Substitute House Bill No. 5640
          Substitute House Bill No. 5640

              PUBLIC ACT NO. 98-167


AN  ACT  CONCERNING  NURSING HOMES FINANCED WITH A
SPECIAL CAPITAL RESERVE FUND GUARANTEE.


    Be  it  enacted  by  the  Senate  and House of
Representatives in General Assembly convened:
    Section  1.  Section  7 of public act 97-11 of
the June 18 special session is  repealed  and  the
following is substituted in lieu thereof:
    The  sum  of $4,000,000 is appropriated to the
STATE Treasurer, from the General  Fund,  for  the
fiscal  year  ending  June  30, 1997, for advances
pursuant to section 40 of [this  act]  PUBLIC  ACT
97-11 OF THE JUNE 18 SPECIAL SESSION AND SECTION 4
OF THIS ACT, for payment of principal and interest
on  nursing  home  bonds issued by the Connecticut
Health and Educational  Facilities  Authority  and
secured  by  a  special capital reserve fund. Such
funds shall not lapse on June 30, 1997, and  shall
continue  to be available for expenditure for such
purpose during the fiscal years  ending  June  30,
1998, and June 30, 1999.
    Sec.  2. Section 39 of public act 97-11 of the
June  18  special  session  is  repealed  and  the
following is substituted in lieu thereof:
    As  used  in  sections 39 to 42, inclusive, of
[this act] PUBLIC ACT 97-11 OF THE JUNE 18 SPECIAL
SESSION  AND  SECTION 4 OF THIS ACT, the following
words and terms shall have the following  meanings
unless  the context indicates another or different
meaning or intent.
    (1)   "Amount   available  for  debt  service"
means, for any accounting period, the net revenues
available for debt service for such period reduced
by the qualified expenditures for such period.
    (2)    "Authority"    means   the   State   of
Connecticut  Health  and  Educational   Facilities
Authority  as  defined  in  section 10a-178 of the
general statutes.
    (3)   "Bonds"   means  revenue  bonds  of  the
authority  issued  to  finance  a  project  at   a
participating  nursing home, as defined in section
10a-178 of the general statutes which are  secured
by a special capital reserve fund.
    (4)   "Bond  documents"  means  all  documents
related to an issue of bonds  including,  but  not
limited   to,   the   trust  indenture,  the  loan
agreement, the bonds, the mortgage and  any  other
documents included in the closing transcript.
    (5)  "Deficiency"  as  used in connection with
any bonds, means the total of the  following:  (A)
For   any   completed   accounting   period,   the
difference between the amount available  for  debt
service  for  such period and the payment required
to be made to the subject special capital  reserve
fund  during  such  period  so  that  the  subject
special capital reserve fund is in compliance with
the  applicable  bond documents; (B) the projected
amount necessary, after taking  into  account  the
estimated  amount  available  for debt service, to
avoid a draw on the special capital reserve  funds
or  such  higher  amount  as  provided in the bond
documents for the period selected by the authority
so  that  the  state  has  no  obligation  to make
payments to such special capital reserve fund; and
(C)  such  additional amounts as the authority may
deem advisable to prevent  the  state  from  being
obligated  to  make  any payment to the applicable
special capital reserve fund.
    (6)  "Deficiency  loan"  means  a loan made by
the authority to a qualified nursing home to  fund
all  or a portion of the deficiency. The principal
amount of the deficiency loan shall not exceed the
deficiency   for   the   qualified   nursing  home
receiving the deficiency loan. All other terms and
conditions  of  the  deficiency loan including the
rate of interest, if any,  shall  be  set  by  the
authority as it deems appropriate.
    (7)  "Net revenues available for debt service"
means, for any accounting period,  the  excess  of
operating   and   nonoperating   revenues  of  the
qualified nursing home, including the proceeds  of
business interruption insurance over the operating
and nonoperating expenses of the qualified nursing
home  for  such  period.  For the purposes of this
subdivision  such  revenues  and  expenses   shall
exclude any depreciation, amortization and current
interest expense, as determined in accordance with
generally  accepted  accounting  principles, using
either accrual or cash basis accounting,  subject,
to     such    adjustment    for    extraordinary,
nonrecurrent, capital and  other  expenditures  as
the   authority  deems  appropriate  to  determine
actual funds available for debt service.
    (8)   "Qualified   expenditures"   means   all
expenditures of any kind and type of  a  qualified
nursing  home,  including capital expenditures and
repayment  of  debt,  which   are   necessary   or
advisable   for   the  continued  operation  of  a
qualified nursing home [outside of bankruptcy and]
in compliance with all applicable laws.
    (9)  "Qualified  nursing home" means a nursing
home [required to make payments  to]  FINANCED  BY
BONDS  ISSUED  BY  THE  AUTHORITY AND SECURED BY a
special   capital   reserve   fund   pursuant   to
applicable bond documents.
    (10)  "Special  capital  reserve  funds" means
the funds authorized under section 10a-186a of the
general  statutes  and as incorporated in the bond
documents.
    (11)  "Subject  special  capital reserve fund"
means the Special Capital Reserve Fund to which  a
specific  qualified  nursing  home  is required to
make payments under applicable bond documents.
    Sec.  3. Section 40 of public act 97-11 of the
June  18  special  session  is  repealed  and  the
following is substituted in lieu thereof:
    There  is  established,  within  the office of
the State Treasurer, a program to be known as  the
["Nursing  Home  Loan Program"] "NURSING HOME DEBT
SERVICE ASSISTANCE PROGRAM". The  State  Treasurer
may,  upon  request  of the Connecticut Health and
Educational Facilities Authority advance funds  TO
THE  AUTHORITY  FROM AMOUNTS APPROPRIATED FROM THE
GENERAL FUND FOR DEBT SERVICE OR appropriated  for
[such]  SAID  program, [to the authority from said
program to the extent funds are available to  fund
deficiency loans] FOR A DEFICIENCY LOAN OR PAYMENT
OF DEBT SERVICE ON NURSING HOME  BONDS  ISSUED  BY
THE  AUTHORITY  AND  SECURED  BY A SPECIAL CAPITAL
RESERVE  FUND.  The  State  Treasurer  shall   not
advance  funds  unless there has been delivered to
the  State  Treasurer  in  connection  with   such
advance,  a  certificate of the executive director
of the authority  [and]  OR  any  officer  of  the
authority   certifying:  (1)  That  the  board  of
directors of  the  authority  has  authorized  the
deficiency loan to be funded and made all findings
required by this act; (2) the principal amount  of
the  deficiency  loan; (3) the requested amount of
the advance from  the  Nursing  Home  [Loan]  DEBT
SERVICE  ASSISTANCE Program; and (4) the amount of
all previous advances  made  in  respect  of  such
deficiency loan. Upon receipt of such certificate,
to the  extent  funds  are  available,  the  State
Treasurer  is  authorized  to make the appropriate
payment  to  the  authority  for  the  purpose  of
funding the deficiency loan.
    Sec.  4.  (NEW)  In the event that a qualified
nursing home, as defined in section 39  of  public
act  97-11  of  the  June  18  special session, as
amended by section 2 of this act, is  disposed  of
as  the  result  of  a receivership, bankruptcy or
insolvency, or upon  determination  by  the  State
Treasurer  that  the  state's  liability  for debt
service  has  been  reduced  through  sale  of   a
qualified  nursing  home, or in order to otherwise
avoid a draw on the special capital  reserve  fund
for  any  bonds  issued  by the authority for such
qualified nursing home, the  State  Treasurer  may
advance   funds  to  the  authority  from  amounts
appropriated for the  Nursing  Home  Debt  Service
Assistance  Program,  or  from  other General Fund
debt service appropriations, for any principal and
interest  payments  on  bonds not retired from the
proceeds of the sale of the home or  which  remain
outstanding   for  any  other  reason.  The  State
Treasurer shall not advance funds unless there has
been   delivered   to   the   State  Treasurer  in
connection with such advance, a certificate of the
executive director of the authority or any officer
of the authority certifying: (1) That the board of
directors  of  the authority has determined that a
draw on the special  capital  reserve  fund  would
occur  in  the  absence  of  the  advance; (2) the
requested amount of the advance required; and  (3)
the  amount of all previous advances made relative
to the bond issue.
    Sec.   5.  Section  10a-186a  of  the  general
statutes  is  repealed  and   the   following   is
substituted in lieu thereof:
    (a)  In  connection with the issuance of bonds
to finance a project at  a  participating  nursing
home  OR  TO REFUND BONDS PREVIOUSLY ISSUED BY THE
AUTHORITY TO FINANCE A PROJECT AT A  PARTICIPATING
NURSING   HOME,   or   to   finance   dormitories,
residential  facilities,  student  centers,   food
service  facilities  and  other  auxiliary service
facilities and related buildings and  improvements
at  a  public institution of higher education, the
authority may create and  establish  one  or  more
reserve  funds  to  be  known  as  special capital
reserve  funds  and  may  pay  into  such  special
capital  reserve funds (1) any moneys appropriated
and made available by the state for  the  purposes
of  such  funds, (2) any proceeds of sale of notes
or bonds for a project, to the extent provided  in
the  resolution  of  the authority authorizing the
issuance thereof, and (3) any other  moneys  which
may  be  made  available  to the authority for the
purpose of such funds from  any  other  source  or
sources.  The  moneys  held  in or credited to any
special capital  reserve  fund  established  under
this  section,  except  as  hereinafter  provided,
shall be  used  solely  for  the  payment  of  the
principal  of  and  interest, when due, whether at
maturity or by mandatory sinking fund instalments,
on  bonds of the authority secured by such capital
reserve fund as the same become due, the  purchase
of such bonds of the authority, the payment of any
redemption premium required to be paid  when  such
bonds are redeemed prior to maturity; provided the
authority shall have power to provide that  moneys
in  any such fund shall not be withdrawn therefrom
at any time in such amount  as  would  reduce  the
amount  of  such  funds  to  less than the maximum
amount of principal and interest becoming  due  by
reasons  of  maturity  or  a required sinking fund
instalment in the then current or  any  succeeding
calendar  year  on the bonds of the authority then
outstanding or the maximum amount permitted to  be
deposited  in  such  fund  by the Internal Revenue
Code of  1986,  or  any  subsequent  corresponding
internal  revenue  code  of  the United States, as
from time to time amended, to permit the  interest
on said bonds to be excluded from gross income for
federal tax purposes and secured by  such  special
capital  reserve  fund,  such  amount being herein
referred  to  as  the  "required  minimum  capital
reserve",  except  for  the purpose of paying such
principal of, redemption premium and  interest  on
such  bonds  of  the  authority  secured  by  such
special capital reserve becoming due and  for  the
payment of which other moneys of the authority are
not available. The authority may provide  that  it
shall not issue bonds secured by a special capital
reserve fund at any time if the  required  minimum
capital  reserve  on the bonds outstanding and the
bonds then to be issued and secured  by  the  same
special  capital  reserve  fund  at  the  time  of
issuance, unless the authority, at the time of the
issuance  of  such  bonds,  shall  deposit in such
special capital reserve fund from the proceeds  of
the bonds so to be issued, or otherwise, an amount
which, together  with  the  amount  then  in  such
special  capital  reserve  fund,  will be not less
than the required minimum capital reserve.  On  or
before  December  first, annually, there is deemed
to be appropriated from  the  state  General  Fund
such  sums,  if  any, as shall be certified by the
chairman or vice-chairman of the authority to  the
Secretary  of  the Office of Policy and Management
and the Treasurer of the state,  as  necessary  to
restore  each such special capital reserve fund to
the amount equal to the required  minimum  capital
reserve  of  such  fund, and such amounts shall be
allotted  and  paid  to  the  authority.  For  the
purpose  of evaluation of any such special capital
reserve   fund,   obligations   acquired   as   an
investment  for  any  such fund shall be valued at
market. Nothing contained in  this  section  shall
preclude   the  authority  from  establishing  and
creating  other  debt  service  reserve  funds  in
connection  with the issuance of bonds or notes of
the  authority  which  are  not  special   capital
reserve   funds.   Subject  to  any  agreement  or
agreements with holders of outstanding  notes  and
bonds  of  the  authority,  any  amount or amounts
allotted and paid to  the  authority  pursuant  to
this  section  shall  be  repaid to the state from
moneys of the  authority  at  such  time  as  such
moneys  are  not  required  for  any  other of its
corporate purposes  and  in  any  event  shall  be
repaid to the state on the date one year after all
bonds  and  notes  of  the  authority  theretofore
issued on the date or dates such amount or amounts
are  allotted  and  paid  to  the   authority   or
thereafter  issued, together with interest on such
bonds and  notes,  with  interest  on  any  unpaid
instalments of interest and all costs and expenses
in connection with any action or proceeding by  or
on  behalf  of  the holders thereof, are fully met
and discharged. No  bonds  secured  by  a  special
capital  reserve  fund  shall  be  issued  to  pay
project costs  unless  the  authority  is  of  the
opinion  and determines that the revenues from the
project  shall  be  sufficient  (A)  to  pay   the
principal  of  and interest on the bonds issued to
finance the project, (B)  to  establish,  increase
and  maintain any reserves deemed by the authority
to be advisable  to  secure  the  payment  of  the
principal  of  and  interest on such bonds, (C) to
pay the cost of maintaining the  project  in  good
repair  and keeping it properly insured and (D) to
pay such other costs of  the  project  as  may  be
required.
    (b)    NOTWITHSTANDING   THE   PROVISIONS   OF
SUBSECTION  (a)  OF  THIS   SECTION,   AFTER   THE
EFFECTIVE  DATE  OF  THIS  ACT NO BONDS SECURED BY
SUCH A  SPECIAL  CAPITAL  RESERVE  FUND  SHALL  BE
ISSUED  BY THE AUTHORITY TO FINANCE A PROJECT AT A
QUALIFIED NURSING HOME, OR TO REFUND BONDS  ISSUED
TO  FINANCE A PROJECT AT A QUALIFIED NURSING HOME,
EXCEPT FOR REFUNDING BONDS THAT MEET THE FOLLOWING
REQUIREMENTS:  (1) THE REFUNDING BONDS MUST REFUND
BONDS WHICH  ARE  ALREADY  SECURED  BY  A  SPECIAL
CAPITAL RESERVE FUND PURSUANT TO THIS SECTION; (2)
THE STATE MUST BE RELEASED FROM ANY OBLIGATION  TO
RESTORE  THE  SPECIAL CAPITAL RESERVE FUND FOR THE
REFUNDED BONDS; AND  (3)  THE  AUTHORITY  AND  THE
STATE  TREASURER  MUST APPROVE THE REFUNDING BONDS
AND MUST DETERMINE THAT THE AGGREGATE DEBT SERVICE
ON  THE  REFUNDING  BONDS  WILL  BE  LESS THAN THE
AGGREGATE DEBT SERVICE ON THE REFUNDED  BONDS  AND
THAT   THE   ECONOMIC  BENEFIT  DERIVED  FROM  THE
REFUNDING WILL INURE TO THE STATE. IN THE EVENT OF
A   REFUNDING  UNDERTAKEN  IN  THE  CONTEXT  OF  A
RECEIVERSHIP,  BANKRUPTCY   OR   INSOLVENCY,   ANY
APPROVAL  AND  DETERMINATION  BY THE AUTHORITY AND
THE STATE TREASURER UNDER SUBDIVISION (3) OF  THIS
SUBSECTION  SHALL  BE IN LIEU OF (A) THE OTHERWISE
REQUIRED OPINION OF SUFFICIENCY BY  THE  AUTHORITY
SET  FORTH  IN SUBSECTION (a) OF THIS SECTION, AND
(B) THE APPROVAL OF THE STATE  TREASURER  AND  THE
DOCUMENTATION  OF THE AUTHORITY OTHERWISE REQUIRED
UNDER SUBSECTION (a) OF SECTION 1-124.  ANY  OTHER
REFUNDING  OF OUTSTANDING BONDS SHALL REQUIRE SUCH
OPINION, APPROVAL AND DOCUMENTATION.
    Sec.  6.  This  act shall take effect from its
passage.

Approved June 4, 1998