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[Senate Report 107-116]
[From the U.S. Government Publishing Office]

                                                       Calendar No. 269
107th Congress                                                   Report
                                 SENATE
 1st Session                                                    107-116

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                  WORLD TRADE CENTER ATTACK CLAIMS ACT

                                _______
                                

                December 7, 2001.--Ordered to be printed

                                _______
                                

   Mr. Jeffords, from the Committee on Environment and Public Works, 
                        submitted the following

                              R E P O R T

                         [to accompany S. 1624]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Environment and Public Works, to which was 
referred a bill (S.1624), to establish the Office of World 
Trade Center Attack Claims to pay claims for injury to 
businesses and property suffered as a result of the attack on 
the World Trade Center in New York City that occurred on 
September 11, 2001, and for other purposes, having considered 
the same, reports favorably thereon with an amendment and 
recommends that the bill, as amended, do pass.

                               Background

    On September 11, 2001, terrorists attacked the Pentagon and 
the World Trade Center. These horrible events marked the first 
time since the 1941 attack on Pearl Harbor that the United 
States has suffered a foreign attack on domestic soil. The 
magnitude and enormity of these attacks are unprecedented in 
our Nation's history. Thousands of innocent people lost their 
lives. Tens of thousands more lost their homes, their 
businesses, their jobs, their livelihoods as a result of this 
attack.
    In New York, the attack left in its wake a mountain of 
debris, damaged buildings and inaccessible businesses and 
residences. New York City will lose an estimated $105 billion 
as a result of the attacks over the next two years. The attack 
damaged or destroyed nearly 25 million square feet of office 
space, roughly equivalent to 20 percent of all the office space 
in downtown New York. The attack physically displaced some 850 
businesses and over 125,000 workers, and an additional 9,000 
businesses and over 145,000 people have only restricted access 
to their property.
    Before the work of rebuilding lower Manhattan can begin, 
crews must remove over a million tons of debris from the site, 
a process that will likely take more than a year. Physical 
reconstruction of destroyed buildings is most likely years 
away. Many businesses and individuals do not have adequate 
insurance or resources to sustain themselves in the near term 
or to rebuild their businesses and lives in the long term.
    S. 1624, the ``World Trade Center Attack Claims Act,'' 
responds to the overwhelming needs of the businesses and the 
people of lower Manhattan, those directly and seriously 
impacted by the recent attacks. The bill would provide 
compensation for residential and business losses suffered by 
injured persons as a result of the events of September 11th. 
The bill would create an Office of World Trade Center Attack 
Claims (Office) within the Federal Emergency Management Agency 
(FEMA). The Office would process and pay claims at the 
discretion of the Director of the Federal Emergency Management 
Agency (Director) acting in accordance with the legislation and 
regulations promulgated by FEMA.

                      Section-by-Section Analysis

Section 1. Short Title
    The World Trade Center Attack Claims Act.
Section 2. Findings and Purposes

                                Summary

    Section 2 sets out the Congressional findings and purposes 
of the legislation.

                               Discussion

    The purpose of the legislation is to compensate certain 
individuals and businesses located within a specific geographic 
region within lower Manhattan suffering injury as a direct 
result of the attack. It is not the intent of this committee to 
create an entitlement to disaster relief funds made available 
under this Act. Nor is it the intent of this committee to 
compensate claimants for losses that bear no relation to the 
September 11th attack. The intent of the legislation is to 
allow the Director to determine and to make discretionary 
awards on a case-by-case basis for qualifying business and 
residential loss caused by the September 11th attacks until the 
Office exhausts funds authorized and appropriated under this 
Act. For businesses and residences located in a specific 
geographic region in Lower Manhattan prior to September 11, 
2001, this Act provides aid to assist attack victims to 
continue, replace, start, establish, or locate their business 
or residence in New York City.
Section 3. Definitions
    Section 3 defines the following terms for purposes of the 
legislation.
    Affected area.--The term ``affected area'' means the area 
in lower Manhattan, New York City, that is comprised of the 
area located on or south of Canal Street, on or south of East 
Broadway (east of its intersection with Canal Street), or on or 
south of Grand Street (east of its intersection with East 
Broadway).
    Attack.--The term ``attack'' means the attack on the World 
Trade Center in New York City that occurred on September 11, 
2001.
    Claim.--The term ``claim'' means a claim by an injured 
person under this Act for payment for injury suffered by the 
injured person as a result of the attack.
    Claimant.--The term ``claimant'' means an injured person 
that submits a claim under section 5(b) of the bill.
    Director.--The term ``Director'' means--
        (A) the Director of the Federal Emergency Management 
        Agency; or
        (B) if an Independent Claims Manager is appointed under 
        section 4(d)(4) of the bill, the Independent Claims 
        Manager.
    Injured person.--
        (A) In General.--The term ``injured person'' means an 
        individual, corporation, partnership, company, 
        association, cooperative, joint venture, limited 
        liability company, estate, trust, or nonprofit 
        organization that
                (i) suffered injury as a result of the attack; 
                and
                (ii) resides or maintains a place of business 
                in the affected area.
        (B) Exclusions.--The term ``injured person'' does not 
        include
                (i) a lender that holds a mortgage on or 
                security interest in real or personal property 
                affected by the attack; or
                (ii) a person that holds a lien on real or 
                personal property affected by the attack.
    Office.--The term ``Office'' means the Office of World 
Trade Attack Claims established in section 4 of the 
legislation.
Section 4. Office of World Trade Center Attack Claims

                                Summary

    Section 4 establishes within FEMA an Office of World Trade 
Center Attack Claims. This section also authorizes the Director 
to appoint an Independent Claims Manager to head the Office and 
to assume the duties of the Director under this Act.

                               Discussion

    The purpose of the Office is to receive, to process, and to 
pay claims in accordance with the provisions set out in section 
5 of the bill. The Office will not diminish FEMA's authority or 
funding under the Stafford Act. Funding for the Office will 
come from funds authorized through this legislation, and not 
from the Disaster Relief Fund or other FEMA sources. But the 
committee does not intend to prohibit FEMA from utilizing 
Stafford Act resources in the administration of the program on 
a cost reimbursable basis provided that the use of those 
resources does not substantially affect FEMA's ability to carry 
out its Stafford Act mission. Examples of Stafford Act 
resources that FEMA might use in administering the Office 
include FEMA's National Processing Service Centers, its 
information technology capabilities, and its cadre of 
experienced, customer-service oriented disaster assistance 
employees. The Director may also hire temporary personnel to 
staff the Office, and other Federal agencies may detail, on a 
reimbursable basis, personnel to assist in carrying out the 
duties of the Office.
    The committee does not view the Office established under S. 
1624 as duplicative of other Federal programs currently 
available to victims of the September 11th attack. Recent news 
accounts concerning various relief agencies and their slow and 
sometimes ineffectual administration of disaster assistance 
shows that many directly affected victims are not receiving the 
necessary funds to restart their lives and their businesses. 
The intent of S. 1624 is to provide direct and timely 
assistance to victims who qualify under this Act.
Section 5. Compensation for Victims of the Attack

                                Summary

    Section 5 establishes the framework for the processing and 
payment of claims by the Office of World Trade Center Attack 
Claims and places the burden of substantiating loss on the 
claimant. Section 5 also establishes a claimant appeals 
process.

                               Discussion

            Processing Claims
    In processing claims and making payment decisions, the 
Director will have complete discretion to determine disposition 
of each claim in accordance with the provisions of this 
legislation and with regulations promulgated by FEMA for the 
purpose of processing claims under this Act. The Director will 
publish final interim regulations in the federal register not 
later than 45 days after enactment of this legislation. Not 
later than two years after the publication of the final interim 
regulations, an injured person may file a claim for injury 
suffered as a result of the September 11th terrorist attacks.
    Qualifying claims fall into two categories of compensable 
loss residential loss and business loss. Residential losses 
include uninsured or underinsured property loss, damage to or 
destruction of physical infrastructure, insurance deductibles, 
temporary living or relocation expense, debris removal and 
other cleanup costs, or any other type of related injury that 
Director determines appropriate.
    Business loss may include uninsured or underinsured 
property loss, damage to or destruction of tangible assets or 
inventory, business interruption loss, overhead costs, employee 
wages for work not performed, insurance deductibles, temporary 
relocation expenses, debris removal and cleanup costs, and any 
other type of injury that the Director determines appropriate. 
Business loss claims are subject to an additional limitation. 
An injured person may receive compensation for business loss 
only if the injured person's business facility has suffered 
disruption of power, disruption in telecommunications capacity, 
damage to or destruction of physical infrastructure, or 
disruption in physical access by employees or customers to the 
business facility.
    Any qualifying claim is subject to a payment ceiling and 
other offsets. Payment on a claim submitted by an injured 
person may not exceed the amount necessary to compensate for 
injuries suffered during the 18-month period following the 
September 11th attack. Also, payment on an injured person's 
claim may not exceed $500,000, except in those instances where 
the Director determines a greater amount is appropriate.
    To prevent recovery by a claimant in excess of the 
equivalent of actual compensatory damages, the committee 
anticipates that insured claimants will seek redress from their 
insurance companies first. The committee expects that the 
Office will require insured claimants to file claims with their 
insurance companies first and to disclose the extent of their 
insurance coverage to the Office. However, it is not the 
committee's intent that insured claimants wait for insurance 
companies to fully process their claims before filing a claim 
or receiving payment under this Act.
    In calculating the amount of any compensable claim, the 
committee expects the Office will consider expected insurance 
proceeds an injured party may receive. Awards are also offset 
by other benefits received through FEMA's individual and public 
assistance benefits program and other government programs as a 
result of the September 11th attacks. But the office should not 
offset awards by the amount of any government loan received by 
the claimant.
    It is important to note that the intent of the committee is 
not to eliminate or to supplant the duty owed by individual 
insurance companies to their policyholders. To the maximum 
extent possible, the committee expects that insured claimants 
will seek redress under existing insurance policies first. The 
intent of the legislation is to provide a secondary source of 
remuneration for actual compensatory damages suffered as a 
direct result of the attack.
            Burden of Proof
    Under this section, the claimant has the burden of 
substantiating loss. If documentary evidence substantiating the 
injury is not available, the Director may pay a claim based on 
an affidavit or other documentation provided by the claimant.
            Payment of Claims
    Once an injured person has submitted a claim for loss to 
the Office, the Director, to the maximum extent practicable, 
will process the claim within 180 days. If the Director 
determines the injured party has suffered compensable loss 
under this section, the Director will pay the claim subject to 
the limitations set out in this section. The Director may give 
processing priority to certain claims based on the claimants' 
assessed needs and any other criteria the Director deems 
appropriate. In determining the validity of a claim, the 
Director will determine whether the claimant is an injured 
person, whether the injuries suffered resulted directly from 
the attack, the amount, if any, to be paid under this section, 
and the person or persons entitled to receive payment.
    Again, in considering the amount of a claim, the Director 
will reduce the award by the amount of any payments on 
insurance policies made as a result of the September 11th 
attack. The Director will also reduce the award by the amount 
of any benefits received in response to the September 11th 
attack under the public assistance program or any other FEMA 
program. But the Director will not reduce the award by the 
amount of any government loan received by the injured person.
    The United States may recover any portion of a payment 
improperly paid to the claimant because of fraud or 
misrepresentation on the part of the claimant, a material 
mistake on the part of the United States, insurance benefits 
not properly accounted for, or failure of the claimant to 
cooperate with an audit.
    The Director may make one or more advance or partial 
payments before the final settlement of the claim.
            Appeals
    If the claimant does not agree with the Director's 
disposition of a claim, the claimant may appeal the decision in 
accordance with the appellate process regulations jointly 
promulgated by FEMA and the Small Business Administration. The 
claimant must file the notice of appeal no later than 60 days 
after the date the Director notifies the claimant that the 
claim will or will not be paid. The Administrator of the Small 
Business Administration will consider the business loss 
appeals, and in the case of residential loss, the Director will 
consider the appeal. In either case, appellate decisions must 
be rendered not later than 90 days after receipt of the notice 
of appeal.
            Debt Collection Requirements
    Section 5 also includes a provision stating that the Debt 
Collection Act shall not preclude the payment of any claim. 
Injured persons cannot assign claims paid under this Act, and 
this bill exempts paid claims from creditors. However, the 
Director may require repayment of Small Business Administration 
disaster loans from the proceeds of claims paid under this Act.
Section 6. Acceptance of Services of Other Agencies and Volunteers; 
        Gifts
    Section 6 allows the Director to accept and to use the 
facilities or employees of any State or local government or 
agency with the consent of the government. The Director may 
also accept voluntary and uncompensated services by individuals 
or organizations and gifts of supplies, equipment, and 
facilities as needed.
Section 7. Relationship to Federal Entitlement Programs

                                Summary

    Section 7 states that nothing in the bill prevents an 
injured person from seeking benefits under any Federal 
entitlement program. Further, calculation of eligibility for 
any Federal benefit or entitlement program should not include 
any compensation received under this Act.

                               Discussion

    Section 7 is necessary to prevent injured persons receiving 
compensation under this Act from being excluded from receiving 
benefits under Federal entitlement programs. Asset calculations 
for programs such as the food stamp program under the Food 
Stamp Act of 1977 (7 U.S.C. 2011 et seq.) and any program 
established under the Social Security Act (42 U.S.C. 301 et 
seq.) should not include monetary compensation for compensable 
loss under this Act.
    This section insures that injured persons can receive 
compensation from the Office without fear of losing essential 
Federal entitlements.
Section 8. Reports and Audits

                                Summary

    Section 8 mandates that the Director submit to Congress a 
report describing the claims submitted under this Act during 
the year preceding the report. Section 8 also directs the 
Comptroller General to conduct an annual audit of the payment 
of all claims submitted under this Act and to report the 
results to Congress.

                               Discussion

    Not later than one year after the promulgation date of 
final interim regulations and annually thereafter, the Director 
must submit to Congress a report describing the claims 
submitted under this Act during the preceding year. The report 
should include information on each claim including the amount 
claimed and a brief description of the nature and status of 
each claim including any payment on the claim.
    The Comptroller General must complete the first annual 
audit not later than 120 days after the Director submits the 
first claims report to Congress, and annually thereafter. The 
purpose of the audit is to ascertain adherence to the 
requirements and standards of this Act, particularly with 
regard to the qualifications of the applicants.
    The committee expects that FEMA's Office of Inspector 
General will maintain a full-time presence in the Office of 
World Trade Center Attack Claims to deter fraud and to promote 
efficiency, consistent with its obligations under the Inspector 
General Act of 1978, as amended.
Section 9. Authorization of Appropriations

                                Summary

    Section 9 authorizes $2 billion for the purposes of 
carrying out this Act.

                               Discussion

    The section authorizes $100 million for administrative 
expenses and $1.9 billion for the payment of claims. The 
committee anticipates that these funds will be part of the 
President's proposed $20 billion relief package for New York. 
These will remain available until expended. The Director will 
not spend disaster relief funds to carry out this Act.
Section 10. Termination of Authority
    The authority of this Act terminates 42 months after the 
date of enactment of this Act.

                          Legislative History

    Senator Hillary Rodham Clinton introduced S. 1624, ``The 
World Trade Center Attack Claims Act,'' on November 1, 2001. 
The committee held a legislative hearing to take testimony on 
the proposed legislation on November 1, 2001. The committee 
reported the bill, with an amendment in the nature of a 
substitute, on November 8, 2001 by voice vote.

                                Hearings

    On November 1, 2001, the committee held a legislative 
hearing on S. 1624, a bill to establish the Office of World 
Trade Center Attack Claims to pay claims for injury to 
businesses and property suffered as a result of the attack on 
the World Trade Center in New York City that occurred on 
September 11, 2001, and for other purposes, receiving testimony 
from Michael Brown, Deputy Director, Federal Emergency 
Management Agency; Joe Moravec, Commissioner, Public Building 
Service, General Services Administration; Dr. David Sampson, 
Assistant Secretary for Economic Development, Economic 
Development Administration, U.S. Department of Commerce; 
Richard Meserve, Chairman, Nuclear Regulatory Commission; 
Herbert Mitchell, Associate Administrator for Disaster 
Assistance, Small Business Administration; and Marianne L. 
Horinko, Assistant Administrator. Office of Solid Waste and 
Emergency Response, Environmental Protection Agency.

                             Rollcall Votes

    The Committee on Environment and Public Works met to 
consider S. 1624 on November 8, 2001. By voice vote, the 
committee agreed to amendment offered by Sentor Clinton in the 
nature of a substitute. In addition, the committee adopted a 
second degree amendment offered by Senator Clinton by voice 
vote. The committee then agreed to report S. 1624, as amended, 
by voice vote with Senator Bond recorded as voting ``no.''

                      Regulatory Impact Statement

    In compliance with section 11(b) of rule XXVI of the 
Standing Rules of the Senate, the committee makes evaluation of 
the regulatory impact of the reported bill.
    The bill does not create any additional regulatory burdens, 
nor will it cause any adverse impact on the personal privacy of 
individuals.

                          Mandates Assessment

    In compliance with the Unfunded Mandates Reform Act of 1995 
(Public Law 104-4), the committee finds that S. 1624 would 
impose no unfunded mandates on local, State, or tribal 
governments.

                          Cost of Legislation

    Section 403 of the Congressional Budget and Impoundment 
Control Act requires that a statement of the cost of the 
reported bill, prepared by the Congressional Budget Office, be 
included in the report. That statement follows:
                                     U.S. Congress,
                               Congressional Budget Office,
                                  Washington, DC, December 5, 2001.

Hon. James Jeffords, Chairman,
Committee on Environment and Public Works,
U.S. Senate, Washington, DC.

Dear Mr. Chairman: The Congressional Budget Office has prepared 
the enclosed cost estimate for S. 1624, the World Trade Center 
Attack Claims Act. If you wish further details on this 
estimate, we will be pleased to provide them.
    The CBO staff contact is Julie Middleton, who can be 
reached at 226-2860.
            Sincerely,
                                            Dan L. Crippen.
                              ----------                              

               Congressional Budget Office Cost Estimate

S. 1624, World Trade Center Attack Claims Act, As ordered reported by 
        the Senate Committee on Environment and Public Works on 
        November 8, 2001.

                                SUMMARY

    S. 1624 would authorize the Federal Emergency Management 
Agency (FEMA) to establish the Office of World Trade Center 
Attack Claims to process and pay claims for injury to 
businesses and property suffered as a result of the September 
11, 2001, terrorist attack in New York. The bill would 
authorize the appropriation of $2 billion for this purpose. 
Under this bill, FEMA would be authorized to issue claims for 
residential and business losses, though each individual claim 
could not exceed $500,000 except under certain circumstances. 
(The funding authorized by this legislation would not be used 
for compensation to injured individuals or families of 
individuals killed in the terrorist attack. That compensation 
will be provided under Public Law 107-42, the Air 
Transportation Safety and System Stabilization Act.)
    Under S. 1624, residential losses would include an 
uninsured or under-insured property loss, damage to or 
destruction of physical infrastructure, an insurance 
deductible, temporary living or relocation expenses, and clean-
up costs. In addition, business losses would include all of 
those listed as residential losses as well as damage to or 
destruction of assets or inventory, a business interruption 
loss, overhead costs, and employee wages for work not 
performed. Any amounts awarded would be net of insurance claims 
that the person or business receives. Such claims would also be 
net of any public assistance provided by federal, state, or 
local agencies. Under the bill, the authority to approve claims 
would end 42 months after enactment.
    Assuming appropriation of the authorized amount, CBO 
estimates that implementing S. 1624 would cost $2 billion over 
the 2002-2006 period. S. 1624 would also have an insignificant 
effect on receipts by establishing a new civil penalty; 
therefore, pay-as-you-go procedures would apply.
    S. 1624 would exempt the compensation awarded under the 
bill from the attempts of creditors to collect outstanding 
debts. That is, the bill would prohibit public and private 
creditors from making claims against awards made to individuals 
or businesses who qualify for compensation under the bill. This 
prohibition would be both an intergovernmental and private-
sector mandate as defined in the Unfunded Mandates Reform Act 
(UMRA). CBO estimates, however, that any costs to comply with 
that mandate would be negligible.

                ESTIMATED COST TO THE FEDERAL GOVERNMENT

    The estimated budgetary impact of S. 1624 is shown in the 
following table. The costs of this legislation fall within 
budget function 450 (community and regional development).

                 By Fiscal Year, in Millions of Dollars
------------------------------------------------------------------------
                                   2002    2003    2004    2005    2006
------------------------------------------------------------------------
 CHANGES IN SPENDING SUBJECT TO
          APPROPRIATION
Authorization Level.............   1,925      25      25      25       0
Estimated Outlays...............     385     500     510     410     195
------------------------------------------------------------------------

                           BASIS OF ESTIMATE

    For this estimate, CBO assumes S. 1624 will be enacted 
early in fiscal year 2002. The bill would authorize the 
appropriation of $2 billion to pay business and property-loss 
claims related to the September 11, 2001, terrorist attack in 
New York. According to a report issued by the New York City 
Office of the Comptroller, the city estimates the level of 
uninsured property loss and damage as a result of the terrorist 
attack will be about $17 billion. Under that information, CBO 
assumes that there would be strong demand for the grants 
offered under this program and that all of the funds authorized 
to be appropriated would be spent. Under the process 
established in the bill, CBO assumes that it would take five 
years to resolve all of the claims submitted to FEMA. 
Consequently. we estimate that implementing S. 1624 would cost 
$2 billion over the 2002-2006 period, assuming appropriation of 
the authorized amounts.
    S. 1624 would establish a ci viI penalty for lawyers who 
overcharge victims for their services. Collections of civil 
fines are recorded in the budget as governmental receipts 
(revenues). CBO expects that any additional receipts would be 
less than $500,000 because the number of cases involved is 
likely to be small.

                      PAY-AS-YOU-GO CONSIDERATIONS

    The Balanced Budget and Emergency Deficit Control Act sets 
up pay-as-you-go procedmes for legislation affecting direct 
spending or receipts. CBO estimates that enacting S. 1624 would 
increase revenues by less than $500,000.

              INTERGOVERNMENTAL AND PRIVATE-SECTOR IMPACT

    S. 1624 would exempt the compensation awarded under the 
bill from the attempts of creditors to collect outstanding 
debts. That is, the bill would prohibit public and private 
creditors from making claims against awards made to individuals 
or businesses who qualify for compensation under the bill. This 
prohibition would be both an intergovernmental and private-
sector mandate as defined in UMRA. Because the compensation 
would be new income generated under the bill, creditors would 
not lose access to funds that they could have made claims 
against in the absence of the bill. Consequently, CBO estimates 
that the costs to comply with the mandate would be negligible, 
if any, and would fall well below the annual thresholds 
established by UMRA ($56 million for intergovernmental mandates 
and $113 million for private-sector mandates in 2001, adjusted 
annually for inflation).
Estimate Prepared by: Federal Costs: Julie Middleton (226-
2860); Impact on State, Local, and Tribal Governments: Leo Lex 
(225-3220); Impact on the Private Sector: Lauren Marks and 
Patrice Gordon (226-2966).

    Estimate Approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                        Changes in Existing Law

    Section 12 of rule XXVI of the Standing Rules of the 
Senate, provides that reports to the Senate should show changes 
in existing law made by the bill as reported. Passage of this 
bill will make no changes to existing law.

                                  
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