United States Territorial Relief Act of 2019

I 116TH CONGRESS 1ST SESSION H. R. 2526 To provide the option of discharging certain unsecured financial obligations of self-governing territories of the United States. IN THE HOUSE OF REPRESENTATIVES MAY 3, 2019 Ms. VELA´ZQUEZ (for herself, Ms. CLARKE of New York, Mr. ESPAILLAT, Mr. GALLEGO, Ms. JAYAPAL, Mr. KHANNA, Ms. SCHAKOWSKY, Mr. SIRES, Mr. SOTO, and Ms. NORTON) introduced the following bill; which was re- ferred to the Committee on Natural Resources, and in addition to the Committees on the Judiciary, and the Budget, for a period to be subse- quently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned 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 VerDate Sep 11 2014 04:15 May 10, 2019 Jkt 089200 PO 00000 Frm 00001 Fmt 6652 Sfmt 6201 E:\BILLS\H2526.IH H2526 pamtmann on DSKBFK8HB2PROD with BILLS 2 •HR 2526 IH Sec. 1. Short title; table of contents. Sec. 2. Definitions. Sec. 3. Findings. 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 VerDate Sep 11 2014 04:15 May 10, 2019 Jkt 089200 PO 00000 Frm 00002 Fmt 6652 Sfmt 6201 E:\BILLS\H2526.IH H2526 pamtmann on DSKBFK8HB2PROD with BILLS 3 •HR 2526 IH (2) COLLATERAL.—The term ‘‘collateral’’ 1 means property subject to a security interest. 2 (3) FINANCIAL GUARANTY INSURANCE.—The 3 term ‘‘financial guaranty insurance’’ means a surety 4 bond, an insurance policy, an indemnity contract, or 5 any similar guaranty, under which loss is payable on 6 proof of a financial loss to an insured claimant, an 7 obligee, or an indemnitee as a result of the failure 8 of any obligor on or issuer of any debt instrument 9 or other monetary obligation to pay, when due, prin- 10 cipal, interest, or any other amount due or payable 11 with respect to that instrument or obligation, if that 12 failure to pay is the result of a financial default, a 13 financial insolvency, or a discharge in bankruptcy. 14 (4) FINANCIAL GUARANTY INSURER.—The term 15 ‘‘financial guaranty insurer’’ means a party that is 16 obligated as a surety, insurer, or indemnitor under 17 a financial guaranty insurance contract. 18 (5) FINANCIAL OBLIGATION.—The term ‘‘finan- 19 cial obligation’’— 20 (A) means an obligation validly owed as of 21 the effective date of this Act by a qualifying 22 territory or an instrumentality of a qualifying 23 territory thereof that arises from any— 24 VerDate Sep 11 2014 04:15 May 10, 2019 Jkt 089200 PO 00000 Frm 00003 Fmt 6652 Sfmt 6201 E:\BILLS\H2526.IH H2526 pamtmann on DSKBFK8HB2PROD with BILLS 4 •HR 2526 IH (i) security issued by a qualifying ter- 1 ritory or instrumentality of a qualifying 2 territory; 3 (ii) loan taken out by a qualifying ter- 4 ritory or instrumentality of a qualifying 5 territory; 6 (iii) repurchase or swap or other de- 7 rivative contract entered into by a quali- 8 fying territory or instrumentality of a 9 qualifying territory; or 10 (iv) guaranty of any security or loan 11 or repurchase or swap or other derivative 12 contract by a qualifying territory or instru- 13 mentality of a qualifying territory; and 14 (B) does not include any— 15 (i) claim made by a vendor or service 16 provider that is owed payment by a quali- 17 fying territory or an instrumentality of a 18 qualifying territory for a good or service 19 rendered in the ordinary course of busi- 20 ness; 21 (ii) claim made by or on behalf of a 22 current or former employee of a qualifying 23 territory or an instrumentality of a quali- 24 fying territory that is owed payment for a 25 VerDate Sep 11 2014 04:15 May 10, 2019 Jkt 089200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H2526.IH H2526 pamtmann on DSKBFK8HB2PROD with BILLS 5 •HR 2526 IH pension or other retirement benefit, or for 1 a health care benefit of any kind; or 2 (iii) claim against a qualifying terri- 3 tory or an instrumentality of a qualifying 4 territory for a pending tax refund or tax 5 credit. 6 (6) INSTRUMENTALITY.—The term ‘‘instrumen- 7 tality’’ includes— 8 (A) a political subdivision of a qualifying 9 territory; 10 (B) a public agency of a qualifying terri- 11 tory; 12 (C) a public corporation of a qualifying 13 territory; and 14 (D) a banking corporation of a qualifying 15 territory. 16 (7) PER CAPITA DEBT OF A TERRITORY.—The 17 term ‘‘per capita debt of a territory’’ means the 18 quotient obtained by dividing— 19 (A) the aggregate amount of the financial 20 obligations of a territory and the instrumental- 21 ities of the territory, which shall not include— 22 (i) the Federal debt; or 23 (ii) the unfunded liabilities of a pen- 24 sion system of the government of the quali- 25 VerDate Sep 11 2014 04:15 May 10, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H2526.IH H2526 pamtmann on DSKBFK8HB2PROD with BILLS 6 •HR 2526 IH fying territory or any instrumentality of a 1 qualifying territory for the payment of 2 pension and other retirement benefits, or 3 health care benefits of any kind, to current 4 or former employees of the qualifying terri- 5 tory or the instrumentality of the quali- 6 fying territory that are owed payment for 7 a pension or other retirement benefit, or 8 for a health care benefit of any kind; by 9 (B) the population of the territory (based 10 on the most recent data available from the Bu- 11 reau of the Census). 12 (8) PROCEEDS.—The term ‘‘proceeds’’ means— 13 (A) whatever is acquired upon the sale, 14 lease, license, exchange, or other disposition of 15 collateral; or 16 (B) whatever is collected on, or distributed 17 on account of, collateral. 18 (9) QUALIFYING TERRITORY.—The term ‘‘quali- 19 fying territory’’ means a territory that meets not 20 less than 2 of the following qualifications: 21 (A) The population of the territory, based 22 on the most recent data available from the Bu- 23 reau of the Census, has decreased by more than 24 VerDate Sep 11 2014 04:15 May 10, 2019 Jkt 089200 PO 00000 Frm 00006 Fmt 6652 Sfmt 6201 E:\BILLS\H2526.IH H2526 pamtmann on DSKBFK8HB2PROD with BILLS 7 •HR 2526 IH 5 percent during the 10-year period ending on 1 the date of a discharge under section 101. 2 (B) The territory has received major dis- 3 aster assistance under the Robert T. Stafford 4 Disaster Relief and Emergency Assistance Act 5 (42 U.S.C. 5121 et seq.) during the 5-year pe- 6 riod ending on the date of a discharge under 7 section 101. 8 (C) The per capita debt of the territory is 9 greater than $15,000 (as adjusted annually to 10 reflect the percentage change in the Consumer 11 Price Index for All Urban Consumers published 12 by the Bureau of Labor Statistics of the De- 13 partment of Labor). 14 (10) SECURITY AGREEMENT.—The term ‘‘secu- 15 rity agreement’’ means an agreement or resolution 16 that creates or provides for a security interest. 17 (11) SECURED FINANCIAL OBLIGATION.—The 18 term ‘‘secured financial obligation’’ means any fi- 19 nancial obligation to the extent of the value of any 20 collateral pledged by a qualifying territory or an in- 21 strumentality of a qualifying territory to secure the 22 repayment of the financial obligation pursuant to a 23 valid and perfected security interest under applicable 24 territorial law, not including— 25 VerDate Sep 11 2014 04:15 May 10, 2019 Jkt 089200 PO 00000 Frm 00007 Fmt 6652 Sfmt 6201 E:\BILLS\H2526.IH H2526 pamtmann on DSKBFK8HB2PROD with BILLS 8 •HR 2526 IH (A) any property acquired or anticipated to 1 be acquired by a qualifying territory or an in- 2 strumentality of a qualifying territory after the 3 date of a discharge under section 101, even if 4 that property, when acquired, would have be- 5 come collateral subject to a security interest; or 6 (B) any proceeds, products, offspring, or 7 profits of the collateral not in existence on the 8 date of a discharge under section 101, unless 9 the property constitutes the proceeds of collat- 10 eral to which the security interest has attached 11 as of the date of the discharge. 12 (12) SECURITY INTEREST.—The term ‘‘security 13 interest’’— 14 (A) means an interest in property, includ- 15 ing a lien or other pledge of property, that se- 16 cures a payment or the performance of an obli- 17 gation; and 18 (B) does not include a pledge of the full 19 faith and credit of a qualifying territory or its 20 instrumentality, even in the case that such 21 pledge includes a promise of all available re- 22 sources of the qualifying territory or its instru- 23 mentality. 24 (13) TERRITORY.—The term ‘‘territory’’— 25 VerDate Sep 11 2014 04:15 May 10, 2019 Jkt 089200 PO 00000 Frm 00008 Fmt 6652 Sfmt 6201 E:\BILLS\H2526.IH H2526 pamtmann on DSKBFK8HB2PROD with BILLS 9 •HR 2526 IH (A) means any self-governing Federal ter- 1 ritory; and 2 (B) includes— 3 (i) the Commonwealth of Puerto Rico; 4 (ii) Guam; 5 (iii) the Commonwealth of the North- 6 ern Mariana Islands; 7 (iv) the United States Virgin Islands; 8 and 9 (v) American Samoa. 10 (14) UNSECURED FINANCIAL OBLIGATION.— 11 The term ‘‘unsecured financial obligation’’ means 12 any financial obligation to the extent the financial 13 obligation is not a secured financial obligation. 14 SEC. 3. FINDINGS. 15 Congress finds that— 16 (1) millions of citizens of the United States re- 17 side in territories of the United States; 18 (2) the Federal Government owes a special duty 19 of care and stewardship to the citizens of territories 20 of the United States because— 21 (A) historically, Federal administration of 22 these territories was often wanting and many 23 residents of the territories faced discriminatory 24 treatment by the Federal Government; 25 VerDate Sep 11 2014 04:15 May 10, 2019 Jkt 089200 PO 00000 Frm 00009 Fmt 6652 Sfmt 6201 E:\BILLS\H2526.IH H2526 pamtmann on DSKBFK8HB2PROD with BILLS 10 •HR 2526 IH (B) the economies of these territories face 1 special constraints, including diminishment of 2 property tax bases because of large, untaxed, 3 Federal land holdings; and 4 (C) these territories lack the benefits of 5 many Federal programs, such as Supplemental 6 Security Income, the Earned Income Tax Cred- 7 it, and full access to Medicaid; 8 (3) prolonged economic downturns, declines in 9 population, and natural disasters have resulted in 10 some territories of the United States and the instru- 11 mentalities of those territories having unsupportable 12 debt burdens on financial obligations, which cannot 13 realistically be repaid without imposing undue hard- 14 ship on the citizens and residents of those terri- 15 tories; 16 (4) disaster recovery funds that are provided by 17 the Federal Government should be used for disaster 18 recovery and not for direct or indirect debt pay- 19 ments; 20 (5) unsecured creditors of financially distressed 21 territories and instrumentalities of those territories 22 have little prospect of recovery upon default because 23 of— 24 VerDate Sep 11 2014 04:15 May 10, 2019 Jkt 089200 PO 00000 Frm 00010 Fmt 6652 Sfmt 6201 E:\BILLS\H2526.IH H2526 pamtmann on DSKBFK8HB2PROD with BILLS 11 •HR 2526 IH (A) the severe indebtedness of those terri- 1 tories; and 2 (B) the lack of effective remedies for unse- 3 cured creditors against those territories and the 4 instrumentalities of those territories; and 5 (6) the people of the Commonwealth of Puerto 6 Rico deserve to know about the social, political, and 7 legal factors associated with the amount of the pub- 8 lic debt of the Commonwealth of Puerto Rico ac- 9 crued over the past 5 decades, and the Federal Gov- 10 ernment has a responsibility to support efforts to ob- 11 tain those answers, including public or private ef- 12 forts to conduct a comprehensive audit of the public 13 debt of the Commonwealth of Puerto Rico. 14 TITLE I—TERRITORIAL RELIEF 15 SEC. 101. RELIEF THROUGH EXERCISE OF THE POWER TO 16 REGULATE COMMERCE, THE BANKRUPTCY 17 POWER, AND THE TERRITORIAL POWER. 18 (a) IN GENERAL.—Pursuant to clauses 3 and 4 of 19 section 8 of article I and clause 2, section 3 of article IV 20 of the Constitution of the United States, any unsecured 21 financial obligation of a qualifying territory or an instru- 22 mentality of a qualifying territory that is outstanding is 23 discharged on the date on which a resolution stating that 24 the qualifying territory wishes to discharge the unsecured 25 VerDate Sep 11 2014 04:15 May 10, 2019 Jkt 089200 PO 00000 Frm 00011 Fmt 6652 Sfmt 6201 E:\BILLS\H2526.IH H2526 pamtmann on DSKBFK8HB2PROD with BILLS 12 •HR 2526 IH financial obligations of the qualifying territory and the in- 1 strumentalities of the qualifying territory— 2 (1) is adopted by an affirmative vote of more 3 than 1⁄2 of the members of each house of the legisla- 4 ture of that qualifying territory and is signed by the 5 chief executive of the qualifying territory; or 6 (2) is adopted by an affirmative vote of not less 7 than 2⁄3 of the members of each house of the legisla- 8 ture of that qualifying territory. 9 (b) LIMITATION.—A qualifying territory may dis- 10 charge unsecured financial obligations of the qualifying 11 territory and the instrumentalities of the qualifying terri- 12 tory under this title not more frequently than once during 13 any 7-year period, and such discharge shall prohibit the 14 qua [Text truncated for display. 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