(1)A provider must establish and maintain at all times:
(a)A debt service liquid reserve in an amount equal to or exceeding the total of all principal and interest payments due during the next 12 months on account of a mortgage loan or other long term financing of the CCRC taking into consideration any anticipated refinancing; and
(b)An operating liquid reserve in an amount equal to or exceeding the total of the CCRC’s projected operating expenses for three months. For the purpose of calculating the amount required for the operating liquid reserve, projected operating expenses include any anticipated expenses associated with providing housing or health related services included under all the residency agreements.
(2)If the provider does not meet the reserve requirements, the Division may require the provider to place the reserves in an escrow account.
(3)The division may allow withdrawal or borrowing from the reserves in an amount not greater than 20 percent of the provider’s total required reserves.
(a)The Division shall only approve the borrowing or withdrawal if required:
(A)For making an emergency repair or replacement of equipment;
(B)To cover catastrophic loss that is not able to be covered by insurance; or
(C)For debt service in a potential default situation.
(b)No withdrawal or borrowing may be made from the reserves without the approval of the Division except upon a court order.
(c)All funds borrowed from the reserves must be repaid to the reserves within 18 months in accordance with a payment plan approved by the Division.
(4)The reserve requirement statement must identify:
(a)The total of all principal and interest payments due during the provider’s previous fiscal year including any mortgage loans or other long-term financing;
(b)Any anticipated refinancing and any change in principal and interest payments expected during the next 12 months;
(c)The amount of liquid reserves maintained by the provider; and
(d)Three months projected operating expenses. A provider must determine the three months projected operating expenses by taking the provider’s previous year’s audited financial statement and adding any projected increases or decreases in expenses for the next year, excluding depreciation and payments on long-term financing.
(5)New providers must determine their three months projected operating expenses by estimating their start-up, marketing, and personnel costs for the year of operation and divide the total costs by four. The projected budget must be provided to the Division. New providers must also submit an audited financial statement to the Division.
(6)Registered providers who build, purchase, or operate a new facility must immediately meet the full reserve requirements for that facility.
Rule 411-067-0060 — Reserve Requirements,