N.Y. Public Health Law § 4604-a: Commissioner approval required for industrial development agency financing in connection with continuing care retirement communities

§ 4604-a. Commissioner approval required for industrial development

agency financing in connection with continuing care retirement

communities. 1. No person seeking financing in connection with a

continuing care retirement community through an industrial development

agency shall undertake such financing without the prior approval of the

commissioner. Upon approving a proposed financing pursuant to this

section, the commissioner shall issue a certificate of authorization to

the applicant.

2. Prior to approving such financing, the commissioner shall find

that:

a. The operator has (i) executed contracts for at least seventy

percent of all living units and has on deposit at least ten percent of

the entrance fees or purchase price for such units; or (ii) executed

contracts for at least sixty percent of all living units and has on

deposit at least twenty-five percent of the entrance fees or purchase

price for such units.

b. The operator has demonstrated capability to comply fully with the

requirements for a certificate of authority and has obtained a

contingent certificate of authority pursuant to section forty-six

hundred four of this article and the operator has agreed to meet the

requirements of article eighteen-A of the general municipal law.

c. The applicant is a not-for-profit corporation as defined in section

one hundred two of the not-for-profit corporation law that is (i)

eligible for tax-exempt financing under this section and (ii) is exempt

from taxation pursuant to section 501(c)(3) of the federal internal

revenue code, and either has (i) an equity position in the community

equivalent to no less than fifteen percent of the amount to be financed

in the aggregate; or (ii) covenants (A) to meet a ratio of cash and

investments to outstanding debt (reserve ratio) of no less than

twenty-five percent commencing at the end of the first quarter after

twenty-four months from the receipt of a certificate of occupancy for

the facility, and (B) to maintain that reserve ratio, as tested

quarterly based upon the facility's interim financial statements and

annually based upon audited financial statements, until debt reduction

equal to twenty-five percent of total indebtedness is accomplished; and

(c) to reduce total debt by twenty-five percent of the total

indebtedness at the time the certificate of occupancy is received by no

later than five years after the receipt of the certificate of occupancy.

d. The operator has submitted in connection with the proposed

financing a financial feasibility study, including a financial forecast

and market study prepared by an independent firm nationally recognized

for continuing care retirement community feasibility studies,

demonstrating to the satisfaction of the commissioner the financial

soundness of the financing. In addition, the operator has submitted an

analysis of economic costs and benefits, including job creation and

retention, the estimated value of tax exemptions provided, the project's

impact on local businesses and the availability and comparative cost of

alternative financing sources. Such analysis shall be prepared by an

independent entity.

e. The operator will establish and maintain a fully funded debt

service reserve equal to the sum of maximum annual debt service

(interest plus annual scheduled principal payments, not including

balloon maturities, if any) on bonds authorized thereby having a

maturity of ten years or less, plus the maximum annual debt service on

bonds authorized thereby having a maturity of greater than ten years,

provided, however, that in the case of tax-exempt bond issues, such debt

service reserve shall not exceed the maximum amount permitted by federal

tax law.

f. The operator will provide for such remedies or limitations of

remedies of bondholders as may be required by or consistent with the

provisions of this article and any regulations in existence at the time

of the issuance promulgated thereunder.

g. Unless all residents or continuing care at home contract holders

have life care contracts, the operator has adequately made the

assurances required by subdivision two of section forty-six hundred

twenty-four of this article and has agreed to fund the liability in the

event that such resident's or contract holder's assets are insufficient

to pay for nursing facility services for a one year period.

3. In addition, an operator which is subject to the provisions of this

section shall:

a. provide the commissioner with notice of any monetary default or

covenant default in connection with such financing and shall further

notify the commissioner of any withdrawal from the debt service reserve

fund established in connection with such financing;

b. respond in writing to the operational recommendations of the

commissioner with respect to protecting the interests of continuing care

retirement community residents in the event of any monetary default or

covenant default provided for in connection with such financing;

c. provide adequate security for the repayment of the bonds issued,

including the granting of liens on real and personal property and the

pledge of project revenues; the maintenance of minimum debt service

coverage and other financial ratios as shall be required in regulations

in existence at the time of issuance by the commissioner; and

restrictions on other debt and expenditures; and

d. undertake to maintain the financial feasibility of the facility,

including the retention of an independent consultant to recommend and

help implement remedial action.

4. The commissioner may request, and shall receive, the technical

assistance of any state agency or state public authority in performing

its functions under this article.