| 1 | The Elder & Long-Term Care Committee recommends the following: |
| 2 |
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| 3 | Council/Committee Substitute |
| 4 | Remove the entire bill and insert: |
| 5 | A bill to be entitled |
| 6 | An act relating to continuing care provider minimum liquid |
| 7 | reserve requirements; amending s. 651.035, F.S.; deleting |
| 8 | property insurance premiums from certain debt service |
| 9 | reserve requirements; deleting certain property insurance |
| 10 | debt service reserve limitations; deleting certain |
| 11 | additional minimum debt service reserve requirements for |
| 12 | certain years; including property insurance premiums in |
| 13 | calculating expenses; providing an effective date. |
| 14 |
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| 15 | Be It Enacted by the Legislature of the State of Florida: |
| 16 |
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| 17 | Section 1. Paragraphs (a) and (c) of subsection (2) of |
| 18 | section 651.035, Florida Statutes, are amended to read: |
| 19 | 651.035 Minimum liquid reserve requirements.-- |
| 20 | (2)(a) A provider shall maintain in escrow as a debt |
| 21 | service reserve an amount equal to the aggregate amount of all |
| 22 | principal and interest payments due during the fiscal year on |
| 23 | any mortgage loan or other long-term financing of the facility, |
| 24 | including taxes and insurance as recorded in the audited |
| 25 | financial statements required under s. 651.026. The amount shall |
| 26 | include any leasehold payments and all costs related to such |
| 27 | payments same. If principal payments are not due during the |
| 28 | fiscal year, the provider shall maintain in escrow as a minimum |
| 29 | liquid reserve an amount equal to interest payments due during |
| 30 | the next 12 months on any mortgage loan or other long-term |
| 31 | financing of the facility, including taxes and insurance. For |
| 32 | the purpose of this paragraph, the amount of property insurance |
| 33 | premiums used in calculating the debt service reserve shall not |
| 34 | exceed the amount paid in calendar year 1999. For providers |
| 35 | initially licensed during or after calendar year 1999, the |
| 36 | amount of property insurance premiums used in calculating the |
| 37 | debt service reserve shall not exceed the amount paid during the |
| 38 | first 12 months of facility operation. However, beginning |
| 39 | January 1, 2006, and each year thereafter, until the amount |
| 40 | maintained in escrow attributable to property insurance equals |
| 41 | 100 percent of the premium, the provider shall increase the |
| 42 | amount maintained in escrow for property insurance by 10 percent |
| 43 | of the premium paid that year. |
| 44 | (c) Each provider shall maintain in escrow an operating |
| 45 | reserve in an amount equal to 30 percent of the total operating |
| 46 | expenses projected in the feasibility study required by s. |
| 47 | 651.023 for the first 12 months of operation. Thereafter, each |
| 48 | provider shall maintain in escrow an operating reserve in an |
| 49 | amount equal to 15 percent of the total operating expenses in |
| 50 | the annual report filed pursuant to s. 651.026. Where a provider |
| 51 | has been in operation for more than 12 months, the total annual |
| 52 | operating expenses shall be determined by averaging the total |
| 53 | annual operating expenses reported to the office by the number |
| 54 | of annual reports filed with the office within the immediate |
| 55 | preceding 3-year period subject to adjustment in the event there |
| 56 | is a change in the number of facilities owned. For purposes of |
| 57 | this subsection, total annual operating expenses shall include |
| 58 | all expenses of the facility except: depreciation and |
| 59 | amortization; interest, insurance and taxes included in |
| 60 | subsection (1); extraordinary expenses which are adequately |
| 61 | explained and documented in accordance with generally accepted |
| 62 | accounting principles; liability insurance premiums in excess of |
| 63 | those paid in calendar year 1999; and changes in the obligation |
| 64 | to provide future services to current residents. For providers |
| 65 | initially licensed during or after calendar year 1999, liability |
| 66 | insurance shall be included in the total operating expenses in |
| 67 | an amount not to exceed the premium paid during the first 12 |
| 68 | months of facility operation. Beginning January 1, 1993, the |
| 69 | operating reserves required under this subsection shall be in an |
| 70 | unencumbered account held in escrow for the benefit of the |
| 71 | residents. Such funds may not be encumbered or subject to any |
| 72 | liens or charges by the escrow agent or judgments, garnishments, |
| 73 | or creditors' claims against the provider or facility. However, |
| 74 | if a facility had a lien, mortgage, trust indenture, or similar |
| 75 | debt instrument in place prior to January 1, 1993, which |
| 76 | encumbered all or any part of the reserves required by this |
| 77 | subsection and such funds were used to meet the requirements of |
| 78 | this subsection, then such arrangement may be continued, unless |
| 79 | a refinancing or acquisition has occurred, and the provider |
| 80 | shall be in compliance with this subsection. |
| 81 | Section 2. This act shall take effect July 1, 2006. |