SECTION 1. Section 2-10 of  chapter 614 of the acts of 1968, as previously amended, is hereby further amended by inserting after subsection (f) the following new subsection:

(g) Community hospital capital reserve fund.

(i)For the benefit of nonprofit community hospitals within the commonwealth licensed by the department of public health, the authority may create and establish one or more special funds, herein individually referred to as a community hospital capital reserve fund, and to the extent so created, shall pay into each such community hospital capital reserve fund any monies appropriated and made available by the commonwealth for the purposes of such fund, any proceeds of sale of notes or bonds to the extent provided in the resolution, trust agreement, or indenture of the authority authorizing issuance thereof, any other monies or funds of the authority that the authority determines to deposit in the fund and any other monies which may be available to the authority only for the purpose of such fund from any other source or sources.

All monies held in the community hospital capital reserve fund, except as hereinafter provided, shall be used solely for the payment of the principal of bonds of the authority which are secured by such community hospital capital reserve fund as the same mature (which herein shall include becoming payable by sinking fund installment), the purchase of such bonds, the payment of interest on such bonds, or the payment of any redemption premium required to be paid when such bonds are redeemed prior to maturity; provided, however, that, monies in a community hospital capital reserve fund shall not be withdrawn there from at any time in such amount as would reduce the amount of such fund to less than the maximum amount of principal and interest maturing and becoming due in any succeeding calendar year on outstanding bonds which are secured by such community hospital capital reserve fund, except for the purpose of paying the principal of and interest on such bonds maturing and becoming due or for the retirement of such bonds in accordance with the terms of any contract between the authority and its bondholders and for the payment of which other monies pledged to secure such bonds are not available. Any income or interest earned by, or increment to, a community hospital capital reserve fund due to the investment thereof shall be used by the authority for the purposes of such community hospital capital reserve fund.

(ii) The authority shall not issue bonds which are secured by a community hospital capital

reserve fund at any time if the maximum amount of principal and interest maturing or becoming due in a succeeding calendar year on such bonds then to be issued and on all other outstanding bonds of the authority which are secured by such community hospital capital reserve fund will exceed the amount of such community hospital capital reserve fund at the time of issuance unless the authority, at the time of issuance of such bonds, shall deposit in such fund from the proceeds of the bonds so to be issued, or otherwise, an amount which, together with the amount then in such fund, will be not less than the maximum amount of principal and interest maturing and becoming due in any succeeding calendar year on such bonds then to be issued and on all other outstanding bonds of the authority which are secured by such community hospital capital reserve fund.

(iii) To assure the continued operation and solvency of the authority for the carrying out of the public purposes of this act, provision is made in paragraph (i) for the accumulation in a community hospital capital reserve fund of an amount equal to the maximum amount of principal and interest maturing and becoming due in any succeeding calendar year on all outstanding bonds which are secured by such community hospital capital reserve fund. In order further to assure such maintenance of a community hospital capital reserve fund there shall be annually appropriated and paid to the authority for deposit in such community hospital capital reserve fund such sum, if any, as shall be certified by the executive director of the authority to the governor as necessary to restore such community hospital capital reserve fund to an amount equal to the maximum amount of principal and interest maturing and becoming due in any succeeding calendar year on the outstanding bonds which are secured by such community hospital capital reserve fund. The executive director of the authority shall annually, on or before December 1, make and deliver to the governor his certificate stating the amount, if any, required to restore a community hospital capital reserve fund to the amount aforesaid and the amount so stated, if any, shall be appropriated and paid to the authority during the then current fiscal year of the commonwealth.

(iv) For the purposes of this subsection in computing the amount of a community hospital

capital reserve fund, securities in which all or a portion of such fund are invested shall be valued at par, or if purchased at less than par, at their cost to the authority, unless otherwise provided in the resolution, trust agreement or indenture authorizing the issuance of bonds secured by the fund.

(v) For the purposes of this subsection, the amount of any letter of credit, insurance contract, surety bond, or similar financial undertaking available to be drawn upon and applied to obligations to which money in the community hospital capital reserve fund may be applied is deemed to be and shall be counted as money in said fund. For the purposes of this subsection, in calculating the maximum amount of interest due in the future on variable rate bonds or bonds with respect to which the interest rate is not at the time of calculation determinable, the interest rate shall be calculated at the maximum interest rate on such bonds or such lesser interest rate as shall be certified by the authority as an appropriate proxy for such variable or nondeterminable interest rate.”

(vi) Bonds secured by the community hospital capital reserve fund shall be issued by the authority solely for the benefit of nonprofit community hospitals within the commonwealth licensed by the department of public health.

(vii) Notwithstanding any provision of this act to the contrary, no loan shall be made to a nonprofit community hospital by the authority from proceeds of bonds secured by a community hospital capital reserve fund established under this paragraph unless: (a) the project to be financed by the loan has been approved by the secretary of health and human services; and (b) the loan and the issuance and terms of the related bonds have been approved by the secretary of administration and finance. In connection with any loan to a nonprofit community hospital pursuant to this paragraph, the secretary of health and human services and the secretary of administration and finance may enter into an agreement with the authority and the nonprofit community hospital to (a) require that the nonprofit community hospital provide financial statements or other information relevant to the financial condition of the nonprofit community hospital and its compliance with the terms of the loan, (b) require that the nonprofit community hospital reimburse the commonwealth for any amounts the commonwealth transfers to the community hospital capital reserve fund under subparagraph (iii) to replenish the fund as a result of a loan payment default by the nonprofit community hospital, and (c) require compliance by the nonprofit community hospital or the authority with any other terms and conditions the secretaries may consider appropriate in connection with the loan.

(viii) When the authority notifies the secretary of administration and finance in writing that an institution eligible to use the authority under this paragraph is in default as to the payment of principal or interest on any bonds issued by the authority on behalf of such institution, or that the authority has reasonable grounds to predict that the institution will not be able to make a full payment when that payment is due, the secretary of administration and finance shall direct the comptroller to withhold any funds in the comptroller’s custody that are due or payable to the institution until the amount of the principal or interest due or anticipated to be due has been paid to the authority or the trustee for the bondholders, or the authority notifies the secretary of administration and finance that satisfactory arrangements have been made for the payment of the principal and interest. Funds subject to withholding under this subparagraph include, but are not limited to, federal and state grants, contracts, allocations or appropriations.

(ix) If the authority further notifies the secretary of administration and finance in writing that no other arrangements are satisfactory, the secretary shall direct the comptroller to make available to the authority without further appropriation any funds withheld from the institution under subparagraph (viii). The authority shall apply the funds to the costs incurred by the institution, including payments required to be made to the authority or trustee for any bondholders of debt service on any bonds issued by the authority for the institution or required by the terms of any other law or contract to be paid to the holders or owners of bonds issued on behalf of the institution upon failure or default, or reasonable expectation of failure or default, of the institution to pay the principal or interest on its bonds when due.

(x) Concurrent with any notice from the authority to the secretary of administration and finance under this paragraph (g), the authority may notify any other agency, department or authority of state government that exercises regulatory, supervisory or statutory control over the operations of the institution. Upon notification, the agency, department or authority shall immediately undertake reviews to determine what action, if any, that agency, department or authority should undertake to assist in the payment by the institution of the money due or steps that the agencies of the state other than the comptroller or the authority should take to assure the continued prudent operation of the institution or provision of services to the people served by the institution.

(xi) Notwithstanding any general or special law to the contrary, in the event that a nonprofit community hospital fails to reimburse the commonwealth for any transfers made by the commonwealth to the authority to replenish the community hospital capital reserve fund in accordance with subparagraph (iii) within 6 months of any such transfer and as otherwise provided in accordance with the terms of the agreement among the nonprofit community hospital, the authority and the commonwealth authorized under subparagraph (vii), the secretary of administration and finance may, in her sole discretion, direct the comptroller to withhold any funds in the comptroller’s custody that are due or payable to the nonprofit community hospital has failed to pay to the commonwealth to reimburse the commonwealth for any such transfers. All contracts issued by the group insurance commission, the health insurance connector authority and MassHealth to any third party for the purposes of providing health care insurance paid for by the commonwealth shall provide that, at the direction of the secretary of administration and finance, the third party shall withhold payments to a nonprofit community hospital which fails to reimburse the commonwealth in accordance with the agreement authorized under subparagraph (vii) and shall transfer the withheld amount to the commonwealth. Any such withheld amounts shall be considered to have been paid to the nonprofit community hospital for all other purposes of law, and the nonprofit community hospital shall be considered to have reimbursed the commonwealth for all or a portion of any such transfers to the community hospital capital reserve fund for purposes of the agreement authorized under subparagraph (vii).

(xii) For purposes of this paragraph a community hospital excludes any hospital where the ratio of the number of physician residents-in-training to the number of inpatient beds exceeds

0.25.

SECTION 2. Section 2-12 of said chatper 614 of the acts of 1968, as amended, is hereby further amended by striking out the last sentence and inserting in place thereof the following: -

“Except as otherwise permitted pursuant to Section 2-10(g) of this act, the issuance of revenue bonds under the provision of this act shall not directly or indirectly or contingently obligate the commonwealth or any political subdivision thereof to levy or to pledge any form of taxation whatever therefore or to make any appropriation of their payment."