Authority Board Meeting September 12, 2006 The State of Connecticut Health and Educational Facilities Authority met in session at the Authority s office at 10 Columbus Boulevard, Hartford, Connecticut at 2:02 p.m. on Tuesday, September 12, The meeting was called to order at 2:02 p.m. by, Chair of the Board of Directors of the Authority, and upon roll call those present and absent were as follows: PRESENT: ABSENT: ALSO PRESENT: John M. Biancamano, Vice Chair (Rep. Honorable Denise L. Nappier), Chair Anne Gnazzo (Rep. Honorable Robert L. Genuario) Bryan K. Pollard Richard D. Gray, Executive Director, Jeffrey A. Asher, Managing Director/CFO, David A. Williams, Managing Director, Michael Morris, Assistant Director, Cynthia Peoples, Assistant Director, Eileen MacDonald, Manager, Administrative Services, JoAnne Mackewicz, Manager, Client Financial Services, Jennifer P. Smyth, Document Analyst, and David Wasch, Child Care Program Manager, of the Connecticut Health and Educational Facilities Authority John Yarbrough, Esq., of Carmody & Torrance LLP Edmund F. See, Esq., of Day, Berry & Howard C. Steven Donovan, Esq. and Kristi Perla, Esq., of Hawkins, Delafield & Wood

2 STATE OF CONNECTICUT HEALTH AND EDUCATIONAL FACILITIES AUTHORITY Minutes of Authority Board Meeting September 12, 2006 Christopher Valentino, Associate of Lamont Financial Services Corporation Sani Williams, Esq., of Lewis & Munday Steven Humes, Esq., of McCarter & English Jeanette Weldon, Vice President, of P.G. Corbin & Company, Inc. Jeremy Bass, Consultant, and Emily Abrantes, Consultant, of of Public Financial Management Michael Andreana, Esq. and John F. Stafstrom, Esq., of Pullman & Comley LLC Edward J. Samorajczyk, Esq., of Robinson & Cole LLP Coleman H. Casey, Esq., of Shipman & Goodwin LLP Dana A. Wilson, CPA, Partner, of Carlin, Charron & Rosen, LLP William Smyth The Notice of Regular Meeting was read and ordered spread upon the Minutes of this Meeting and filed for the record.

3 STATE OF CONNECTICUT HEALTH AND EDUCATIONAL FACILITIES AUTHORITY Minutes of Authority Board Meeting September 12, 2006 The Meeting was called to order by, Chair, at 2:02 p.m. MINUTES Dr. Sullivan moved approval of the Minutes of the Regular Meeting of the Board of Directors of July 25, 2006, which motion was seconded by Mr. Cohn. 1 None John M. Biancamano ELECTION OF VICE CHAIRPERSON Ms. Rubin asked for a motion to submit Mr. Colangelo s name for Vice Chairman of the Board of Directors. Mr. Biancamano made the motion and Mr. Cohn seconded the motion. Mr. Colangelo accepted the appointment as Vice Chairman. 1 Messrs. Biancamano, Blackburn and Rifkin abstained from voting as they were not present at the July 25 Meeting. 1

4 REPORT ON THE FY 2006 AUDITED FINANCIAL STATEMENTS Ms. Rubin introduced Dana Wilson, CPA, Partner, of Carlin, Charron & Rosen LLP to present the results of the Fiscal Year 2006 audit of Authority operations. Mr. Wilson gave a brief overview of what was discussed at the Audit-Finance Committee meeting earlier that day. Some of the topics highlighted and presented to the Audit-Finance Committee include the following required auditor communications: the auditors responsibilities regarding the preparation of the financial statements in accordance with auditing standards; significant accounting policies; audit adjustments, of which there were none; management s judgment regarding the use of estimates; the auditors judgment of the quality of the company s accounting principles; the Management Discussion and Analysis; and supplemental schedules. Mr. Wilson stated that there were no significant matters to report related to the audit. There were no disagreements with management on financial and accounting reporting matters, no consultations with other accountants, no major issues discussed with management prior to retention of the audit firm for the engagement, and no serious difficulties encountered in the course of the audit; no material errors, fraud, illegal acts or material weaknesses in internal controls. Carlin Charron & Rosen has not billed any additional fees other than those quoted for the audit engagement services. Nothing occurred in the course of the audit that would cause the auditors not to rely on the Authority s information. Regarding governance, there have been new promulgations from the Accounting Oversight Board, PCOP. These regulations relate to internal controls and proper levels of business controls. The Authority s internal accounting policies have not changed, and these are reviewed each year to ensure that they have been consistent with the prior year; there were no changes to industry standards relating to accounting that would affect the notes to the financial statements. There were no changes to the notes other than the numbers represented. Mr. Wilson reported that there have been eight new auditing standards issued, most of which affect only auditing firms. However, there is one which does affect audited clients. This new regulation will affect on CHEFA. The standard states that if an audit client does not physically prepare their financial statements, it will be considered a material weakness. Mr. Wilson stated that CHEFA Staff is capable of preparing the Authority s financial statements. He recommended that Staff develop an action plan regarding this new regulation and the impact on its borrowers, as the smaller and less sophisticated institutions may not be able to prepare their own financial reports, and a material weakness would be shown on the auditor s statement. CHEFA may decide to accept those financial statements indicating a material weakness, but there may be issues with the State Auditors of Public Accounts. He suggested some communication to Authority clients regarding the new regulation, which is effective for FY 2007, and perhaps phase in new requirements for its bond issue compliance. Mr. Wilson offered to share the auditing standard so that Staff could begin its planning on how to address CHEFA s client financial reporting. At this time, Ms. Rubin asked if the Members wished to enter into Executive Session with Mr. Wilson to discuss the audit results. The consensus of Members did not feel an Executive Session was needed, as five of the eight present had attended the Audit-Finance Committee, which held an Executive Session with the auditor. 2

5 REPORT OF THE AUDIT-FINANCE COMMITTEE Mr. Cohn reported on the Audit-Finance Committee Meeting that was held today prior to the Board meeting. The Committee conducted an Executive Session where Mr. Wilson was present, and there are no issues related to the audit results to report to the Board. Mr. Cohn praised Staff on their efforts toward corporate governance, stating that CHEFA is ahead of the curve in this matter. One item that arose from the presentation of the audit by Carlin, Charron & Rosen is that there is a new requirement by the Accounting Standards Board whereby companies must prepare the annual financial audit and related footnotes themselves. If a company s audit firm prepares the financial statements, it will be considered a material weakness. CHEFA must consider whether it will continue to accept audit reports from its clients where this material weakness is cited. Also, the Authority must consider whether it will consider prospective transactions where this material weakness is reported. Mr. Cohn stated the Audit-Finance Committee recommends Board approval of the audit report for FY Mr. Rifkin moved acceptance of the audit, which motion was seconded by Mr. Biancamano. Ms. Rubin remarked that Staff must determine whether the Authority will have issues from third parties, such as credit providers, the State, etc. if it accepts client audits prepared by an audit firm, resulting in a material weakness issue. Ms. Rubin thanked Mr. Wilson for his presentation, and congratulated Staff on the positive audit report. Mr. Wilson left the meeting at this time. Dr. Cibes charged the Audit-Finance Committee and Staff to discuss the matter of auditor prepared financial reports versus client prepared reports, and develop requirements regarding its clients for this new Accounting Board standard. If a client is not capable of preparing its audit, the Authority may be subject to an adverse finding by the Auditors of Public Accounts. Ms. Rubin concurred, and requested that Staff investigate this matter with the appropriate state departments. 3

6 Mr. Gray replied that there are two issues facing CHEFA regarding the Accounting Board standard: 1) whether the Authority will prepare its own fiscal year financial statements, and 2) the impact of this new requirement on CHEFA s borrowers. Mr. Gray feels that the Authority has the resources and expertise to prepare the financial statements, and will proceed to establish the necessary framework to do so for FY Regarding CHEFA clients, Mr. Gray posed that if this topic is seized upon by credit enhancers, it may add additional costs to tax-exempt borrowing. Staff will have to determine how to sort out this new requirement and its ramifications, and will seek legal opinions from Authority counsel. Mr. Cohn requested that when the Board meets in early December, the Audit-Finance Committee and Staff be prepared to report on the progress of the new audit requirements. CURRENT AND PENDING BOND ISSUES Financing Forecast Mr. Morris presented the Financing Forecast as of August 29, There have been some changes to this report since it was published, in that the Bridgeport Hospital transaction will be delayed for Board approval until the December meeting. Middlesex Hospital Series L&M will be presented today, as will the Sales Report for the Yale-New Haven Hospital Issue, Series J. The Child Care Facilities Program, Series F will also be delayed for approval until the December meeting. Jerome Home Series D and Mulberry Gardens Series E will be presented for approval at today s meeting. Summary of CHEFA Financings Regarding the Summary of CHEFA Financings, Mr. Morris stated that two issues have closed since the July Board meeting, Canterbury School, Series B and the University of New Haven Issue, Series G. Ms. Rubin asked why the Bridgeport Hospital transaction is delayed, to which Mr. Morris replied that the Hospital prefers to wait until its FY 2006 audited financials are available to proceed with the financing. The reports were accepted as information. Interest Rate Update Mr. Williams presented the Interest Rate update, stating that the 30-year Treasury rate is 4.91% today, down approximately 17 basis points since the July 25 Board meeting. The Revenue Bond Index (RBI) is currently at 4.88%; down about 21 basis points from the 5.19% level at July s meeting. The RBI was at a high on June 29 at 5.31%, with a subsequent 40-basis point decline in the tax-exempt long-term revenue bond index. The current one-month LIBOR rate is 5.33%, compared to 5.39% in July. The BMA index changed a little more than the LIBOR rate at 3.35% today from 3.66% at the July Board meeting. The 10-year Treasury rate is 4.78%, compared to 5.03% at July s Board meeting, and a high of 5.25% on June 28, with a decline of 45 basis points from that high. 4

7 SALES REPORTS Sales Report for the University of New Haven Issue, Series G Mr. Valentino presented the Sales Report for the University of New Haven Issue, Series G. The $15.89 million transaction provided funds for the construction of a new Student Center and an advance refunding of the taxable portion of University s 2005 Series F bonds. The new money amount was $11.1 million, and the refunding amount was $4.7 million. The Series G issue was sold in a variable rate mode with a weekly interest rate reset, and backed by a letter of credit from Wachovia Bank for a premium of 45 basis points. The bonds are rated AA-/A-1+ based on the Bank s ratings; the University does not have an underlying rating. Wachovia will also act as remarketing agent for the Series G issue, at an annual fee of eight basis points. The University s issue initially priced at 3.58%, which was equal to BMA; the reset rate two days later was 3.41%, also level with the BMA index. The Series G bonds were well-received, in a period when there were not a lot of new issuance in the market. The bonds were sold mainly to Fidelity and Citigroup, with one million of the issue sold to Dreyfus. The University of New Haven has entered in to an interest rate swap, which priced at 3.96% a month earlier than the sale of the bonds. The University will receive 68% of the three-month LIBOR index in exchange for a fixed rate. The refunding portion of Series G achieved a net present value savings of 6.75% on the prior bond coupon rate of 5.40%. Mr. Gray stated that the president of the University of New Haven wrote a very nice letter of appreciation to the Authority for its help on the transaction. Sales Report for the Yale-New Haven Hospital Issue, Series J Ms. Abrantes presented the Sales Report for the Yale-New Haven Hospital Issue, Series J. The first tranche, Series J-1 of $ million fixed rate par amount of bonds were sold on September 7; there will be two other tranches of variable auction rate bonds for the total issue amount of $280 million. Series J-2 and J-3 will price just before the closing scheduled for September 25. Proceeds for the Series J transaction will provide a portion of the costs of a new Cancer Center/North Pavilion on the existing campus of the Hospital. The bonds will be rated Aaa/AAA by Moody s and S&P, respectively, and will be insured by Ambac. Lehman Brothers will act as Senior Managing Underwriters on the transaction with Banc of America Securities and Morgan Stanley serving as Co-Managers. Market conditions at the time of pricing were optimal to receive the Yale-New Haven Hospital issue, having experienced a substantial decline in long-term rates in the previous month. There was an $800 million State of California General Obligation bond issue in the market that day, but it was not considered competition for the Series J issue, as there was a different buyer base. The market had a limited overall volume, and a limited supply of Connecticut paper, on the day of the sale, which helped the sale of the bonds. The pre-pricing was set at 14.3 basis points above the MMD rate, with serial bonds and one term. On the day of the pricing, Lehman lowered the yields by two basis points, which is equivalent to the secondary market trading for the Danbury Hospital s 2006 transaction, also insured by Ambac. There was limited health care issuance in the market, and lower spreads were achieved based on the Ambac insurance and the name recognition of Yale-New Haven. Orders for the bonds were strong in all maturities, both from 5

8 retail and institutional investors. The final orders and allocation information have not yet been received, but can be provided to the Board. The final pricing averaged approximately 13 basis points above the MMD scale, and the all-in true interest cost was 4.75%. PRELIMINARY STAFF MEMOS Quinnipiac University, Series H Ms. Peoples presented the preliminary information for the $71 million Series H Issue for Quinnipiac University. Bond proceeds will be used for various projects, including construction of a residence hall, acquisition of apartments, renovations to the Student Center, expansion of the dining hall, gymnasium and information systems upgrades. The University s issue will be structured as a synthetic fixed rate insured transaction. The University has entered into a BMA swap hedge at a rate of 4.602% with JP Morgan Chase Bank. Quinnipiac is meeting with both bond insurers and rating agencies this week; its current ratings are A- and A3 by S&P and Moody s, respectively. S&P reaffirmed its rating of the University in June Quinnipiac has three outstanding CHEFA issues which total $129.4 million: Series E insured by ACA with a wrap from FSA, Series F is a variable rate insured by Radian with a liquidity facility by Morgan Guaranty, and Series G which is a variable rate issue supported by a letter of credit by JP Morgan Chase. Undergraduate student demand continues to be strong with applications at an all-time high for last year at just over 11,400, and the University has received over 10,300 for Fall The strong demand has allowed Quinnipiac to be more selective, reducing its historical average acceptance ratio of over 70% to 52.7%, which compares to Moody s A median of 64%. Matriculation has continued to be flat averaging 23% over the last five years which is well below Moody s A and Baa medians of 29% and 31% respectively. The growth in enrollment is a part of the University s strategic plan targeted to increase FTE students. The growth has not affected student quality. The fall 2005 SAT score for entering freshman was 1,106, slightly lower than CHEFA s private school median of 1,147. Graduate enrollment reached a peak for fiscal year 2004 of 958 and was 880 for fiscal year No information is currently available for the fall of Applications at the Law School increased 47% over fall 2002 when they received 1,708 applications. For fall 2005 they received 2,195 and as of August 23 rd they had received 2,511. Quinnipiac has indicated that it has made a planned decrease in enrollment at the Law School in order to improve student quality. LSAT scores have increased, from for fall 2002 to 156 for fall 2006 out of a maximum 180. The University s finances through fiscal year 2005 include an average operating margin of 19.45% over the past five fiscal years. This far surpasses Moody s AAA median of 5.9%. For FY 2005, Quinnipiac had a $49.8 million operating surplus with endowment spending of.3% totaling about $350,000. Total Net Assets have grown to $336.5 million increasing 285% over the last five years. Cash and investments grew 274% to $229.4 million in the same period. Expendable resources to operations provide a 1.54 times cushion, which compares to Moody s A median of 1.2 times. Including the new issue amount, expendable resources to debt will provide a 1.67 times cushion also higher than Moody s A median of 1.5 times. Quinnipiac endowment has grown to greater than $205 million, an increase of more than 224% since FY 6

9 2002 with 91.8% unrestricted. The New Millennium capital campaign has been very successful, receiving $44.7 million in gifts and grants, including $10 million for endowment. The University is preparing to launch a new campaign, Academic Excellence and National Prominence, in Ms. Peoples noted that Quinnipiac has provided corrected information regarding Exhibit I, which will be included in the final information presented at the October Board meeting. STAFF MEMOS Jerome Home Issue, Series D and Mulberry Gardens Issue, Series E Mr. Asher presented the Staff Memo for the $11.9 million Series D Jerome Home Issue and the $4.2 million Series E Mulberry Gardens Issue. These transactions were previously presented on a preliminary basis to the Board at the July 27, 2006 meeting. The two transactions will be structured as variable rate issues, offered in one official statement. There has been a change in the amount of the Jerome Home issue with an increase of $1.5 million, due to increased project costs. The $8,223 million new money for the Jerome Home Issue is being used for a $15 million 62- bed assisted living facility; and $2.7 million is allocated for refinancing the variable rate 1997 CHEFA bond issue. Key credit strengths for the Jerome Home include a healthy private payor mix, and a high stable occupancy rate, averaging 98.7% for the past five fiscal years. Jerome Home is the only facility offering all of HFA, ICF and SNF levels of care in the New Britain area. Jerome was recognized as one of the top ten facilities in Connecticut according to Consumer Reports September 2006 Nursing Home Guide. Financial operations as of September 30, 2005 indicate favorable cash and investments at $19.1 million. Cash to pro forma debt is also favorable at 160.8% for FY 2005, and days cash on hand for the same period is very favorable at days. The Jerome Home has experienced losses from operations totaling over $835,000 for the past four fiscal years. Jerome s management addressed the losses at the due diligence session, stating that they have made a change in senior management, and the Home identified a number of expense and budget areas to control expenses going forward. Jerome also anticipates that the addition of the assisted living facility will bring in more private pay revenues. The private pay census has declined from over 44% in FY 2003 to approximately 37% as of June 2006, and further declines may be expected with the opening of the assisted living facility. Staff is concerned with the level of historical maximum annual debt service coverage for Jerome Home, which equaled 1.03 times in FY With the addition of the assisted living facility, this level is expected to stabilize. The Mulberry Gardens, Series E, Issue, will provide for a refinancing of a $4.2 million taxable loan through the Bank of America, which loan was used to purchase the facility for Bradley Healthcare. Mulberry has experienced improving financial operations, with income from operations increasing from a loss of $257,000 in FY 2003 to a gain of over $285,000 in FY

10 Occupancy has increased from 76.7% in FY 2003 to 99.5% in FY Pro forma debt service coverage for FY 2005 is favorable at 2.95 times. The Jerome Home is comprised of 116 beds, 60 of which are skilled nursing, 30 intermediate care beds, and 26 residential private care private rooms. Mulberry Gardens is a 93-apartment community that offers assisted living and memory care services. With the addition of the 62-unit assisted living facility, Jerome Home will add 16 units devoted to Alzheimer s care, and apartment options at the new facility will include 25 studio units, 17 one-bedroom units, and four two-bedroom units. Series D will also refinance approximately $2.7 million in outstanding variable rate debt for Jerome issued by CHEFA in Mulberry s Series E Issue will refinance a $4.1 million loan issued by Bank of America. There being no further discussion, Ms. Rubin introduced Resolution A and B (Jerome Home Issue, Series D and Mulberry Gardens Issue, Series E, Authorizing), which resolution was read and considered. Mr. Cohn moved for adoption of Resolution A and B, which was seconded by Mr. Biancamano. The Chair then declared Resolution A and B adopted (see Appendix A, Resolution A and B). Middlesex Hospital Issue, Series L & M Mr. Morris presented the Staff Memo for the two issue series for Middlesex Hospital Issue. Series L will be a fixed rate issue in the amount of $23 million to finance a portion of a new Emergency Department and surface parking. The total cost of the project is $31.2 million, and the hospital will fund the balance of costs from equity and capital campaign contributions. A CON approval has been received from the Office of Health Care Access ( OHCA ) for the project. The $16.8 million Series M portion of the Hospital s issue will be a variable auction rate structure, which proceeds will provide for the refinancing of Middlesex s 2002 Series K Issue with $14.5 million outstanding. The net present value savings on the refinancing is at breakeven. However, the bond insurer, FSA, most likely would not have insured the Series L portion without the refinancing. Also, auction rate issues historically trade at better interest rates than the 7-day 8

11 variable rate demand bonds, as in Series K. FSA s premium for the two series will be 165 basis points. Included in the Obligated Group for the Series L&M issues will be the Hospital and its parent, Middlesex Health System; the Hospital does not have a Foundation. Middlesex currently has $58.7 million in bonds outstanding: Series H $40.8 million, Series J $33.4 million, and Series K $14.5 million. The Hospital is also the guarantor of the $7 million Middlesex Health System, Series I, Issue, which financed the renovations to an assisted living facility. Middlesex Hospital has an underlying rating of A3 with a stable outlook with Moody s Investor Services, which rating was recently affirmed with a positive outlook. Middlesex Hospital reported 153 staffed beds and 11 bassinets out of its 275 licensed beds and 22 bassinets for FY The average daily census, excluding newborn, for FY 2005 was 139, an increase from 115 five years ago. For the first eight months of FY 2006, census was 143 patients, or 94% occupancy. The Hospital enjoys a strong market share, with no other acute care hospitals in its primary service area, which is comprised of 15 towns in Middlesex County. There are nine other hospitals that do garner a share of Middlesex s 58 primary service market share including Hartford, Yale-New Haven Hospitals, MidState Yale-New Haven Hospitals, and the Hospital of Saint Raphael. Discharges have increased 9.5% over the last five years, and increased 4.9% for the first eight months of FY The average length of stay increased from a low of 4.0 days in FY 2001 to 4.4 days in FY 2004; FY 2005 and FY 2006 levels are 4.3 days. Outpatient volume for the Emergency Department has increased approximately 7% over the last five years, at three sites: Middlesex, Essex and Marlborough. Emergency visits are currently at 33,000, at the current facilities which were designed for 26,000 patients. The proposed new Emergency Department will be able to serve 50,000 patients by 2015, and can expand to accommodate 60,000. Ambulatory surgeries increased 7.2% over the past five years, but have declined 19% in the first eight months of FY The Hospital attributes the decline to a gastroenterology group which opened an endoscopy suite in Middletown in Operationally, Middlesex has been profitable with positive operating margins for the past fifteen years. For FY 2005, the Hospital experienced a significant operating margin of 6.3%, or $15.2 million operating gain. The operating gain for the first eight months of FY 2006 is less than FY 2005, but still ahead of budget. Cash and investments as of September 30, 2005 were $118.0 million, an increase of 89.2% from $63.4 million in FY Days cash on hand increased from 153 days in FY 2001 to over 202 days in FY 2005, an increase of 32.5%. Cash to pro forma debt, including the $23 million for Series L, is 128%, slightly above Moody s A median of 125.2%. The pro forma debt service has been favorable for the past five years, and the coverage for FY 2005 is very strong at 5.23 times, including the new debt. Moody s cites the Hospital s strong market share and liquidity position as factors in its affirming rating, and upgrading its outlook to positive from stable. Ms. Rubin asked if the 58% market share is increasing or decreasing compared to prior periods. Mr. Morris replied increasing slightly or same. The Hospital did not provide any specific history for each fiscal year regarding market share. Ms. Rubin asked if the cash to pro forma ratio 9

12 includes guaranty amount. Mr. Morris replied that the guaranty amount was not included in the cash to pro forma debt ratio, but was included in the debt service coverage ratio calculation. There being no further discussion, Ms. Rubin introduced Resolution (Middlesex Hospital Issue, Series L & M, Authorizing), which resolution was read and considered. Mr. Colangelo moved for adoption of Resolution , which was seconded by Dr. Sullivan. The Chair then declared Resolution adopted (see Appendix A, Resolution ) PARK FAIRFIELD AUTHORIZATION TO USE AUTHORITY RESERVES Mr. Gray called Members attention to the resolution requesting Board approval for the Executive Director to take actions necessary relative to the 3030 Park Fairfield nursing home workout. This nursing home, located in Fairfield County, has been in receivership for the last year or so. After the Receiver was appointed, operations at the facility stabilized. The Receiver marketed and solicited bids for the sale for the facility. CHEFA s Board approved the creation of a subsidiary were it necessary to take over the nursing home. The Board also approved the establishment of a minimum bid level for the sale of $9.8 million, which made a substantial difference in the bids, ultimately achieving a sale price of $ million. The closing for the sale of the 3030 Park Fairfield facility was held on August 15, 2006, which provided an $899,000 recoupment to DSS and provided payment to the Receiver for its services and reserves for the receiver's estimated payables and potential claims. Approximately $7.8 million flowed to the escrow account for the bonds. There remains a potential loss to the State of possibly as high as $5.3 million. When the facility was sold, Staff sought advice of the Treasurer s Office and counsel regarding the tax-exempt status of the bonds; in order to maintain that status they should be redeemed by the first call date, November 1, In order to prevent a possible call on the State s Special Capital Reserve Fund, Treasury Staff may advance funds to redeem bonds. Mr. Gray stated that the purpose of the resolution for the 3030 Park Fairfield nursing home issue would empower the Executive Director, working in conjunction with the Treasurer s office, to execute agreements to redeem the bonds. CHEFA is being asked to certify to the Treasurer s Office that: 1) that there are not sufficient funds on deposit to redeem the bonds; and 2) the 10

13 bonds could become taxable if not redeemed by the call date. In concert with the Treasurer s office, Staff requesting Board approval of this resolution. There is a required 45-day advance notice to bondholders in order to redeem the bonds for the November 1 call date. Mr. Rifkin informed the Board that, but for the tenaciousness of the Authority, and specifically Mr. Gray, regarding the workout for 3030 Park Fairfield, the State s exposure to a draw on the SCRF could have been larger. Mr. Gray worked with other significant state agencies to achieve the positive results for this workout issue. Mr. Rifkin reported that the funding for redemption of the bonds may be derived from general obligation debt service from the Office of Policy and Management, which would result in saving a draw on CHEFA s SCRF reserves. Mr. Gray acknowledged Mr. Williams diligence on the 3030 Park Fairfield workout, which was absolutely integral to the results achieved. Ms. Rubin questioned whether the resolution shows the amount that may be required from CHEFA s reserves, to which Mr. Rifkin replied he hoped there would be no draw necessary on the Authority reserves. There being no further discussion, Ms. Rubin introduced Resolution (3030 Park Fairfield Health Center Project, Authorizing), which resolution was read and considered. Mr. Rifkin moved for adoption of Resolution , which was seconded by Mr. Cohn. The Chair then declared Resolution adopted (see Appendix A, Resolution ). RECOGNITION OF CHEFA STAFF ANNIVERSARY Ms. Rubin interrupted the Meeting to recognize a significant CHEFA Staff service anniversary. Mr. Gray stated that the celebration of such a significant length of service is very rare. The employee started at the Authority in 1971, and recently celebrated a 35-year service anniversary. Mr. Gray offered congratulations to Jennifer Smyth on behalf of the Board Members, coworkers, and consultants, for this significant achievement. He thanked Ms. Smyth for all she has done, and said that the Authority could not run without her assistance. All attendees of the meeting acknowledged Ms. Smyth with a standing ovation. Ms. Smyth replied that she has enjoyed working for the Authority, and is often asked how she could work so long in one company. She acknowledged the employees and staff, the consultants and counsels of the Authority as being wonderful to work with, and added that her work is 11

14 always an adventure. Ms. Smyth added that she has seen many changes over the years and the operations were always ethically conducted, and Mr. Gray has given everyone new standards to which to adhere. CHEFA FINANCIAL OPERATIONS Financial Statements for the Month of July 2006 Mr. Asher presented the financial statements for the month of July 31, 2006, the first month of the new fiscal year. The financials show an excess of revenue over expenses of $225,855 compared to a budget excess of $154,622. Two reasons for the variance are 1) investment income is above budget by $35,000, and 2) salary and benefit expense are below budget. The yield on Authority investments is currently 5.5%, compared to a budgeted yield of $4.0%; the salary and benefit expense level is due to the vacancy of two staff positions. OTHER REPORTS Report of the Human Resources Committee Dr. Cibes reported on the Human Resources Committee Meeting that was held today prior to the Board meeting. The Committee recommends Board approval of a revised vacation policy, which proposes an increase of the accrued vacation time for non-officers from the current level of four weeks to five weeks earned after 25 years of service. Dr. Cibes moved for approval of the revised vacation policy of five weeks accrued time after 25 years of service. Dr. Blackburn seconded the motion. Dr. Cibes then stated that the Human Resources Committee had conducted performance reviews of the Executive Director and two Managing Directors. Dr. Cibes reported the review of the Executive Director showed excellent results, based on budget controls, responsiveness to the Board, CHEFA clients, and maintenance of a highly qualified staff. Most of the goals under the strategic plan have been completed for FY 2006, and the Committee recommends Board approval of the payment of incentive compensation for the three officers of the Authority, as well 12

15 as an increase in base compensation to match inflation at the level established for all CHEFA employees. Dr. Cibes moved for approval of the recommendations of the Human Resources Committee regarding the performance reviews and compensation for the Executive Director and two Managing Directors. Mr. Blackburn seconded the motion. DATE OF NEXT MEETING The Chair reminded everyone that the next Board Meeting is scheduled for Tuesday, October 24, 2006 at 2:00 p.m. There being no further business, at 3:30 p.m., Dr. Cibes motioned to adjourn the meeting. Mr. Cohn seconded that motion. Upon roll call, the Ayes, Nays, and Abstentions were as follows: Respectfully Submitted, Richard D. Gray Executive Director 13