United States Territorial Relief Act of 2019

II 116TH CONGRESS 1ST SESSION S. 1312 To provide the option of discharging certain unsecured financial obligations of self-governing territories of the United States. IN THE SENATE OF THE UNITED STATES MAY 2, 2019 Ms. WARREN (for herself, Mr. SANDERS, Ms. HARRIS, Mr. MARKEY, and Mrs. GILLIBRAND) introduced the following bill; which was read twice and re- ferred to the Committee on Energy and Natural Resources A BILL To provide the option of discharging certain unsecured finan- cial obligations of self-governing territories of the United States. Be it enacted by the Senate and House of Representa- 1 tives of the United States of America in Congress assembled, 2 SECTION 1. SHORT TITLE; TABLE OF CONTENTS. 3 (a) SHORT TITLE.—This Act may be cited as the 4 ‘‘United States Territorial Relief Act of 2019’’. 5 (b) TABLE OF CONTENTS.—The table of contents for 6 this Act is as follows: 7 Sec. 1. Short title; table of contents. Sec. 2. Definitions. Sec. 3. Findings. VerDate Sep 11 2014 04:18 May 07, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6211 E:\BILLS\S1312.IS S1312 kjohnson on DSK79L0C42 with BILLS 2 •S 1312 IS TITLE I—TERRITORIAL RELIEF Sec. 101. Relief through exercise of the power to regulate commerce, the bank- ruptcy power, and the territorial power. Sec. 102. Effect of discharge. Sec. 103. Actions relating to the status of financial obligations. Sec. 104. Notice of discharge. Sec. 105. Effective date. TITLE II—PUERTO RICO DEBT RESTRUCTURING COMPENSATION FUND Sec. 201. Purpose. Sec. 202. Definitions. Sec. 203. Administration. Sec. 204. Determination of eligibility for compensation. Sec. 205. Puerto Rico Debt Restructuring Compensation Fund. Sec. 206. Regulations. Sec. 207. Sunset. TITLE III—PUERTO RICO PUBLIC CREDIT COMPREHENSIVE AUDIT COMMISSION Sec. 301. Definitions. Sec. 302. Establishment; dissolution. Sec. 303. Reports. Sec. 304. Duties. Sec. 305. Authority of the Commission. Sec. 306. Membership. Sec. 307. Powers and responsibilities. Sec. 308. Provision of requested information. Sec. 309. Access to information. Sec. 310. Funding. TITLE IV—SEVERABILITY Sec. 401. Severability. SEC. 2. DEFINITIONS. 1 In this Act: 2 (1) ATTACHMENT.—The term ‘‘attachment’’ 3 means the time at which a security interest becomes 4 enforceable against a debtor with respect to collat- 5 eral. 6 (2) COLLATERAL.—The term ‘‘collateral’’ 7 means property subject to a security interest. 8 VerDate Sep 11 2014 04:18 May 07, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\S1312.IS S1312 kjohnson on DSK79L0C42 with BILLS 3 •S 1312 IS (3) FINANCIAL GUARANTY INSURANCE.—The 1 term ‘‘financial guaranty insurance’’ means a surety 2 bond, an insurance policy, an indemnity contract, or 3 any similar guaranty, under which loss is payable on 4 proof of a financial loss to an insured claimant, an 5 obligee, or an indemnitee as a result of the failure 6 of any obligor on or issuer of any debt instrument 7 or other monetary obligation to pay, when due, prin- 8 cipal, interest, or any other amount due or payable 9 with respect to that instrument or obligation, if that 10 failure to pay is the result of a financial default, a 11 financial insolvency, or a discharge in bankruptcy. 12 (4) FINANCIAL GUARANTY INSURER.—The term 13 ‘‘financial guaranty insurer’’ means a party that is 14 obligated as a surety, insurer, or indemnitor under 15 a financial guaranty insurance contract. 16 (5) FINANCIAL OBLIGATION.—The term ‘‘finan- 17 cial obligation’’— 18 (A) means an obligation validly owed as of 19 the effective date of this Act by a qualifying 20 territory or an instrumentality of a qualifying 21 territory thereof that arises from any— 22 (i) security issued by a qualifying ter- 23 ritory or instrumentality of a qualifying 24 territory; 25 VerDate Sep 11 2014 04:18 May 07, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\S1312.IS S1312 kjohnson on DSK79L0C42 with BILLS 4 •S 1312 IS (ii) loan taken out by a qualifying ter- 1 ritory or instrumentality of a qualifying 2 territory; 3 (iii) repurchase or swap or other de- 4 rivative contract entered into by a quali- 5 fying territory or instrumentality of a 6 qualifying territory; or 7 (iv) guaranty of any security or loan 8 or repurchase or swap or other derivative 9 contract by a qualifying territory or instru- 10 mentality of a qualifying territory; and 11 (B) does not include any— 12 (i) claim made by a vendor or service 13 provider that is owed payment by a quali- 14 fying territory or an instrumentality of a 15 qualifying territory for a good or service 16 rendered in the ordinary course of busi- 17 ness; 18 (ii) claim made by or on behalf of a 19 current or former employee of a qualifying 20 territory or an instrumentality of a quali- 21 fying territory that is owed payment for a 22 pension or other retirement benefit, or for 23 a health care benefit of any kind; or 24 VerDate Sep 11 2014 04:18 May 07, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\S1312.IS S1312 kjohnson on DSK79L0C42 with BILLS 5 •S 1312 IS (iii) claim against a qualifying terri- 1 tory or an instrumentality of a qualifying 2 territory for a pending tax refund or tax 3 credit. 4 (6) INSTRUMENTALITY.—The term ‘‘instrumen- 5 tality’’ includes— 6 (A) a political subdivision of a qualifying 7 territory; 8 (B) a public agency of a qualifying terri- 9 tory; 10 (C) a public corporation of a qualifying 11 territory; and 12 (D) a banking corporation of a qualifying 13 territory. 14 (7) PER CAPITA DEBT OF A TERRITORY.—The 15 term ‘‘per capita debt of a territory’’ means the 16 quotient obtained by dividing— 17 (A) the aggregate amount of the financial 18 obligations of a territory and the instrumental- 19 ities of the territory, which shall not include— 20 (i) the Federal debt; or 21 (ii) the unfunded liabilities of a pen- 22 sion system of the government of the quali- 23 fying territory or any instrumentality of a 24 qualifying territory for the payment of 25 VerDate Sep 11 2014 04:18 May 07, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\S1312.IS S1312 kjohnson on DSK79L0C42 with BILLS 6 •S 1312 IS pension and other retirement benefits, or 1 health care benefits of any kind, to current 2 or former employees of the qualifying terri- 3 tory or the instrumentality of the quali- 4 fying territory that are owed payment for 5 a pension or other retirement benefit, or 6 for a health care benefit of any kind; by 7 (B) the population of the territory (based 8 on the most recent data available from the Bu- 9 reau of the Census). 10 (8) PROCEEDS.—The term ‘‘proceeds’’ means— 11 (A) whatever is acquired upon the sale, 12 lease, license, exchange, or other disposition of 13 collateral; or 14 (B) whatever is collected on, or distributed 15 on account of, collateral. 16 (9) QUALIFYING TERRITORY.—The term ‘‘quali- 17 fying territory’’ means a territory that meets not 18 less than 2 of the following qualifications: 19 (A) The population of the territory, based 20 on the most recent data available from the Bu- 21 reau of the Census, has decreased by more than 22 5 percent during the 10-year period ending on 23 the date of a discharge under section 101. 24 VerDate Sep 11 2014 04:18 May 07, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\S1312.IS S1312 kjohnson on DSK79L0C42 with BILLS 7 •S 1312 IS (B) The territory has received major dis- 1 aster assistance under the Robert T. Stafford 2 Disaster Relief and Emergency Assistance Act 3 (42 U.S.C. 5121 et seq.) during the 5-year pe- 4 riod ending on the date of a discharge under 5 section 101. 6 (C) The per capita debt of the territory is 7 greater than $15,000 (as adjusted annually to 8 reflect the percentage change in the Consumer 9 Price Index for All Urban Consumers published 10 by the Bureau of Labor Statistics of the De- 11 partment of Labor). 12 (10) SECURITY AGREEMENT.—The term ‘‘secu- 13 rity agreement’’ means an agreement or resolution 14 that creates or provides for a security interest. 15 (11) SECURED FINANCIAL OBLIGATION.—The 16 term ‘‘secured financial obligation’’ means any fi- 17 nancial obligation to the extent of the value of any 18 collateral pledged by a qualifying territory or an in- 19 strumentality of a qualifying territory to secure the 20 repayment of the financial obligation pursuant to a 21 valid and perfected security interest under applicable 22 territorial law, not including— 23 (A) any property acquired or anticipated to 24 be acquired by a qualifying territory or an in- 25 VerDate Sep 11 2014 04:18 May 07, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\S1312.IS S1312 kjohnson on DSK79L0C42 with BILLS 8 •S 1312 IS strumentality of a qualifying territory after the 1 date of a discharge under section 101, even if 2 that property, when acquired, would have be- 3 come collateral subject to a security interest; or 4 (B) any proceeds, products, offspring, or 5 profits of the collateral not in existence on the 6 date of a discharge under section 101, unless 7 the property constitutes the proceeds of collat- 8 eral to which the security interest has attached 9 as of the date of the discharge. 10 (12) SECURITY INTEREST.—The term ‘‘security 11 interest’’— 12 (A) means an interest in property, includ- 13 ing a lien or other pledge of property, that se- 14 cures a payment or the performance of an obli- 15 gation; and 16 (B) does not include a pledge of the full 17 faith and credit of a qualifying territory or its 18 instrumentality, even in the case that such 19 pledge includes a promise of all available re- 20 sources of the qualifying territory or its instru- 21 mentality. 22 (13) TERRITORY.—The term ‘‘territory’’— 23 (A) means any self-governing Federal ter- 24 ritory; and 25 VerDate Sep 11 2014 04:18 May 07, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\S1312.IS S1312 kjohnson on DSK79L0C42 with BILLS 9 •S 1312 IS (B) includes— 1 (i) the Commonwealth of Puerto Rico; 2 (ii) Guam; 3 (iii) the Commonwealth of the North- 4 ern Mariana Islands; 5 (iv) the United States Virgin Islands; 6 and 7 (v) American Samoa. 8 (14) UNSECURED FINANCIAL OBLIGATION.— 9 The term ‘‘unsecured financial obligation’’ means 10 any financial obligation to the extent the financial 11 obligation is not a secured financial obligation. 12 SEC. 3. FINDINGS. 13 Congress finds that— 14 (1) millions of citizens of the United States re- 15 side in territories of the United States; 16 (2) the Federal Government owes a special duty 17 of care and stewardship to the citizens of territories 18 of the United States because— 19 (A) historically, Federal administration of 20 these territories was often wanting and many 21 residents of the territories faced discriminatory 22 treatment by the Federal Government; 23 (B) the economies of these territories face 24 special constraints, including diminishment of 25 VerDate Sep 11 2014 04:18 May 07, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\S1312.IS S1312 kjohnson on DSK79L0C42 with BILLS 10 •S 1312 IS property tax bases because of large, untaxed, 1 Federal land holdings; and 2 (C) these territories lack the benefits of 3 many Federal programs, such as Supplemental 4 Security Income, the Earned Income Tax Cred- 5 it, and full access to Medicaid; 6 (3) prolonged economic downturns, declines in 7 population, and natural disasters have resulted in 8 some territories of the United States and the instru- 9 mentalities of those territories having unsupportable 10 debt burdens on financial obligations, which cannot 11 realistically be repaid without imposing undue hard- 12 ship on the citizens and residents of those terri- 13 tories; 14 (4) disaster recovery funds that are provided by 15 the Federal Government should be used for disaster 16 recovery and not for direct or indirect debt pay- 17 ments; 18 (5) unsecured creditors of financially distressed 19 territories and instrumentalities of those territories 20 have little prospect of recovery upon default because 21 of— 22 (A) the severe indebtedness of those terri- 23 tories; and 24 VerDate Sep 11 2014 04:18 May 07, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\S1312.IS S1312 kjohnson on DSK79L0C42 with BILLS 11 •S 1312 IS (B) the lack of effective remedies for unse- 1 cured creditors against those territories and the 2 instrumentalities of those territories; and 3 (6) the people of the Commonwealth of Puerto 4 Rico deserve to know about the social, political, and 5 legal factors associated with the amount of the pub- 6 lic debt of the Commonwealth of Puerto Rico ac- 7 crued over the past 5 decades, and the Federal Gov- 8 ernment has a responsibility to support efforts to ob- 9 tain those answers, including public or private ef- 10 forts to conduct a comprehensive audit of the public 11 debt of the Commonwealth of Puerto Rico. 12 TITLE I—TERRITORIAL RELIEF 13 SEC. 101. RELIEF THROUGH EXERCISE OF THE POWER TO 14 REGULATE COMMERCE, THE BANKRUPTCY 15 POWER, AND THE TERRITORIAL POWER. 16 (a) IN GENERAL.—Pursuant to clauses 3 and 4 of 17 section 8 of article I and clause 2, section 3 of article IV 18 of the Constitution of the United States, any unsecured 19 financial obligation of a qualifying territory or an instru- 20 mentality of a qualifying territory that is outstanding is 21 discharged on the date on which a resolution stating that 22 the qualifying territory wishes to discharge the unsecured 23 financial obligations of the qualifying territory and the in- 24 strumentalities of the qualifying territory— 25 VerDate Sep 11 2014 04:18 May 07, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\S1312.IS S1312 kjohnson on DSK79L0C42 with BILLS 12 •S 1312 IS (1) is adopted by an affirmative vote of more 1 than 1⁄2 of the members of each house of the legisla- 2 ture of that qualifying territory and is signed by the 3 chief executive of the qualifying territory; or 4 (2) is adopted by an affirmative vote of not less 5 than 2⁄3 of the members of each house of the legisla- 6 ture of that qualifying territory. 7 (b) LIMITATION.—A qualifying territory may dis- 8 charge unsecured financial obligations of the qualifying 9 territory and the instrumentalities of the qualifying terri- 10 tory under this title not more frequently than once during 11 any 7-year period, and such discharge shall prohibit the 12 qualifying territory from discharging, adjusting, or im- 13 pairing, in any manner or degree including in a proceeding 14 under title III of PROMESA (48 U.S.C. 2161 et seq.), 15 a debt described in section 2(5)(B)(ii). 16 (c) NO STAY OF ACTIONS BY QUALIFYING TERRI- 17 TORY TO OBTAIN A DISCHARGE.—Notwithstanding any 18 other provision of Federal [Text truncated for display. 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