Section 33-45-11. Maintaining financial reserves; requirements

   (a) A provider or facility shall maintain financial reserves equal to 25 percent of the total operating costs of the facility projected for the 12 month period following the period covered by the most recent audited financial statements included in the disclosure statement required by Code Section 33-45-10. In addition to total operating expenses, total operating costs shall include debt service, consisting of principal and interest payments, along with taxes and insurance on any mortgage loan or other financing, but shall exclude depreciation, amortized expenses, and extraordinary items as approved by the Commissioner. If the debt service portion is accounted for by way of another reserve account, the debt service portion may be excluded.

(b) A provider or facility which has opened but not yet achieved full occupancy, as defined by its lender or financing documents, if any, or 95 percent occupancy of its residential units; or a provider or facility that has received a certificate of authority and has been in conformance with the provisions of this chapter prior to July 1, 2011, shall be required to achieve the level of financial reserves required by paragraph (1) of this subsection as follows:

   (1) The provider or facility shall submit a plan to the Commissioner the terms of which assure that the provider or facility shall maintain sufficient progress to achieving the level of financial reserves required by this Code section; and

   (2) The plan demonstrates that the provider or facility is substantially likely to achieve the required level of financial reserves within five years of opening or for existing facilities that received a certificate of authority and have been in conformance with the provisions of this chapter prior to July 1, 2011, within five years of July 1, 2011. For purposes of this paragraph, the term "substantially likely" means a provider or facility shall meet the level of financial reserves required by paragraph (1) of this subsection at a minimum rate of 20 percent per year as of the end of each fiscal year after the later of the date the facility opens or July 1, 2011, up to a total of 100 percent as of the end of the fifth fiscal year.

(c) The financial reserves required by this Code section may be funded by cash, by invested cash, or by investment grade securities, including bonds, stocks, United States Treasury obligations, obligations of United States government agencies, any reserves required by lenders or established by the facility, or any other financial resources approved by the Commissioner that can be used by the facility to meet its operating reserve.

(d) The provider or facility shall notify the Commissioner as soon as the provider or facility has knowledge of the need to expend any funds which reduce the balance in the financial reserves to an amount less than the amount required by this Code section. Such notice shall be made within at least 30 business days of the provider or facility having such knowledge. If the provider or facility does not have such knowledge within 30 business days, the provider or facility shall notify the Commissioner as soon as possible, but not more than 30 business days after the expenditure of such funds. In the event that the amount in the reserves falls to an amount less than the amount required by this Code section, the Commissioner:

   (1) Shall require that the provider or facility submit a corrective action plan to be approved by the department such that the Commissioner finds that the provider or facility can be reasonably expected to be able to reinstate the level of financial reserves required by this Code section within sufficient time to ensure that the contractual liabilities of the provider and the best interests of the residents of the facility will be adequately protected; and

   (2) May require the provider or facility to make additional financial arrangements to ensure that the contractual liabilities of the provider and the best interests of the residents of the facility are adequately protected. Such arrangements may include:

      (A) The posting of a security bond;

      (B) Requiring that the proceeds from any entrance fees from new residents be placed in escrow. Any requirement to escrow funds shall not be applied to funds which are subject to prior claims by a resident of the facility;

      (C) Any other security which the Commissioner determines provides adequate assurance that the provider or facility will be able to fulfill its obligations to its residents to the same extent as it would be if the financial reserves were funded at the amount required by this Code section; or

      (D) Requiring the provider or facility to work with lenders to refinance or reevaluate the current debt of the provider or facility.

(e) Upon written application by a provider, the Commissioner may authorize a facility to maintain financial reserves in an amount less than the amount set forth in this Code section, or at a lesser rate than the minimum rate of 20 percent per year as of the end of each fiscal year set forth in paragraph (2) of subsection (b) of this Code section, if the Commissioner determines that the contractual liabilities of the provider and the best interests of the residents of the facility may be adequately protected by the financial reserves in a lesser amount or by achieving the required financial reserves at a lesser rate than 20 percent per year.

Code 1981, § 33-45-11, enacted by Ga. L. 2011, p. 315, § 1/SB 166.