Bill Text: CA AB853 | 2017-2018 | Regular Session | Amended
Bill Title: Continuing care retirement communities.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Failed) 2018-02-01 - From committee: Filed with the Chief Clerk pursuant to Joint Rule 56. [AB853 Detail]
Download: California-2017-AB853-Amended.html
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Amended
IN
Assembly
April 17, 2017 |
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Amended
IN
Assembly
March 29, 2017 |
CALIFORNIA LEGISLATURE—
2017–2018 REGULAR SESSION
| Assembly Bill | No. 853 |
| Introduced by Assembly Member Choi |
February 16, 2017 |
An act to amend Sections 1771, 1782, 1783.3, and 1792.2 of the Health and Safety Code, relating to continuing care retirement communities.
LEGISLATIVE COUNSEL'S DIGEST
AB 853, as amended, Choi.
Continuing care retirement communities.
(1) Existing law requires a continuing care retirement community, as defined, to possess a certificate of authority issued by the State Department of Social Services before it can enter into a continuing care contract, as defined. Existing law provides for different types of continuing care contracts, including, among the others, a repayable contract. A repayable contract is a continuing care contract that includes a promise to repay all or a portion of an entrance fee that is conditioned upon reoccupancy or resale of the unit previously occupied by the resident.
This bill would expand the definition of a “repayable contract” to include a promise to repay all or a portion of an entrance fee that is conditioned upon the reoccupancy or resale
of the next available unit at the facility. based on the sequential order of termination of all repayable contracts at the facility previously occupied by the resident.
(2) Existing law prohibits an applicant for a permit to accept deposits and a certificate of authority from beginning construction, as defined, on any phase of a continuing care retirement community without first obtaining a written acknowledgment from the department that specified prerequisites have been met.
This bill would provide that, for the above-mentioned purposes, construction does not include construction of care facilities or buildings that provide community amenities and services or otherwise are not residential living units.
(3) Existing law
requires an applicant seeking a release of escrowed funds to petition in writing to the department and certify, among other things, that the construction of a proposed continuing care retirement community or phase is at least 50% completed. Existing law authorizes the department, when an application describes different phases of construction that will be completed and commence operating at different times, to apply the 50% construction completion requirement to the phase of construction if the applicant’s projections are economically viable.
This bill would require the department, when determining the economic viability of a phase, to consider the availability of financing to cover any projected shortfalls in revenues from resident fees.
(4) Existing law requires a provider of continuing care to maintain, at all times, qualifying assets as a liquid reserve in an amount that equals or exceeds the sum of
the amount the provider is required to hold as a debt service reserve and the amount the provider is required to hold as an operating expense reserve. Existing law requires the provider to satisfy this liquid reserve obligation with specified qualifying assets, including the available and unused portion of a qualifying line of credit or letter of credit. Existing law authorizes the department to condition, suspend, or revoke a provider’s permit or certificate of authority if it finds that the provider failed to maintain this reserve requirement.
This bill would add the available and unused portion of a surety bond to the list of qualifying assets a provider may use to satisfy its liquid reserve obligation.
Digest Key
Vote: MAJORITY Appropriation: NO Fiscal Committee: YES Local Program: NOBill Text
The people of the State of California do enact as follows:
SECTION 1.
Section 1771 of the Health and Safety Code is amended to read:1771.
Unless the context otherwise requires, the definitions in this section govern the interpretation of this chapter.(a) (1) “Affiliate” means any person, corporation, limited liability company, business trust, trust, partnership, unincorporated association, or other legal entity that directly or indirectly controls, is controlled by, or is under common control with, a provider or applicant.
(2) “Affinity group” means a grouping of entities sharing a common interest, philosophy, or connection (e.g., military officers, religion).
(3) “Annual report” means the report each
provider is required to file annually with the department, as described in Section 1790.
(4) “Applicant” means any entity, or combination of entities, that submits and has pending an application to the department for a permit to accept deposits and a certificate of authority.
(5) “Assisted living services” includes, but is not limited to, assistance with personal activities of daily living, including dressing, feeding, toileting, bathing, grooming, mobility, and associated tasks, to help provide for and maintain physical and psychosocial comfort.
(6) “Assisted living unit” means the living area or unit within a continuing care retirement community that is specifically designed to provide ongoing assisted living
services.
(7) “Audited financial statement” means financial statements prepared in accordance with generally accepted accounting principles, including the opinion of an independent certified public accountant, and notes to the financial statements considered customary or necessary to provide full disclosure and complete information regarding the provider’s financial statements, financial condition, and operation.
(b) (reserved)
(c) (1) “Cancel” means to destroy the force and effect of an agreement or continuing care contract.
(2) “Cancellation period” means the 90-day period, beginning when the resident physically moves into the
continuing care retirement community, during which the resident may cancel the continuing care contract, as provided in Section 1788.2.
(3) “Care” means nursing, medical, or other health-related
services, protection or supervision, assistance with the personal activities of daily living, or any combination of those services.
(4) “Cash equivalent” means certificates of deposit and United States treasury securities with a maturity of five years or less.
(5) “Certificate” or “certificate of authority” means the certificate issued by the department, properly executed and bearing the State Seal, authorizing a specified provider to enter into one or more continuing care contracts at a single specified continuing care retirement community.
(6) “Condition” means a restriction, specific action, or other requirement imposed by the department for the initial or continuing validity of a permit to accept deposits, a
provisional certificate of authority, or a certificate of authority. A condition may limit the
circumstances under which the provider may enter into any new deposit agreement or contract, or may be imposed as a condition precedent to the issuance of a permit to accept deposits, a provisional certificate of authority, or a certificate of authority.
(7) “Consideration” means some right, interest, profit, or benefit paid, transferred, promised, or provided by one party to another as an inducement to contract. Consideration includes some forbearance, detriment, loss, or responsibility, that is given, suffered, or undertaken by a party as an inducement to another party to contract.
(8) “Continuing care contract” means a contract that includes a continuing care promise made, in exchange for an entrance fee, the payment of periodic charges, or both types of payments. A
continuing care contract may consist of one agreement or a series of agreements and other writings incorporated by reference.
(9) “Continuing care promise” means a promise, expressed or implied, by a provider to provide one or more elements of care to an elderly resident for the duration of his or her life or for a term in excess of one year. Any such promise or representation, whether part of a continuing care contract, other agreement, or series of agreements, or contained in any advertisement, brochure, or other material, either written or oral, is a continuing care promise.
(10) “Continuing care retirement community” means a facility located within the State of California where services promised in a continuing care contract are provided. A distinct phase of development
approved by the department may be considered to be the continuing care retirement community when a project is being developed in successive distinct phases over a period of time. When the services are provided in residents’ own homes, the homes into which the provider takes those services are considered part of the continuing care retirement community.
(11) “Control” means directing or causing the direction of the financial management or the policies of another entity, including an operator of a continuing care retirement community, whether by means of the controlling entity’s ownership interest, contract, or any other involvement. A parent entity or sole member of an entity controls a subsidiary entity provider for a continuing care retirement community if its officers, directors, or agents directly participate in the management of the subsidiary
entity or in the initiation or approval of policies that affect the continuing care retirement community’s operations, including, but not limited to, approving budgets or the administrator for a continuing care retirement community.
(d) (1) “Department” means the State Department of Social Services.
(2) “Deposit” means any transfer of consideration, including a promise to transfer money or property, made by a depositor to any entity that promises or proposes to promise to provide continuing care, but is not authorized to enter into a continuing care contract with the potential depositor.
(3) “Deposit agreement” means any agreement made between any entity accepting a deposit and a depositor.
Deposit agreements for deposits received by an applicant prior to the department’s release of funds from the deposit escrow account shall be subject to the requirements described in Section 1780.4.
(4) “Depository” means a bank or institution that is a member of the Federal Deposit Insurance Corporation or a comparable deposit insurance program.
(5) “Depositor” means any prospective resident who pays a deposit. Where any portion of the consideration transferred to an applicant as a deposit or to a provider as consideration for a continuing care contract is transferred by a person other than the prospective resident or a resident, that third-party transferor shall have the same cancellation or refund rights as the prospective resident or resident for whose benefit the
consideration was transferred.
(6) “Director” means the Director of Social Services.
(e) (1) “Elderly” means an individual who is 60 years of age or older.
(2) “Entity” means an individual, partnership, corporation, limited liability company, and any other form for doing business. Entity includes a person, sole proprietorship, estate, trust, association, and joint venture.
(3) “Entrance fee” means the sum of any initial, amortized, or deferred transfer of consideration made or promised to be made by, or on behalf of, a person entering into a continuing care contract for the purpose of ensuring care or related services pursuant to that continuing
care contract or as full or partial payment for the promise to provide care for the term of the continuing care contract. Entrance fee includes the purchase price of a condominium, cooperative, or other interest sold in connection with a promise of continuing care. An initial, amortized, or deferred transfer of consideration that is greater in value than 12 times the monthly care fee shall be presumed to be an entrance fee.
(4) “Equity” means the value of real property in excess of the aggregate amount of all liabilities secured by the property.
(5) “Equity interest” means an interest held by a resident in a continuing care retirement community that consists of either an ownership interest in any part of the continuing care retirement community property or a transferable membership that
entitles the holder to reside at the continuing care retirement community.
(6) “Equity project” means a continuing care retirement community where residents receive an equity interest in the continuing care retirement community property.
(7) “Equity securities” shall refer generally to large and midcapitalization corporate stocks that are publicly traded and readily liquidated for cash, and shall include shares in mutual funds that hold portfolios consisting predominantly of these stocks and other qualifying assets, as defined by Section 1792.2. Equity securities shall also include other similar securities that are specifically approved by the department.
(8) “Escrow agent” means a bank or institution, including, but not
limited to, a title insurance company, approved by the department to hold and render accountings for deposits of cash or cash equivalents.
(f) “Facility” means any place or accommodation where a provider provides or will provide a resident with care or related services, whether or not the place or accommodation is constructed, owned, leased, rented, or otherwise contracted for by the provider.
(g) (reserved)
(h) (reserved)
(i) (1) “Inactive certificate of authority” means a certificate that has been terminated under Section 1793.8.
(2) “Investment securities” means any of the
following:
(A) Direct obligations of the United States, including obligations issued or held in book-entry form on the books of the United States Department of the Treasury or obligations the timely payment of the principal of, and the interest on, which are fully guaranteed by the United States.
(B) Obligations, debentures, notes, or other evidences of indebtedness issued or guaranteed by any of the following:
(i) The Federal Home Loan Bank System.
(ii) The Export-Import Bank of the United States.
(iii) The Federal Financing Bank.
(iv) The Government National Mortgage Association.
(v) The Farmers Home Administration.
(vi) The Federal Home Loan Mortgage Corporation of the Federal Housing Administration.
(vii) Any agency, department, or other instrumentality of the United States if the obligations are rated in one of the two highest rating categories of each rating agency rating those obligations.
(C) Bonds of the State of California or of any county, city and county, or city in this state, if rated in one of the two highest rating categories of each rating agency rating those bonds.
(D) Commercial paper of finance companies
and banking institutions rated in one of the two highest categories of each rating agency rating those instruments.
(E) Repurchase agreements fully secured by collateral security described in subparagraph (A) or (B), as evidenced by an opinion of counsel, if the collateral is held by the provider or a third party during the term of the repurchase agreement, pursuant to the terms of the agreement, subject to liens or claims of third parties, and has a market value, which is determined at least every 14 days, at least equal to the amount so invested.
(F) Long-term investment agreements, which have maturity dates in excess of one year, with financial institutions, including, but not limited to, banks and insurance companies or their affiliates, if the financial institution’s
paying ability for debt obligations or long-term claims or the paying ability of a related guarantor of the financial institution for these obligations or claims, is rated in one of the two highest rating categories of each rating agency rating those instruments, or if the short-term investment agreements are with the financial institution or the related guarantor of the financial institution, the long-term or short-term debt obligations, whichever is applicable, of which are rated in one of the two highest long-term or short-term rating categories, of each rating agency rating the bonds of the financial institution or the related guarantor, provided that if the rating falls below the two highest rating categories, the investment agreement shall allow the provider the option to replace the financial institution or the related guarantor of the financial institution or shall provide for the investment
securities to be fully collateralized by investments described in subparagraph (A), and, provided further, if so collateralized, that the provider has a perfected first security lien on the collateral, as evidenced by an opinion of counsel and the collateral is held by the provider.
(G) Banker’s acceptances or certificates of deposit of, or time deposits in, any savings and loan association that meets any of the following criteria:
(i) The debt obligations of the savings and loan association, or in the case of a principal bank, of the bank holding company, are rated in one of the two highest rating categories of each rating agency rating those instruments.
(ii) The certificates of deposit or time deposits are fully insured
by the Federal Deposit Insurance Corporation.
(iii) The certificates of deposit or time deposits are secured at all times, in the manner and to the extent provided by law, by collateral security described in subparagraph (A) or (B) with a market value, valued at least quarterly, of no less than the original amount of moneys so invested.
(H) Taxable money market government portfolios restricted to obligations issued or guaranteed as to payment of principal and interest by the full faith and credit of the United States.
(I) Obligations the interest on which is excluded from gross income for federal income tax purposes and money market mutual funds whose portfolios are restricted to these obligations, if the obligations
or mutual funds are rated in one of the two highest rating categories by each rating agency rating those obligations.
(J) Bonds that are not issued by the United States or any federal agency, but that are listed on a national exchange and that are rated at least “A” by Moody’s Investors Service, or the equivalent rating by Standard and Poor’s Corporation or Fitch Investors Service.
(K) Bonds not listed on a national exchange that are traded on an over-the-counter basis, and that are rated at least “Aa” by Moody’s Investors Service or “AA” by Standard and Poor’s Corporation or Fitch Investors Service.
(j) (reserved)
(k) (reserved)
(l) “Life care contract” means a continuing care contract that includes a promise, expressed or implied, by a provider to provide or pay for routine services at all levels of care, including acute care and the services of physicians and surgeons, to the extent not covered by other public or private insurance benefits, to a resident for the duration of his or her life. Care shall be provided under a life care contract in a continuing care retirement community having a comprehensive continuum of care, including a skilled nursing facility, under the ownership and supervision of the provider on or adjacent to the premises. A change shall not be made in the monthly fee based on level of care. A life care contract shall also include provisions to subsidize residents who become financially unable to pay their monthly care fees.
(m) (1) “Monthly care fee” means the fee charged to a resident in a continuing care contract on a monthly or other periodic basis for current accommodations and services, including care, board, or lodging. Periodic entrance fee payments or other prepayments shall not be monthly care fees.
(2) “Monthly fee contract” means a continuing care contract that requires residents to pay monthly care fees.
(n) “Nonambulatory person” means a person who is unable to
leave a building unassisted under emergency conditions in the manner described by Section 13131.
(o) (reserved)
(p) (1) “Per capita cost” means a continuing care retirement community’s operating expenses, excluding depreciation, divided by the average number of residents.
(2) “Periodic charges” means fees paid by a resident on a periodic basis.
(3) “Permanent closure” means the voluntary or involuntary termination or forfeiture, as specified in subdivisions (a), (b), (g), (h), and (i) of Section 1793.7, of a provider’s certificate of authority or license, or another action that results in the permanent relocation of
residents. Permanent closure does not apply in the case of a natural disaster or other event out of the provider’s control.
(4) “Permit to accept deposits” means a written authorization by the department permitting an applicant to enter into deposit agreements regarding a single specified continuing care retirement community.
(5) “Prepaid contract” means a continuing care contract in which the monthly care fee, if any, may not be adjusted to cover the actual cost of care and services.
(6) “Preferred access” means that residents who have previously occupied a residential living unit have a right over other persons to any assisted living or skilled nursing beds that are available at the community.
(7) “Processing fee” means a payment to cover administrative costs of processing the application of a depositor or prospective resident.
(8) “Promise to provide one or more elements of care” means any expressed or implied representation that one or more elements of care will be provided or will be available, such as by preferred access.
(9) “Proposes” means a representation that an applicant or provider will or intends to make a future promise to provide care, including a promise that is subject to a condition, such as the construction of a continuing care retirement community or the acquisition of a certificate of authority.
(10) “Provider” means an
entity that provides continuing care, makes a continuing care promise, or proposes to promise to provide continuing care. “Provider” also includes any entity that controls an entity that provides continuing care, makes a continuing care promise, or proposes to promise to provide continuing care. The
department shall determine whether an entity controls another entity for purposes of this article. No homeowner’s association, cooperative, or condominium association may be a provider.
(11) “Provisional certificate of authority” means the certificate issued by the department, properly executed and bearing the State Seal, under Section 1786. A provisional certificate of authority shall be limited to the specific continuing care retirement community and number of units identified in the applicant’s application.
(q) (reserved)
(r) (1) “Refund reserve” means the reserve a provider is required to maintain, as provided in Section 1792.6.
(2) “Refundable contract” means a continuing care contract that includes a promise, expressed or implied, by the provider to pay an entrance fee refund or to repurchase the transferor’s unit, membership, stock, or other interest in the continuing care retirement community when the promise to refund some or all of the initial entrance fee extends beyond the resident’s sixth year of residency. Providers that enter into refundable contracts shall be subject to the refund reserve requirements of Section 1792.6.
(3) “Repayable contract” means a continuing care contract that includes a promise to repay all or a portion of an entrance fee that is conditioned upon reoccupancy or resale of the unit previously occupied by the resident or upon the reoccupancy or resale of the next available unit at the facility.
based on the sequential order of termination of all repayable contracts at the facility previously occupied by the resident. A repayable contract shall not be considered a refundable contract for purposes of the refund reserve requirements of Section 1792.6, provided that this conditional promise of repayment is not referred to by the applicant or provider as a “refund.” A provider may repay all or a portion of an entrance fee that is conditioned upon resale of the unit before the resale of the unit. The repayment of an entrance fee before the resale of the unit shall not cause any other entrance fee to be subject to the refund reserve requirements of Section 1792.6, provided that the provider does not promise, at the time of contracting or thereafter, to make this type of early repayment, represent that the provider intends to make this type of early repayment, or indicate that
the provider has a practice of making this type of early repayment.
(4) “Resale fee” means a levy by the provider against the proceeds from the sale of a transferor’s equity interest.
(5) “Reservation fee” refers to consideration collected by an entity that has made a continuing care promise or is proposing to make this promise and has complied with Section 1771.4.
(6) “Resident” means a person who enters into a continuing care contract with a provider, or who is designated in a continuing care contract to be a person being provided or to be provided services, including care, board, or lodging.
(7) “Residential care facility for the elderly” means a housing arrangement
as defined by Section 1569.2.
(8) “Residential living unit” means a living unit in a continuing care retirement community that is not used exclusively for assisted living services or nursing services.
(9) “Residential temporary relocation” means the relocation of one or more residents, except in the case of a natural disaster that is out of the provider’s control, from one or more residential living units, assisted living units, skilled nursing units, or a wing, floor, or entire continuing care retirement community building, due to a change of use or major repairs or renovations. A residential temporary relocation shall mean a relocation pursuant to this subdivision that lasts for a period of at least 9 months but that does not exceed 18 months without the written agreement of the
resident.
(s) (reserved)
(t) (1) “Termination” means the ending of a continuing care contract as provided for in the terms of the continuing care contract.
(2) “Transfer trauma” means death, depression, or regressive behavior, that is caused by the abrupt and involuntary transfer of an elderly resident from one home to another and results from a loss of familiar physical environment, loss of well-known neighbors, attendants, nurses and medical personnel, the stress of an abrupt break in the small routines of daily life, or the loss of visits from friends and relatives who may be unable to reach the new facility.
(3) “Transferor” means a
person who transfers, or promises to transfer, consideration in exchange for care and related services under a continuing care contract or proposed continuing care contract, for the benefit of another. A transferor shall have the same rights to cancel and obtain a refund as the depositor under the deposit agreement or the resident under a continuing care contract.
SEC. 2.
Section 1782 of the Health and Safety Code is amended to read:1782.
(a) An applicant shall not begin construction on any phase of a continuing care retirement community without first obtaining a written acknowledgment from the department that all of the following prerequisites have been met:(1) A completed application has been submitted to the department.
(2) A permit to accept deposits has been issued to the applicant or, in the case of continuing care retirement community renovation projects, the department has issued a written approval of the applicant’s application.
(3) For new continuing
care retirement communities, or construction projects adding new units to an existing continuing care retirement community, deposits equal to at least 10 percent of each depositor’s applicable entrance fee have been placed into escrow for each phase for at least 50 percent of the number of residential living units to be constructed.
(b) Applicants shall notify depositors in writing when construction is commenced.
(c) For purposes of this chapter only, construction shall not include site preparation, demolition, or the construction of model units, or the construction of care facilities or buildings that provide community amenities and services or otherwise are not residential living units.
SEC. 3.
Section 1783.3 of the Health and Safety Code is amended to read:1783.3.
(a) In order to seek a release of escrowed funds, the applicant shall petition in writing to the department and certify to each of the following:(1) The construction of the proposed continuing care retirement community or phase is at least 50 percent completed.
(2) At least 10 percent of the total of each applicable entrance fee has been received and placed in escrow for at least 60 percent of the total number of residential living units. Any unit for which a refund is pending may not be counted toward that 60-percent requirement.
(3) Deposits made with cash
equivalents have been either converted into, or substituted with, cash or held for transfer to the provider. A cash equivalent deposit may be held for transfer to the provider, if all of the following conditions exist:
(A) Conversion of the cash equivalent instrument would result in a penalty or other substantial detriment to the depositor.
(B) The provider and the depositor have a written agreement stating that the cash equivalent will be transferred to the provider, without conversion into cash, when the deposit escrow is released to the provider under this section.
(C) The depositor is credited the amount equal to the value of the cash equivalent.
(4) The
applicant’s average performance over any six-month period substantially equals or exceeds its financial and marketing projections approved by the department, for that period.
(5) The applicant has received a commitment for any permanent mortgage loan or other long-term financing.
(b) The department shall instruct the escrow agent to release to the applicant all deposits in the deposit escrow account when all of the following requirements have been met:
(1) The department has confirmed the information provided by the applicant pursuant to subdivision (a).
(2) The department has determined that there has been substantial compliance with projected annual financial
statements that served as a basis for issuance of the permit to accept deposits.
(3) The applicant has complied with all applicable licensing requirements in a timely manner.
(4) The applicant has obtained a commitment for any permanent mortgage loan or other long-term financing that is satisfactory to the department.
(5) The applicant has complied with any additional reasonable requirements for release of funds placed in the deposit escrow accounts, established by the department under Section 1785.
(c) The escrow agent shall release the funds held in escrow to the applicant only when the department has instructed it to do so in writing.
(d) When an application describes different phases of construction that will be completed and commence operating at different times, the department may apply the 50-percent construction completion requirement to any one or group of phases requested by the applicant, provided the phase or group of phases is shown in the applicant’s projections to be economically viable. In determining the economic viability of a phase, the department shall consider the availability of financing to cover any projected shortfalls in revenues from resident fees.
SEC. 4.
Section 1792.2 of the Health and Safety Code is amended to read:1792.2.
(a) A provider shall satisfy its liquid reserve obligation with qualifying assets. Qualifying assets are:(1) Cash.
(2) Cash equivalents as defined in paragraph (4) of subdivision (c) of Section 1771.
(3) Investment securities, as defined in paragraph (2) of subdivision (i) of Section 1771.
(4) Equity securities, including mutual funds, as defined in paragraph (7) of subdivision (e) of Section 1771.
(5)
Lines of credit and letters of credit that meet the
requirements of this paragraph. The line of credit or letter of credit shall be issued by a state or federally chartered financial institution approved by the department or whose long-term debt is rated in the top three long-term debt rating categories by either Moody’s Investors Service, Standard and Poor’s Corporation, or a recognized securities rating agency acceptable to the department. The line of credit or letter of credit shall obligate the financial institution to furnish credit to the provider.
(A) The terms of the line of credit or letter of credit shall at a minimum provide both of the following:
(i) The department’s approval shall be obtained by the provider and communicated in writing to the financial institution before any modification.
(ii) The financial institution shall fund the line of credit or letter of credit and pay the proceeds to the provider no later than four business days following written instructions from the department that, in the sole judgment of the department, funding of the provider’s minimum liquid reserve is required.
(B) The provider shall provide written notice to the department at least 14 days before the expiration of the line of credit or letter of credit if the term has not been extended or renewed by that time. The notice shall describe the qualifying assets the provider will use to satisfy the liquid reserve requirement when the line of credit or letter of credit expires.
(C) A provider may satisfy all or a portion of
its liquid reserve requirement with the available and unused portion of a qualifying line of credit, letter of credit, or surety bond.
(6) For purposes of satisfying all or a portion of a provider’s debt service reserve requirement described in Section 1792.3, restricted assets that are segregated or held in a separate account or escrow as a debt service reserve under the terms of the provider’s long-term debt instruments are qualifying assets, subject to all of the following conditions:
(A) The assets are restricted by the debt instrument so that they may be used only to pay principal, interest, and credit enhancement premiums.
(B) The provider furnishes to the department a copy of the agreement under which the
restricted assets are held and certifies that it is a correct and complete copy. The provider, escrow holder, or other entity holding the assets must agree to provide to the department any information the department may request concerning the debt service reserve it holds.
(C) The market value, or guaranteed value, if applicable, of the restricted assets, up to the amount the provider must hold as a debt reserve under Section 1792.3, will be included as part of the provider’s liquid reserve.
(D) The restricted assets described in this paragraph will not reduce or count towards the amount the provider must hold in its liquid reserve for operating expenses.
(7) For purposes of satisfying all or a portion of a provider’s operating
expense reserve requirement described in Section 1792.4, restricted assets that are segregated or held in a separate account or escrow as a reserve for operating expenses, are qualifying assets subject to all of the following conditions:
(A) The governing instrument restricts the assets so that they may be used only to pay operating costs when operating funds are insufficient.
(B) The provider furnishes to the department a copy of the agreement under which the assets are held, certified by the provider to be a correct and complete copy. The provider, escrow holder, or other entity holding the assets shall agree to provide to the department any information the department may request concerning the account.
(C)
The market value, or the guaranteed value, if applicable, of the restricted assets, up to the amount the provider is required to hold as an operating expense reserve under Section 1792.4, will be included as part of the provider’s liquid reserve.
(D) The restricted assets described in this paragraph shall not reduce or count towards the amount the provider is required to hold in its liquid reserve for long-term debt.
(b) Except as otherwise provided in this subdivision, the assets held by the provider as its liquid reserve may not be subject to any liens, charges, judgments, garnishments, or creditors’ claims and may not be hypothecated, pledged as collateral, or otherwise encumbered in any manner. A provider may encumber assets held in its liquid reserve as part of a
general security pledge of assets or similar collateralization that is part of the provider’s long-term capital debt covenants and is included in the provider’s long-term debt indenture or similar instrument.
