Media Statement

California Hospitals Oppose Congressional Effort to Eliminate Tax-Exempt Private Activity Bonds
Federal Tax Cuts and Jobs Act Threatens Not-for-Profit Hospital Financing, 25,000 Construction Jobs

A provision in the proposed federal Tax Cuts and Jobs Act that would eliminate the tax exemption for private activity bonds could have a devastating financial impact on California’s private not-for-profit and district hospitals. These bonds provide a critical source of funding that result in job creation and economic development beyond hospital walls.

Charitable hospitals and health systems use these tax-exempt bonds to pay for a variety of capital improvement and building projects including mandated seismic compliance requirements, new technologies, diagnostic equipment and expanded and modernized patient care facilities. Removing the tax exemption from these financing vehicles could increase the costs of borrowing by California hospitals by as much as $120 million annually, or $3.5 billion over the life of a 30-year bond.

It’s ironic that legislation intended to strengthen the economy and provide jobs will, in fact, have the opposite effect. Hospitals are significant employers – often the largest in their community – providing more than 500,000 jobs across California. The loss of these tax-exempt bonds could compromise the financial viability of some hospitals. Additionally, some hospitals may be unable to pay for required seismic retrofitting or rebuilding projects. Hospitals that fail to meet the seismic mandate by specified deadlines must be shut down under existing state law. More than 25,000 construction jobs related to the seismic building requirements also would be at risk if access to capital is compromised.

To protect access to vital health care services throughout our state, CHA urges the members of California’s congressional delegation to oppose the elimination of tax-exempt private activity bonds in the Tax Cuts and Jobs Act.