STATE OF CONNECTICUT HEALTH AND EDUCATIONAL FACILITIES AUTHORITY. Minutes of Authority Meeting October 23, 2000

STATE OF CONNECTICUT HEALTH AND EDUCATIONAL FACILITIES AUTHORITY Minutes of Authority Meeting October 23, 2000 The State of Connecticut Health and Educational Facilities Authority met in session at the Authority s office at 10 Columbus Boulevard, Hartford, Connecticut at 2:11 p.m. on Monday, October 23, 2000. The meeting was called to order by Barbara Rubin, 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 A. Barone, Vice-Chairman John Biancamano William J. Cibes, Jr. Benson R. Cohn (Rep. Marc S. Ryan) Patrick A. Colangelo Phyllis C. DeLeo Howard J. Rifkin (Rep. Denise L. Nappier) Barbara Rubin, Chair Laurence R. Smith, Jr. James R. Birle Richard D. Gray, Executive Director, Jeffrey A Asher, Managing Director/CFO, David A. Williams, Managing Director, Diana Hughes, Accounting Manager Eileen MacDonald, Manager, Administrative Services, JoAnne Mackewicz, Manager, IT/Compliance Michael Morris, Manager, New Business, Erin Pellicci, Financial Analyst Compliance/Audit Cynthia D. Peoples H., Financial Analyst, and Jennifer P. Smyth, Document Analyst, of the Connecticut Health and Educational Facilities Authority Frederic Martucci, Managing Director, of FitchIBCA, Duff & Phelps H. Bart Price, Sr. Vice President, Finance, of Yale-New Haven Hospital

STATE OF CONNECTICUT HEALTH AND EDUCATIONAL FACILITIES AUTHORITY Minutes of Authority Meeting October 23, 2000 ALSO PRESENT: J. Hanson Guest, Esq., of Brown, Rudnick, Freed & Gesmer John D. Yarbrough, Esq., of Carmody & Torrance Edmund See, Esq., of Day, Berry & Howard Laurie Hall, Esq., of Hawkins, Delafield & Wood Patrice I. Mitchell, Senior Managing Director, of P.G. Corbin & Company Stephanie Gibson, Managing Director, of Public Financial Management Edward J. Samorajczyk, Jr., Esq. and David M. Panico, Esq., of Robinson & Cole LLP Coleman H. Casey, Esq., of Shipman & Goodwin LLP Eric P. Taylor, Esq., of Whitman Breed Abbott & Morgan The Notice of Regular Meeting was read and ordered spread upon the Minutes of this Meeting and filed for the record.

BOARD OF DIRECTORS MEETING October 23, 2000 The Meeting was called to order by Barbara Rubin, Chair, at 2:11 p.m. MINUTES Ms. Rubin requested that the agenda item for approval of the Minutes from the September 11 meeting be addressed before the presentation by Fitch. Therefore, upon motion duly moved and seconded, the revised Minutes of the Regular Meeting of September 11, 2000 were unanimously approved. Ms. Rubin welcomed and introduced CHEFA s newest Board member, Mr. John Biancamano, who is the Vice President, Finance of Hartford Hospital. The Chair also reminded everyone present of the reception for Mr. Price s retirement that will immediately follow today s meeting. HEALTHCARE PRESENTATION BY FITCH IBCA Ms. Rubin introduced Mr. Fred Martucci, Managing Director of FitchIBCA. Mr. Martucci discussed his company s rated portfolio, which is made up of 159 hospitals, health care systems, or related institutions in 37 states. The smallest organization is a 25-bed hospital, and the largest has over 125 beds. He outlined the issues from the handout material that he would discuss in length: profitability, cash flow (how institutions cover debt service), and liquidity (includes both unrestricted and Board designated funds). In 1998, Fitch forecasted that profitability and debt service payments would experience significant declines. 1999 results demonstrated a 63% decrease in profitability. The AA institutions experiencing the least decline, at 57%; below investment grade clients fared far worse, at five times the decline. Changes in the portfolio regarding shifting in the ratings of institutions were not great. Numbers on Excess Margin, which include non-operating revenue, declined to a lesser degree, by 34%. This level of change is not expected to continue, but in fact worsen. Again, the individual rating categories did not show significant change, except in the below investment grade level. One reason for the significant fall in this category is the areas in which those institutions funds are invested. Mr. Martucci stated that organizations are becoming more aggressive in ways to make money, and are looking to investments to provide additional funds. In the area of Debt Service Coverage by EBITDA, 1 the AA institutions were all operating in the area of 4 times coverage. Debt Service Coverage by Cash Flow from Operations Before Interest ( CFFOBI ) was somewhat worse. The most significant deterioration was in the ratio of CFFOBI Less Capital Expenditures, in which 78% of the Fitch portfolio did not achieve a level of 1.0 times. Institutions in this category that were hardest hit were those rated AA. 1 EBIDA Margin: Shown as a percentage, earnings before interest, taxes, depreciation and amortization, divided by total operating revenues plus non-operating revenues. Minutes of the Board of Directors Meeting October 23, 2000 1 Final Approved: 12/11/00 2:05 PM

Liquidity levels did not decline as greatly, with only a 17% change. Accounts Receivable days continue to increase, and includes difficulties in the areas of coverage and operations. Ms. Rubin asked why the larger hospitals were most impacted, and Mr. Martucci replied that because they are larger and often have more cash available, changes are not as readily apparent as with a smaller facility that may rely more on its cash position. He stated that, for the first time in five years, the reported Days Cash on Hand did not improve. For the nine months ended September 30, 2000, Fitch downgraded 16 creditors, and there were no upgrades in its portfolio. A 1999 municipal default study showed that this market is relatively safe, but indicated that defaults in the health care portion were around 2.6%. Mr. Martucci cited factors for the decline in health care as including the impact of the Balanced Budget Act ( BBA ), decreased payments from managed care payors (capitation contracts), rising personnel and supply costs (primarily nursing and pharmacy), and sustained losses on physician contracts. Nearly every hospital in Fitch s portfolio underestimated the impact of the Balanced Budget Act. Ascension Health, which has a strong management team, also underestimated the impact of the BBA. A large factor in the performance of a hospital is its management, and Mr. Martucci said that it is often difficult in dealing with an institution when its Board is not represented. This makes it difficult to determine a sense of the client s management and underlying operating philosophy, which is reflected in those organizations experiencing the most problems. Pressures in the health care sector will continue, due to the enactment of the Health Insurance Portability and Accountability Act ( HIPAA ), enacted in 1996, additional 1997 legislation regarding a payment system based on Ambulatory Payment Classifications ( APCs ), and shifting of investment and debt portfolios. HIPAA established standards to regulate the way health information is transmitted and secured electronically, and the amount of capital to meet compliance could be significant. Information systems technology affecting both operations and finances necessary to implement the outpatient prospective payment system for Medicare on APCs is expected to be staggering. Hospitals have become increasingly dependent on nonoperating income, primarily investment income, to compensate for decreases in operating income. Trends by hospitals towards investments in equities and the use of variable rate debt could be dangerous as the stock market changes. Mr. Martucci distributed articles prepared by Fitch on HIPAA, APCs and the shifting of investment and debt portfolios of hospitals and health care systems. Fitch recommends that institutions focus in the following areas to control the affects of factors affecting health care: governance and management, lines of business, information systems, reimbursements procedures and retention of physicians and nurses. The percentage of health care debt in the market is expected to remain flat, between nine and twelve percent of the total. Additionally, access to the market will be increasingly difficult, due in part to the decreased availability of credit enhancement. The institutions that need bond insurance will most likely be unable to secure backing, due to the reduction by insurers in this market. Letter of Credit banks are also pulling away from financing health care, and are experiencing mergers and consolidations, further reducing accessibility of this type of enhancement. Covenants and security provisions will continue to tighten, and the requirement of a mortgage may increase as a stakehold interest measure. Institutional investors may be reluctant to select hospital credits, except at higher interest rates, due to the decline in credit quality. Hospitals must provide ongoing disclosure in order to continue to draw interest in their bonds. Also, increased scrutiny by the IRS and SEC for Minutes of the Board of Directors Meeting October 23, 2000 2

reporting requirements makes disclosure critical to forestall the imposition of fines or the possible loss of the benefit of tax-exempt financing. Ascension Health is currently in the midst of an IRS audit, and their position is unchanged in that they are fully disclosing all information and assert that there are no liability issues. Variable rate issues that are frequently remarketed are expected to be the most likely to be subject to audit. The Chair thanked Mr. Martucci for his presentation and update on the hospital market. Mr. Martucci then left the meeting. CURRENT AND PENDING BOND ISSUES Mr. Morris reported on the Financing Forecast, indicating a new EasyLease application by Sacred Heart University for $1.0 million in computer and telephone equipment. Kent and Kingswood- Oxford Schools have been postponed for Board approval until December. CHEFA sent a mailing to its clients on the EasyLease program, which has generated some interest, in particular from hospitals, including Bridgeport, Bristol and St. Mary s Hospitals. Mr. Morris stated that there were no closings or changes to the Summary of Financings report. The reports were accepted as information. INTEREST RATE UPDATE Mr. Williams gave a verbal report on market interest rates, which show readjustments between various maturities since the report of September 11. The 30-year Treasury rate is unchanged since last month s information, and the 10-year rate is currently down 16 basis points. Taxexempt revenue bond ratings are up 8 basis points, but long-term rates are down by 2 points. LIBOR has risen 10 basis points. PRELIMINARY STAFF MEMORANDUM The Gunnery School Issue, Series A Ms. Peoples H. presented the information for the Gunnery School s first CHEFA financing. The School was established in 1850 and is a four-year coeducational college preparatory boarding and day school located in Washington, CT. There are 254 students enrolled in grades 9 through 12 for the current school year, 193 boarding and 61 day students. Staff received a request by the Gunnery today to increase the size of the issue to $10.0 million. Additional information and analysis will be reviewed to reply to the request. Mr. Asher stated that Staff is concerned about the School s ability to carry the debt load for the increased amount of financing. Ms. Peoples H. stated that, although Gunnery is not a strong credit, it compares to other CHEFA financed independent schools such as Pomfret and Canterbury. A 30-year variable rate structure supported by a letter of credit is being considered by the School. There has been no request for proposals for a LOC provider sent as yet. Projects included for this transaction are renovations to dormitories, a dining hall and a field house, as well as the construction of an alumni house, and maintenance building. Minutes of the Board of Directors Meeting October 23, 2000 3

The average number of applications for the last five years is 398, but for Fall 2000 the School received a total record number of applications of 623 for approximately 117 spaces. Selectivity increased to 40% from 75.4% over the same five-year period, reflected by the increase in Fall 2000 applications. Matriculation averages 38.2% in this same period, and improved to 46% for Fall 2000 enrollment. Geographic distribution of the student body is made up of 21 states and 17 foreign countries. Attrition is high at 19%, compared to Canterbury (14%), Pomfret (9.7%), and Salisbury (14.5%). Staff will seek more information to be included in the final presentation for Board approval at the December 11 meeting. SAT scores are low at 1,080, but are above the national average of 1,019 and Connecticut scores of 1,017. Ms. Peoples H. then reviewed the credit information for the Series A issue. Expendable resources to debt is 1.2 times, and.76x for a $10 million issue in FY2000. Expendable resources to operation is 1.26 times for a $7.0 million issue in FY2000; 1.02 times for $10 million. As of June 30, 2000, the market value of Gunnery s endowment fund is $15.4 million, which has increased from $5.0 million in FY 1996; 55.9%, or $8.62 million of funds are unrestricted. The School is preparing to launch a capital campaign. A brief discussion followed, including a suggestion by Dr. Cibes that the dramatic increase in applications is related to the Internet. Ms. Peoples H. replied that such may well be the answer, as the School had recently launched its Web site. Ms. Rubin asked how Staff based its comparison to other independent schools. Ms. Peoples H. responded that information from the Appendix A prepared by Gunnery indicates which schools it considers as peers, and Staff compares financial ratios to its internal sector analysis. Mr. Gray reported that Ms. Peoples H. is working on the development of a database for comparing the independent school sector similar to the information provided for the nursing home report. The data will include analysis on 2 to 3 credit levels within the sector. Staff will make a formal presentation to the Board once the report is compiled and completed. Loomis Chaffee School Issue, Series D Ms Peoples H. gave the information on the $24 million Series D issue for the Loomis Chaffee School. The School has three outstanding issues: Series A, $1.0 million; Series B, $10.26 million; and Series C. $11.44 million. Loomis will make a $2.0 million equity contribution toward the Series D transaction. This financing will be insured, either as a 30-year fixed rate issue, or a combination $10 million, 30-year fixed rate and a $12 million 5-year variable rate with a single maturity and a liquidity facility for the variable rate portion. The School will seek insurance through MBIA, which insured the Series B and C bond issues. Proceeds for the new issue will be used to renovate and expand the existing gymnasium complex, make improvements to the electrical substation in support of this expansion, and upgrade an exterior athletic track. Loomis has a history of high demand, and received 1,114 applications for 250 spaces, its largest number of applications for the entering class of Fall 2000. Selectivity is down from 54.5% in Fall 1995 to 48% for Fall 1999. Matriculation has improved from 38% in Fall 1996 to 47.9% in Fall 2000, which is below Moody s medians for this category, but which compares to competition such as Kent and Westminster Schools. Students are drawn from 31 states and 15 foreign countries, with 62% from Connecticut. Minority students comprise 20% of the student body, 5.6% African American, 9.5% Asian, 1.82% Hispanic and 3.1% other. Attrition (2.5%) and SAT scores (1,280) are favorable; SAT scores for competition are 1,156 Kent, 1,299 - Choate, and 1,226 Westminster. Minutes of the Board of Directors Meeting October 23, 2000 4

Ms. Peoples H. reviewed the credit factors for the financing, stating that debt service to operations with the new issue decreases to 11%. This is higher than Moody s medians, but is in line with peer schools such as Choate 6.7%, Kent 12.7%, Taft 9.2% and Westminster- 9.8%. Historical coverage of future debt for FY2000, based on a projected annual debt service of $2.6 million is 1.72 times. As of June 30, 2000, the FY1999 draft audit for Loomis shows the market value of the endowment fund to be $90.2 million. Expendable resources to operations at June 30 is 2.73 times. Expendable resources to debt and expendable resources to operations have shown improvement in the draft FY2000 audit to 1.48 times and 2.89 times, respectively, compared to Taft School at 1.27 times and 2.32 times. Loomis Chaffee shows a strong June 30, 2000 balance sheet of $140.3 million, up from $109.2 million at June 30, 1996. Ms. Peoples H. stated that Staff expects to present this financing for approval at the December 11, 2000 Board meeting. A brief discussion followed, including a question from Mr. Biancamano on the change in restricted versus unrestricted assets from FY1999 to FY2000. Ms. Peoples H. replied that additional information will be included in the final memo on this matter. CONSENT AND BOND ISSUE AUTHORIZATION RESOLUTIONS Continuing Care Retirement Community of Greater Stamford, Inc. (Edgehill) Issue, Series C Mr. Williams distributed the authorizing resolution for the Edgehill Issue. Mr. Colangelo recused himself from discussion and voting, due to his position as Sr. Vice President, System Support Services and Treasurer of Stamford Health Systems, of which Edgehill is a subsidiary. Staff recommends approval of up to $22 million for the Series C issue, which will be issued as variable rate bonds. KBC Bank, New York Branch, which is rated Aa3/A+ long-term and P-1/A-1 shortterm by Moody s and Standard & Poor s, will provide enhancement through a letter from credit. The letter of credit provider has changed since the preliminary memo, because Fleet withdrew from the transaction. Edgehill has demonstrated outstanding success in achieving 95% occupancy within seven months of operations, compared to 95% occupancy on 24-months fill-up assumption in the base case feasibility study. At June 30, 2000, twelve months after opening, Edgehill had sold all 207 of its CCRC independent living units, generating more than $83 million in entrance fees. Edgehill has already paid off 66.4%, or $56 million, of the $84 million in CHEFA bonds. After the Series C refinancing, the $20.8 million estimated remaining debt will be equal to less than 25% of the original 1997 debt. Edgehill has also paid down subordinated debt to Marriott and Stamford Health Systems and deferred remarketing and start-up fees associated with the CCRC project. The Assisted Living unit has experienced a slower fill-up, but demand is good. The Skilled Nursing Facility unit is less than half occupied as of August 31, 2000. Edgehill has reduced staffing for the SNF unit to 30 beds, and is holding assisted living beds open to assure availability for contracted CCRC residents when needed. Due to the short operating history, Edgehill does not meet Authority and Standard & Poor s underwriting guidelines of a five-year operating history for attainment of an investment grade rating. Merrill Lynch believes the short operating history will prevent the Series C issue from being rated investment grade on a stand-alone basis. Edgehill and Marriott do not reserve for, nor accrue cash from monthly fees for, future required health care obligations. The facility has a Type I life care contract that commits to providing lifetime health care in return for entrance fees and monthly resident fees. However, physical Minutes of the Board of Directors Meeting October 23, 2000 5

examinations are required before the second deposit of 10% is accepted. Also, the feasibility study and current management project that with 95% occupancy, the monthly CCRC fees will cover the extra health care costs. Mr. Williams summarized the salient points for Staff s recommendation for approval of the Series C issue as follows: 1) existing CHEFA debt will be refunded with the new issue; 2) the remaining previously unenhanced debt will become enhanced; 3) the overall amount of debt will be reduced; 4) Edgehill is a strong credit, based on the exceptional fill-up rate; and 5) the strength of the ratings of the letter of credit bank. A brief discussion followed, including a discussion of the coverage of costs for the Type 1 health care contract, and the results of the recent due diligence meeting held for the transaction. Mr. Colangelo stated that, in addition to the facility being completely sold out, there is also a considerable waiting list. Mr. Williams reported that Edgehill presented itself well at the due diligence session, and discussed the SNF and Assisted Living units, as well as sources from the CCRC. Representatives from the Marriott Corporation also spoke at the meeting. There being no further questions, the Chair then introduced Resolution 2000-13 (Edgehill Issue, Series C, Authorizing), which Resolution was read and considered. Mr. Smith moved adoption of Resolution No. 2000-13, which motion was seconded by Dr. DeLeo. Upon roll call, the Ayes, Nays, and Abstentions were as follows: AYES NAYS ABSTENTIONS John A. Barone None Patrick A. Colangelo John Biancamano William J. Cibes, Jr. Benson R. Cohn Phyllis C. DeLeo Howard J. Rifkin Barbara Rubin Laurence R. Smith, Jr. The Chair then declared Resolution 2000-13 adopted (see Appendix A, Resolution 2000-13). Greenwich Academy Issue, Series B Mr. Morris presented the memo for the approval of the Series B issue, and reported that the amount of the issue has been reduced to $31 million, as a result of an additional bonds test requirement for the Series A issue. The Academy will make a $2.3 million equity contribution towards the transaction, which includes a $1.0 million gift restricted for use towards the Series B project. Bond proceeds will be used for: 1) construction of a new upper school and library; 2) renovations to an existing administrative building; 3) acquisition of land adjacent to the property and faculty housing complex; and 4) reconstruction of playing fields damaged during construction. These projects are the second phase of the School s facilities master plan developed in 1994. The School is considering issuing based on its own credit rating, as a 30-year fixed rate issue. FSA, which insured the previous issue, recently upgraded Greenwich to an A rating and has submitted a bid for credit insurance at 80 basis points. MBIA has approved Greenwich for Minutes of the Board of Directors Meeting October 23, 2000 6

enhancement at 69 basis points, if the School receives an A rating. MBIA also provides credit insurance to Brunswick s CHEFA issue. Ambac has responded to the bid in the range of 90 to 100 basis points. Moody s will issue a new credit rating within a few days, and it appears that there is a good possibility that Greenwich will receive an A rating. Greenwich Academy is an all girls college preparatory school for grades K through 12, with a projected enrollment of 729 students for the 2000 01 academic year. There is excellent demand in the Greenwich area, with a slight decline in New York students from Fall 1997 to Fall 2000. The School states that there is no major reason such as increased competition for the decline, and it expects fluctuations in its market. Minority students for the current academic year comprise 14.1% of the student body (3.6% African-American, 4.0% Asian/Middle East, 2.2% Hispanic and 4.3% Mixed Racial), taking into consideration the number reported as Mixed Racial. Greenwich cited diversification as a goal, especially in the lower and middle grades. The School does state that the goal may be difficult to implement, as siblings take preference for admissions, but they are working to increase minority enrollment. The Community Outreach Program, REACH, prepares African American and Latino students to transition to an independent school setting. Approximately 15% of students have been enrolled in the program since its inception in 1996. Additionally, the Academy supports other community service programs typical of independent schools. Mr. Morris then reviewed the credit information, stating that the debt services to operations with the new debt will decrease to 17% which is high, but should be manageable based on student demand. Expendable resources to debt is 1.2 times, which is below Moody s Baa median; resources to operations are 2.92 times. As a result of the Academy s capital campaign efforts, cash and investments have increased 42%, from $32.5 million to $46.1 million from FY 1996 to FY 2000. The Academy s current campaign has raised $25 million to date. Staff requests approval for Greenwich Academy either on the basis of the attainment of its own credit rating, or supported by bond insurance. Mr. Morris also stated that all questions raised from the preliminary memo had been addressed with this month s information. There being no questions, the Chair then introduced Resolution 2000-14 (Greenwich Academy Issue, Series B, Authorizing), which Resolution was read and considered. Mr. Cohn moved adoption of Resolution No. 2000-14, and Dr. Barone seconded the motion. Upon roll call, the Ayes, Nays, and Abstentions were as follows: AYES NAYS ABSTENTIONS John A. Barone None None John Biancamano William J. Cibes, Jr. Benson R. Cohn Patrick A. Colangelo Phyllis C. DeLeo Howard J. Rifkin Barbara Rubin Laurence R. Smith, Jr. The Chair then declared Resolution 2000-14 adopted (see Appendix A, Resolution 2000-14). Minutes of the Board of Directors Meeting October 23, 2000 7

Westover School Issue, Series A Westover School has requested an increase in the amount to be financed, from $8.5 million to $10.0 million, due to increased construction prices. Funds will be used for construction of a new athletic facility complex and parking. The Series A issue will be structured as a fixed rate issue, insured by Asset Guaranty at a 120 basis point premium. This rate for credit insurance is higher than that for Salisbury (85 bps) and Canterbury (93 bps) Schools. The analyst at Asset Guaranty stated that the difference in the premiums is not a reflection of Westover, which they stated appears to be a solid credit, but due to internal changes in pricing structures. Mr. Morris stated that all issues from last month s information had been addressed in the memo, including the School s academic programs. Westover s programs are strong in the performing arts, but also constitutes a traditional curriculum of courses. The development of women in the fields of computer science and engineering is addressed under the WISE program, a collaboration with Rensselaer Polytechnic Institute. Rensselaer will accept any Westover WISE student who has completed this program in good standing. Westover also offers other special programs through collaborative initiatives with institutions such as School of Dance Connecticut and the Manhattan School of Music. SAT scores for the School s students are favorable at 1,250 for the class of 2000. There are 25 full-time faculty and 12 part-time faculty for the current school year, and has a student to faculty ratio of over five to one. Westover has established a goal of attracting and retaining the best faculty candidates, representing diverse racial and ethnic backgrounds. The increased salaries offered to candidates also is reflective of salaries offered at peer institutions. Mr. Rifkin left the meeting at this time. Financial aid to 65% of students is high at 44% of tuition revenues for the past five years. However, Westover feels tuition discount is critical to attract a well-balanced socioeconomic student base. To achieve this goal, the School will seek additional endowment through fundraising. Dr. Cibes questioned the proposed intent to increase the draw on endowment funds from 5% to 6.5% to meet debt service. Mr. Morris replied that this practice is not unusual, and that Taft School had increased its endowment spending policy up to 8% for the same purpose. Moreover, Westover expects that it will reduce its endowment draw to the original level of 5% as its endowment increases, which the School anticipates will occur by the fifth year. There being no further questions, the Chair then introduced Resolution 2000-15 (Westover School Issue, Series A, Authorizing), which Resolution was read and considered. Mr. Smith moved adoption of Resolution No. 2000-15, which motion was seconded by Mr. Colangelo. Upon roll call, the Ayes, Nays, and Abstentions were as follows: AYES NAYS ABSTENTIONS John A. Barone None None John Biancamano William J. Cibes, Jr. Benson R. Cohn Patrick A. Colangelo Phyllis C. DeLeo Barbara Rubin Laurence R. Smith, Jr. The Chair then declared Resolution 2000-15 adopted (see Appendix A, Resolution 2000-15). Minutes of the Board of Directors Meeting October 23, 2000 8

CHEFA FINANCIAL OPERATIONS August and September 2000 Financial Statements Mr. Asher reviewed the August and September financials. Revenues continue to exceed expenses, and include a $77,000 recovery from AHF fees. Mr. Asher stated that the 2000 budget amounts do not include a provision for a reimbursement for CHEFA fees. OTHER REPORTS Finance Committee Report Mr. Cohn, who was elected Chair of this committee at today s meeting, reported on business from that session. Draft Committee minutes are attached as Exhibit A. There was a nine-month review of CHEFA financed hospitals, a review of the compliance function, and a nine-month review of CHEFA financed nursing homes. The hospital review indicated 40 per cent of hospitals are experiencing operating losses. In addition, debt service ratios are declining, down to 3.9 times at September 30, 2000 compared to 5.9 times for FY 1999. CHEFA s nursing home portfolio has been reduced to 64% of its original issues, and all have secured credit enhancement. Staff is increasingly acting as brokers to the Legislature regarding issues facing the health care market. Mr. Cohn stated that the Committee did not take any actions at today s meeting. Dr. Cibes requested a copy of the information from the Finance Committee meeting held today. He also suggested that committee mailings be sent to all Board members, as any Member may wish to attend, depending on agenda items. Mr. Gray replied that committee mailing procedures will be revised to send information to all Board members. OTHER BUSINESS Draft FY2001 Strategic Plan Ms. Rubin stated that the Strategic Plan that was sent out is a draft version at this time. She has submitted minor changes to Mr. Gray, and she urges Members to contact him with their input and comments. Discussion and modification to this draft are essential, as the plan outlines key goals for the operations of the Authority for the upcoming years. Dr. Cibes questioned the feasibility of the establishment of a separate 501(c)3 foundation, as there could be considerable possibilities and problems to structure the entity. Mr. Gray replied that the purpose of the foundation would be to expand CHEFA s marketing efforts, such as the charter school loans, and interest rate subsidy for a portion of the child care loan program. The subject of this separate entity would need to be fully studied to determine its viability. Its purpose would be to identify sources of funds for products such as grants and technical assistance to those institutions that are unable to obtain funds from traditional sources. Mr. Gray stated that he felt the Authority s mission to provide for public good would be better served under its own governance, rather than if the General Assembly appropriated surpluses. In addition, the proposed foundation may be able to secure funds from other foundations for projects such as translating services for the Visiting Nurses Association. Minutes of the Board of Directors Meeting October 23, 2000 9

Considerable discussion followed, including a goal of the proposed foundation would be not to compete in any way with CHEFA clients in their fundraising efforts. Another possible conflict may be with competition with the General Assembly regarding public benefit of programs. Mr. Cohn discussed the Connecticut Housing Finance Authority ( CHFA ), which has similar experience of utilizing funds for alternate programs. There has been no decrease in that authority s ability to continue such programs, despite any changes in political or other leadership over time. Mr. Cohn feels a similar effort could be initiated at CHEFA, with no impact from changes in state government. Mr. Gray added that this Authority has a reputation for not making decisions based on political affiliation or pressure. The Board is diverse in its make-up, drawing members from health care, finance and educational sectors, as well as independent and both major political parties. Mr. Cohn suggested that CHEFA staff contact CHFA for information on governance and structure for a separate 501(c)3 operation. Ms. Rubin also raised the subject of expanding our strategy toward new products and increased presence in governmental policy. Changes in the nursing home industry discussed at the Finance Committee meeting may include legislation of CCRCs and Assisted Living facilities. Mr. Gray stated that there may be some areas where CHFA finances some types of long-term care projects, specifically congregate housing. However, when any type of health care is implemented at these facilities, the financing may then fall under CHEFA s enabling legislation. Mr. Gray further stated that formal discussions should be held with CHFA to establish guidelines for referrals. Staff has been approached by an out of state entity to finance a pooled issue in Connecticut, which will also have to be reviewed for viability or rejection. The Chair again requested Members to provide their input on the Strategic Plan, so it can be presented for vote at the December 11 meeting. Draft 2001 Board Meeting Schedule All Members reviewed the draft 2001 Board meeting schedule that had been provided. Dr. Barone suggested that the December 17, 2001 meeting date be changed to December 10, as there will be a lengthy period due to the absence of a November meeting. DATE OF NEXT MEETING Ms. Rubin reminded everyone present of the next meeting date, scheduled for December 11. Mr. Gray reminded Members of the presentation by Mr. Rick Levine of Levine Health Care, which will take place during the last hour of that meeting. Mr. Levine provides consulting services to HMO companies, and Mr. Gray expects the presentation to be very informative. There being no further business, the Board unanimously agreed to adjourn at 3:45 p.m. Respectfully submitted, Richard D. Gray Executive Director Minutes of the Board of Directors Meeting October 23, 2000 10

TO-DO s from the Board Meeting of October 23, 2000 1. Explanation of record number of applications at Gunnery this year. Internet? 2. Additional information on Gunnery attrition to be included in final memo. 3. Independent school sector analysis to be presentation to Board when complete. 4. Loomis Provide information on change in restricted vs. unrestricted net assets for FY1999 to FY2000 in final memo. Biancamano 5. Send Finance Committee material to Dr. Cibes. 6. Committee mailings will now be sent to all Board members, in the event they wish to attend the meetings. Minutes of the Board of Directors Meeting October 23, 2000 11