| (1) The Special Reserve Account is funded through a
one-time payment or annually through an agreed upon percentage of
net cash flow generated by the Development, excess development funds
at completion as determined by the Department, or as otherwise set
forth in the written agreement. For the purpose of this account, net
cash flow is defined as funds available from operations after all
expenses and debt service required to be paid have been considered.
This does not include a deduction for depreciation and amortization
expense, deferred developer fee payment, or other payments made to
Related Parties or Affiliates, except as allowed by the Department
for property management. Proceeds from any refinancing or other fund
raising from the Development will be considered net cash flow for
purposes of funding the Special Reserve Account unless otherwise approved
by the Department. Deposits to a Special Reserve at cost certification
will be limited in accordance with §11.302(e)(12) of this title
(relating to Underwriting Rules and Guidelines). The account will
be structured to require Department concurrence for withdrawals.
(2) All disbursements from the account must be approved
by the Department.
(3) The Development Owner will be responsible for setting
up a separate and distinct account with a financial institution acceptable
to the Department. A Special Reserve Account Agreement will be drafted
by the Department and executed by the Department and the Development
Owner.
(4) The Development Owner must make reasonable efforts
to notify tenants of the existence of the Special Reserve Account
and how to submit an application to access funds from the Special
Reserve. Documentation of such efforts must be kept onsite and made
available to the Department upon request.
(e) Other Reserve Accounts. Additional reserve accounts
may be recognized by the Department as necessary and required by the
Department, superior lien lender, or syndicator.
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