VEFA director asks committee to shrink board, add limited direct-lending tools for health and education nonprofits

Michael Gaughn, executive director of both the Vermont Bond Bank and the Vermont Educational Health Buildings Financing Agency (VEFA), briefed the Senate Government Operations Committee on Feb. 19 and requested legislative changes to VEFA’s board structure and statutory authority.

Gaughn told the committee VEFA functions as a conduit issuer that helps nonprofit health and educational institutions access tax-exempt private activity bonds; the agency reported about $922 million outstanding as of 2024 and has facilitated several billion dollars in financing over its history. “VEFA bears no financial liability for the transactions — those are 100% pass-through,” Gaughn said, describing the agency’s role in enabling nonprofits to obtain tax-exempt financing.

Board structure and appointments

VEFA’s governing board currently has 13 members, including gubernatorial appointees and ex officio officials. Gaughn said the size and appointment cadence creates scheduling and quorum challenges for an agency that meets infrequently and that recruitment of qualified volunteers has become more difficult. He proposed reducing the board to six or seven members — a mix of gubernatorial appointments and two ex officio designees (the state treasurer and the secretary of administration) — while preserving the ability of administration officials to delegate subject-matter representatives when needed.

Committee members said they were sympathetic to operational concerns but voiced caution about removing subject-matter expertise. One member suggested keeping state treasurer and secretaries for education and human services represented to retain sector knowledge; others emphasized that statutory safeguards and third-party financial advisory processes remain in place for VEFA transactions.

Expanded tools for sustainability

Gaughn also asked for limited statutory authority to enable VEFA to undertake targeted direct lending (in addition to conduit pass-through financing) for niche purposes such as energy-efficiency upgrades at rural hospitals and nonprofit colleges. He said a recent study identified roughly $23 million in “ready-to-go” projects in the educational sector. The intent is to leverage bond-bank relationships to deliver lower-cost capital that could improve long-term fiscal sustainability for anchor institutions.

Operational details and next steps

Gaughn said the agency is flexible on timing for changes and will return with proposed statutory language. Committee members asked for language that preserves subject-matter oversight while addressing quorum and recruitment concerns. No formal committee vote or bill was taken at the hearing; Gaughn agreed to refine draft changes and follow up with committee counsel.