§ 44-151.08. Operating reserves.

(a) All continuing care facilities shall maintain, after opening, operating reserves equal to 20% of the total operating costs projected for the 12-month period following the period covered by the most recent annual disclosure statement filed.  The forecast statements as required shall serve as the basis for computing the operating reserve.  In addition to total operating expenses, total operating costs shall include debt service, consisting of principal and interest payments and taxes and insurance on any mortgage loan or other long-term financing, but shall exclude depreciation, amortized expenses, and extraordinary items as may be approved by regulation.   If the debt service portion is accounted for by way of another reserve account, the debt service portion may be excluded.  The operating reserves may be funded by cash, invested cash, commercial paper, or by investment grade securities, including bonds, stocks, United States Treasury obligations, or obligations of United States government agencies.

(c) The Commissioner may require a provider not meeting its reserve requirements established by subsection (a) of this section to place the reserves in an escrow account with a bank, trust company, or other escrow agent approved by the Commissioner.

(e) The Commissioner may allow withdrawal or borrowing from the reserves in an amount not greater than 20% of the provider's total reserves. The withdrawal or borrowing may be approved by the Commissioner only if required for making an emergency repair or replacement of equipment, to cover catastrophic loss that is not able to be covered by insurance, or for debt service in a potential default situation. No withdrawal or borrowing may be made from a reserve without the approval of the Commissioner pursuant to subsection (f) of this section. All funds borrowed shall be repaid to the reserve within 18 months in accordance with a payment plan approved by the Commissioner.