Exhibit HH

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 1 of 31
(S. B. 211)

(No. 2-2017)

(Approved January 18, 2017)

AN ACT

To create the Puerto Rico Fiscal Agency and Financial Advisory Authority 

(FAFAA) in order to empower the Authority to oversee compliance with the 

certified budget and fiscal plan approved pursuant to the Puerto Rico 

Oversight, Management, and Economic Stability Act of 2016; delegate to 

the Authority the power to revise matters including, but not limited to, 

agreements, transactions, and regulations of the agencies and 

instrumentalities of the Government of Puerto Rico; provide that the 

Authority shall be the only entity authorized to enter into a creditors’ 

agreement, and/or renegotiate or restructure the public debt, in whole or in 

part, or any other debt issued by any Government body including, but not 

limited to agencies, boards, commissions, instrumentalities, public 

corporations or applicable political subdivision; provide that the Executive 

Director of the Authority shall be the legal successor of the President of the 

Government Development Bank in every Board, Committee, Commission, 

or Council; repeal Chapter 6 of Act No. 21-2016, as amended; repeal the

Puerto Rico Fiscal Oversight and Economic Recovery Organic Act, Act No. 

208-2015; and for other related purposes.

STATEMENT OF MOTIVES

Puerto Rico is currently undergoing a serious fiscal and social crisis. Said 

crisis was caused, in part, by the lack of adequate constitutional limitations to 

prevent the deficits of the Central Government, the liquidity problems caused by 

the increase in debt level, the slow Gross Domestic Product (GDP) growth, and the 

loss of investors’ trust in the policies and actions of the Government. In other 

words, there was a lack of expenditure controls, sustainable development 

measures, as well as management information systems that promote clarity and 

transparency in government affairs.

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 2 of 31
2

The public policy of the past administration was focused on the debt’s 

renegotiation based on payment deferment, which could have increased the burden 

of future debt. However, the debt restructuring subject was a distraction from the 

pressing need of reducing government spending, which exceeded revenues by 

$6,000,000,000 in fiscal year 2013. The debt service of the Government of Puerto 

Rico of approximately $3,000,000,000 is slightly over the 10% of the total 

government spending and the elimination of the entire debt would only reduce the 

operating deficit by 50%.

Furthermore, measures were implemented based on the “taxes first, then 

cuts” philosophy, to wit, increasing the Sales and Use Tax (SUT) from 7% to 

11.5% and approving raises in the excise tax on crude oil. Said philosophy 

promoted an excessive spending and the rejection of policies that would have 

allowed for the efficient management of the fiscal issues of the Government of 

Puerto Rico. All of this was implemented without taking the necessary actions to 

improve greater operational efficiency in the Government or cutting back on 

excessive government spending.

Without it being construed as a comprehensive list, the García-Padilla 

Administration insisted on taking the following actions, which worsened the 

economic environment, namely:

 Approving local legislation on bankruptcy (Recovery Act) and then 

insisting on challenging the constitutionality thereof knowing its slim

chances of success;

 Exerting pressure on Congress for the retroactive application of Chapter 

9 of the U.S. Bankruptcy Code to the subdivisions of the Government of 

Puerto Rico;

 Failing to meet the bond obligations of the Public Financing Corporation;

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 3 of 31
3

 Threatening with indiscriminate noncompliance with all the obligations 

of the Government of Puerto Rico without taking into account the 

priorities set forth in the Constitution, statutes, and contracts of the 

Government of Puerto Rico;

 Delaying the publication of audited financial statements and attempting 

to replace them with customized cash flow projections and analyses;

 Misrepresenting the availability of resources.

In addition, while securities plummeted and the economy collapsed, the 

Central Government was unable to generate the necessary financial information to 

provide Congress and other entities concerned, with a deep insight into the 

problem.

The Government Development Bank (hereinafter, the “Bank”), which 

should have acted as the chief financial advisor of the Government, remained in 

the background, failing to carry out its duties. The Bank could not and cannot 

comply with the duties entrusted thereto by law. All of these events have shown 

that the duties assigned to the Bank under its enabling act are not attuned to the 

new trends and dynamism required by the global economy.

Consequently, the debt of the Government of Puerto Rico experienced 

several downgrades. Credit rating agencies Moody’s, Standard & Poor’s, and Fitch 

Ratings downgraded the public debt of the Government of Puerto Rico and its 

public corporations to junk status. Puerto Rico has been kept in an unjustifiable 

financial stagnation, especially in times where interest rates were so low that some 

jurisdictions issued debts even at negative rates.

It is time to implement an administration and a public policy that do not 

improvise or manage the Island’s finances on a year-to-year basis, but that rather 

strike a balance between income and expenses in the long-term. We must look into 

the future and anticipate the challenges ahead, rather than simply survive the next 

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 4 of 31
4

crisis. The leaders and officials of the Government of Puerto Rico must concentrate 

on balancing income and expenditures, reducing the level of government 

intervention in Puerto Rico’s economy, and creating a competitive business 

environment governed by good faith and observing the Code of Laws, so that 

investors as well as local and foreign business people may lead the way towards an 

economic recovery. 

Act No. 21-2016 created the “Puerto Rico Emergency Moratorium and 

Rehabilitation Act (hereinafter, the “Moratorium Act.”) The Moratorium Act 

created, among other things, the Authority as the principal financial and 

operational entity to provide the fiscal policy of the Government of Puerto Rico

with direction and responsibility. This Legislative Assembly deems it necessary to 

repeal Chapter 6 of the Moratorium Act to create, through a separate enabling act,

a new Puerto Rico Fiscal Agency and Financial Advisory Authority (FAFAA), 

conferring unto it additional powers and authorities to deal with the budget and 

fiscal crisis of Puerto Rico. All of this, in light of the present fiscal crisis, the 

approval of Public Law 114-187 of June 30, 2016, entitled “Puerto Rico Oversight, 

Management, and Economic Stability Act,” known as PROMESA, as well as the 

letter dated December 20, 2016 of the Fiscal Oversight Board addressed to both 

then governor Alejandro García-Padilla and then governor-elect and current 

governor, Dr. Ricardo Rosselló-Nevárez.

This Legislative Assembly hereby adopts this new enabling act to improve 

and extend the powers of the Authority. In this manner, the Government may avail 

itself of an entity that shall assist it in using available resources efficiently, thus 

arousing, once again, the interest and trust of capital markets.

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 5 of 31
5

The Administration of the Honorable Ricardo Rosselló-Nevares has taken a 

significant step toward restoring investors’ trust in Puerto Rico, beginning with 

following the code of laws, including the United States Constitution, federal 

statutes, the Constitution of Puerto Rico and the agreements entered into by and 

between the Government of Puerto Rico and its creditors.

According to data provided by the U.S. Department of the Treasury, Puerto 

Rico is suffering a 14.6% economic contraction in the Gross State Product (actual 

GSP) with a forecast of an additional 3% contraction in the next two years. For 

years, the Government has operated with a structural deficit that has been financed 

with bond issues and loans from the Government Development Bank. The 

Government has been lacking liquidity for over a year, and the tax refunds, the 

payments to contractors, the money of pensioners, and intra-governmental loans 

have been used as a substitute for sources of liquidity.

Access to the Government’s financial information as well as the making of 

adequate predictions have been affected by a divided government structure and 

obsolete government systems. Revenues are constantly overestimated and continue 

to decrease despite the imposition of many new taxes. The Government 

Development Bank has failed to meet its obligations to bondholders since May 1, 

2016, and is no longer fulfilling its duty to provide liquidity. Puerto Rico’s 

obligations portfolio amounts to $66 billion and includes 18 different issuers 

whose financial situation is precarious. Debt service amounts to an average $3.5 

billion and uses more than one-fourth of the sources of income. Retirement 

systems are practically insolvent with a $50 billion debt. All of the foregoing is 

worsened by a decrease in population caused by the emigration wave that began in 

2006 and that is becoming one of the challenges to overcome on our path to 

recovery.

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 6 of 31
6

Taking into account this dismal state of affairs, it is time to leave behind the 

philosophy of “me vale” [I couldn’t care less], roll up our sleeves and work hard 

for the wellbeing of Puerto Rico. It is our duty to build a new Puerto Rico and to 

set in motion an administration that does not improvise on the implementation of 

public policy nor manages the Island’s finances on a year-to-year basis, but that 

rather strikes a balance between the Government’s income and expenses with a 

long-term goal. Our commitment under the Plan for Puerto Rico is to address these 

situations responsibly and restore the Island’s credibility. We must look into the 

future and anticipate the challenges ahead, rather than simply survive the next 

crisis. Leaders and officials of the Government of Puerto Rico should concentrate 

on balancing income and expenditures, reducing the level of government 

intervention in Puerto Rico’s economy, and creating a competitive business 

environment governed by good faith, so that investors as well as local and foreign 

business people may lead the way towards an economic recovery. 

The policies of the past led the United States Congress to adopt PROMESA, 

delegating to a Fiscal Oversight Board the power to work with the Government of 

Puerto Rico to find a solution to the current crisis. Our commitment is to work 

hand in hand with the Fiscal Oversight Board to push Puerto Rico forward. Thus, 

on December 20th, the Fiscal Oversight Board requested that Puerto Rico’s 

priorities include a plan and a commitment to implement significant changes 

directed to:

o Restoring economic growth and creating a more competitive economy. 

In the short-term, the labor market and social programs should be 

liberalized, energy costs should be lowered, taxation should be 

rationalized and optimized, and the permit process should be improved 

to promote investment.

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 7 of 31
7

o Restructuring the Government to achieve balanced budgets, while 

preserving essential services for the People of Puerto Rico.

o Restructuring the pension systems in accordance with PROMESA and 

reestablishing access to capital markets.

To achieve this, unprecedented changes are required to render the 

government more efficient and fiscally responsible. In fact, the Plan for Puerto 

Rico endorsed by the People on November 8, 2016, includes measures to achieve 

fiscal responsibility and develop the Island’s economy.

BE IT ENACTED BY THE LEGISLATIVE ASSEMBLY OF PUERTO RICO:

Section 1.- Title.-

This Act shall be known as the “Puerto Rico Fiscal Agency and Financial 

Advisory Authority Act.”

Section 2.- Public Policy.-

It is hereby declared as the public policy of the Government of Puerto Rico 

that the Puerto Rico Fiscal Agency and Financial Advisory Authority be the 

leading public corporation and instrumentality responsible for coordinating the 

sustainable use of resources and presenting a coordinated and global vision of the 

capital needs of the instrumentalities of the Government of Puerto Rico. It is the 

public policy of the Government to take measures that enable Puerto Rico to 

overcome the current crisis and to provide the residents of the Island with essential 

services, all of which requires, in part, taking the following actions: (I) regaining 

investors’ trust to have access to capital markets; (II) addressing the budget 

imbalance between income and expenditures; (III) negotiating the debt’s 

repayment terms; and (IV) decelerating future debt growth and reducing the 

current debt.

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 8 of 31
8

Section 3.- Definitions.-

a) “Authority” or “FAFAA” - means the Puerto Rico Fiscal Agency 

and Financial Advisory Authority created in this Act.

b) “Creditors’ Agreement” - means an agreement entered into by and 

between a government entity and the creditors thereof, including a consented debt

restructuring agreement, as amended, supplemented, or reinstated from time to 

time, whether it is securitized or not.

c) “Bank” - means the Government Development Bank for Puerto Rico.

d) “Government of Puerto Rico” - means all the entities comprising the 

Government of Puerto Rico including, but not limited to, its public corporations, 

instrumentalities, commissions, boards, and political subdivisions. Said concept 

shall be interpreted as broadly as possible so as to include, but not be limited to, 

any entities that receive funds from the general fund and issue public debt.

(e) “Board” or “Board of Directors” - means the Board of the 

Authority.

(f) “Act” - means the Government of Puerto Rico Fiscal Agency and 

Financial Advisory Authority Act;

(g) “Act No. 21” - means Act No. 21-2016, as amended, known as the 

“Puerto Rico Emergency Moratorium and Rehabilitation Act.”

(h) “Person” - means any natural or juridical person including, but not 

limited to, any government agency, department, instrumentality, public 

corporation, municipality, board, office, commission, or entity, or any public or 

private person, business, association, society, company, limited liability company, 

partnership, or corporation organized and existing under the laws of Puerto Rico, 

the United States of America or any state thereof, or any foreign country or any 

combination thereof.

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 9 of 31
9

(i) “PROMESA” - means Public Law 114-187 of June 30, 2016, known 

as the “Puerto Rico Oversight, Management, and Economic Stability Act.”

Section 4.- Establishment.-

The Puerto Rico Fiscal Agency and Financial Advisory Authority (FAFAA) 

is hereby created as a public corporation and Government instrumentality, with 

legal existence, fiscal and administrative autonomy, separate and independent from 

the Government of Puerto Rico. The Authority shall exist in perpetuity, unless 

terminated by legislation.

For all intents and purposes, the Authority shall be the successor of the 

Puerto Rico Fiscal Agency and Financial Advisory Authority created by virtue of 

Chapter VI of Act No. 21.

Section 5.- Purposes, Authorities, and Powers of the Authority.-

(a) The Authority is created for the purpose of acting as fiscal agent, 

financial advisor, and reporting agent of all entities of the Government of Puerto 

Rico and to assist such entities in facing the serious fiscal and economic crisis that 

Puerto Rico is currently undergoing. The Authority shall be the government entity 

responsible for the collaboration, communication, and cooperation between the 

Government of Puerto Rico and the Fiscal Oversight Board, created under 

PROMESA.

(b) To such effect, the Authority is hereby empowered to collaborate in 

conjunction with the Governor of Puerto Rico and his representatives in the 

creation, execution, supervision, and oversight of any Fiscal Plan and any Budget, 

as such terms are defined in PROMESA. Likewise, the Authority shall be the 

government entity charged with supervising, executing, and administering the 

Fiscal Plan approved and certified in accordance with PROMESA and shall ensure 

that all the entities of the Government of Puerto Rico comply with the duly 

approved Fiscal Plan. In that sense, the Authority shall develop a comprehensive 

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 10 of 31
10

operational, managerial and/or administrative audit program aimed at overseeing 

compliance by every entity of the Government of Puerto Rico with the Fiscal Plan 

approved in accordance with PROMESA.

(c) The Authority shall assume all fiscal agency, financial advisory, and 

reporting functions of the Bank under Act No. 272 of May 15, 1945, as amended. 

The Authority shall oversee all matters related to the restructuring, renegotiation or 

adjustment of any existing or future obligation, and the liability management 

transactions for any existing or future obligation of the Government of Puerto 

Rico. Furthermore, the Authority shall become a party to, any and all contracts

between the Authority and any advisor, including legal and financial advisors, 

whether or not the salaries or fees were incurred prior to the date on which the 

Authority became a party thereto, related to the restructuring or adjustment of the 

obligations of the Government of Puerto Rico in its role as Fiscal Agent and 

Financial Advisor. Any reference in any law of the Government of Puerto Rico 

approved prior to the effective date of this Act, to (i) the Bank, in its role as fiscal 

agent, financial advisor, and reporting agent of the Government of Puerto Rico, or 

in connection with any operation other than a banking operation, including the 

functions assigned to the Bank under Act No. 29-2009, as amended, and Act No. 

64-1996, as amended, shall be understood as referring and applying to the 

Authority; and (ii) the President of the Bank, relating to the duties, responsibilities, 

or powers thereof in connection with the functions he discharges as the fiscal 

agency, financial advisory, and reporting agent of the Government of Puerto Rico, 

its instrumentalities, and municipalities, or any operation of the Bank, other than a 

banking operation, including the functions assigned to the Bank under Act No. 29-

2009, as amended, shall be understood as referring to the Executive Director of the 

Authority; provided that should there be any doubt about whether a provision of 

law refers to the Bank, as fiscal agency, financial advisory, and reporting agent of 

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 11 of 31
11

the Government of Puerto Rico or to any operation of the Bank, other than a 

banking operation, the Secretary of Justice of the Government of Puerto Rico shall 

advise on such matters and any interpretation that he makes with regards to this 

subsection shall be relied on. Any regulations adopted by the Bank prior to this 

Act, in the discharge of its fiscal agency, financial advisory, and reporting 

functions shall continue in effect after the approval of this Act, until they are 

amended or modified by the Authority, and any reference to such regulations of the 

Bank relating to the functions thereof as fiscal agency, financial advisory, and 

reporting agent of the Government of Puerto Rico shall be understood as a 

reference to the Authority. 

(d) In order to achieve its purposes, the Authority is hereby conferred, 

and shall have and may exercise, all the rights and powers as are necessary or 

convenient to carry out such purposes including, but not limited to, the following:

i. To adopt, alter, and use a corporate seal which shall be 

recognized by the courts;

ii. To draft, adopt, amend, and revoke bylaws for the 

administration of its corporate affairs and those standards, rules, and regulations 

that may be necessary or pertinent to exercise and perform its functions, powers, 

and duties;

iii. To have complete dominion over all of its properties;

iv. To determine the nature of, and need for, all its expenses, and 

the manner in which the same shall be incurred, authorized, and paid without 

taking into consideration any legal provisions that regulate public spending, and 

such determination shall be final and binding for all the officials of the 

Government of Puerto Rico, but it must adopt rules for the use and disbursement of 

its funds and it shall be subject to audits conducted by the Office of the 

Comptroller of Puerto Rico;

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 12 of 31
12

v. To sue and be sued under its own name, to file complaints and 

defend itself in all courts of law and administrative bodies, and to participate in 

commercial arbitration proceedings;

vi. To negotiate and execute with any person, including any federal 

or state government agency, any type of contract, including all those instruments

and agreements necessary or convenient to exercise the powers and functions 

conferred to the Authority by this Act;

vii. To acquire any property through any lawful means;

viii. To appoint and remove officials, agents, and employees and to 

grant them the powers, impose on them the duties and establish, change, and pay 

them the compensation determined by the Authority;

ix. To accept donations from any person, and to use the proceeds 

of any such donations for any corporate purpose; 

x. To procure insurance against losses in the amounts and with the 

insurers it deems desirable, which insurance may include, without it being 

construed as a limitation, civil liability insurance for directors, officers, agents and 

employees;

xi. To assume any and all contracts and related liabilities of the 

Bank, or its successor;

xii. The power to charge and collect fees as fiscal agent and 

financial advisor;

xiii. To exercise such other corporate powers, not inconsistent 

herewith, as are conferred upon private corporations by the laws of Puerto Rico 

and to exercise all its powers within and without Puerto Rico to the same extent as 

natural persons do or could do; provided, that the Authority shall not have legal 

authority to issue bonds, notes, or other evidence of indebtedness; however, the 

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 13 of 31
13

Authority shall be the main financial advisor in future debt issues of any entity of 

the Government of Puerto Rico; and 

xiv. To take any action or measure necessary or convenient to 

exercise the powers conferred by this Act or by any other law of the Legislative 

Assembly of Puerto Rico or of the United States Congress.

Section 6.- Board of Directors.-

(a) The Authority shall be governed by a Board of Directors, whose sole 

member shall be the Executive Director of the Authority for a maximum term of 

forty-five (45) days from the approval of this Act. Thereafter, the Authority shall 

be directed by a Board of Directors composed of five (5) members, including the 

Executive Director of the Authority, appointed by the Governor, one (1) 

representative of the Senate of Puerto Rico, and one (1) representative of the 

House of Representatives of Puerto Rico, who shall be designated by the Presiding 

Officer of each Legislative House. The remaining two members shall be appointed 

by the Governor. In the case of vacancies, the appropriate appointments shall be 

made within a term not to exceed forty-five (45) days. Members of the Board of 

Directors, except for the representatives of the Legislative Assembly, who are 

appointed by the Governor at his discretion, shall serve at his will and may be 

removed or replaced by the Governor at any time, with or without cause. Board 

members designated by the Presiding Officers of the Legislative Houses may only 

be removed by said Presiding Officers. 

(b) The Board shall choose from among its members, a chair and a vice 

chair, who shall substitute the chair in his absence, as well as a secretary; provided, 

that if the Board is constituted by a sole member, said member shall serve as chair 

and secretary of the Board. 

(c) The Board may also appoint committees to address any matter that the 

Board may address. 

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 14 of 31
14

(d) Unless the Authority’s regulations so prohibit or restrict, any action 

necessary or allowed during any meeting of the Board or Board committee shall be 

authorized without the need for a meeting; provided, that all the members of the 

Board or Board committee, as the case may be, consent in writing to such action. 

In such event, the written document shall be attached to the minutes of the Board 

or Board committee, as the case may be. Except as otherwise provided in the 

Authority’s regulations, Board members or Board committee members, 

respectively, may participate in any Board or Board committee meeting, 

respectively, through telephone conference, or other means of communication, 

whereby all of the persons participating in the meeting may listen and 

communicate simultaneously. The participation of any member of the Board or of 

any Board committee thereof in the manner described above shall constitute 

attendance at said meeting.

(e) Board members shall not receive any compensation for their services

as board members. However, Board members shall be entitled to reimbursement 

for travel expenses necessarily incurred in the discharge of their official duties, in 

accordance with the applicable regulations of the Department of the Treasury.

(f) The Board shall have, without it being construed as a limitation, the 

following duties and faculties—

i. To establish the general policy of the Authority in order to 

achieve the objectives of this Act;

ii. To authorize the Authority’s work plan and annual budget;

iii. To adopt and approve rules and regulations to govern its 

internal affairs, as well as those that may be necessary to exercise the faculties and 

powers conferred thereto under this Act;

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 15 of 31
15

iv. To establish, subject to Section seven (7) of this Act, the duties 

and powers of the Executive Director, in accordance with the provisions of this 

Act, as well as to establish his compensation;

v. To require any officer or employee of the Authority those 

reports and statistical data deemed necessary;

vi. To validate or select the independent advisor who shall 

ascertain the revenue projections of the Government of Puerto Rico for any fiscal 

year, before such projections are submitted to the Legislative Assembly as part of 

the budget of the Government of Puerto Rico, in accordance with Section 4(a) of 

Act No. 147 of June 18, 1980, as amended;

vii. To issue summons to require the appearance and testimony of 

witnesses, as well as the production of any evidence to gather information related 

to any matter under its jurisdiction. If any person refuses to obey any summons 

issued by the Authority, the Authority may petition the court of First Instance of 

the Commonwealth, San Juan Part, to issue an order to compel such person to 

appear before the Authority to testify, produce evidence, or both, in connection 

with the issue under its consideration, which petitions shall be notified in the same 

manner as they would be notified under the applicable rules of civil procedure;

viii. To promulgate rules to protect the confidentiality of the 

information and documents it receives in accordance with the laws and case law in 

effect in the Government of Puerto Rico in matters related thereto, which act of 

furnishing information or documents as requested by the Authority shall not be 

construed as a waiver to the right to file a confidentiality claim by any natural or 

juridical person with respect to the information or the document thus furnished;

ix. To adopt the regulations deemed pertinent to comply with the 

faculties and responsibilities conferred under this Act, taking into consideration the 

purposes thereof and the declaration of Public Policy;

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 16 of 31
16

x. To delegate to any Board committee or to the Executive 

Director any of the powers and faculties granted to the Board under this this Act; 

and

xi. To take all those actions deemed convenient or necessary to 

achieve the purposes of the Authority in accordance with the provisions of this 

Act. 

Section 7.- Executive Director.-

(a) The Authority shall operate under the direction of an Executive 

Director, who shall be appointed by the Governor; provided, that if the Board is 

constituted by a sole member, said member shall also serve as Executive Director 

of the Authority. At any time during which the Executive Director is the sole 

member of the Board of the Authority, the Governor shall establish the duties and 

powers of the Executive Director in accordance with the provisions of this Act and 

fix his compensation. 

(b) Without it being understood as a limitation, the duties of the 

Executive Director shall be the following:

i. To be the chief executive officer of the Authority;

ii. To draft and submit to the Board the Authority’s work plan and 

annual budget;

iii. To authorize and supervise any contract necessary for the 

operations of the Authority subject to the rules established by the Board;

iv. To establish, organize, direct, and supervise the Authority’s 

administrative structure;

v. To hire personnel and professionals, including legal advisors, 

financial advisors, and economists, on reasonable terms and as determined by the 

Authority, to assist the Executive Director in the discharge of the Authority’s 

duties;

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 17 of 31
17

vi. To establish the functional levels of the Authority’s operations, 

including the power to hire and contract any of the officials and employees under 

his supervision, subject to the rules established by the Board; and

vii. To discharge any other functions as assigned thereto by the 

Board.

Section 8.- Authority To Oversee Compliance with the Certified Budget 

and the Fiscal Plan Approved Pursuant to PROMESA

For the purpose of ensuring compliance with, and the enforcement of, the 

Fiscal Plan approved, and the Budget certified, pursuant to PROMESA, there is 

hereby conferred upon the Authority, and the Authority may have and may 

exercise all the rights and powers that are necessary and convenient to achieve 

such purposes, including, but not limited to the generality of the provisions of this 

Act, the following:

(a) To require that, not later than thirty (30) days, after the last day of 

each quarter of a fiscal year, every head of the entities of the Government of Puerto 

Rico, shall submit to the Authority a report, in the manner prescribed by the 

Authority, describing the following:

i. The current revenues, expenses, and cash flow for the quarter in 

question, compared to the projected revenues, expenses, and cash flow in the 

Budget certified for the quarter in question; and 

ii. Any other information requested by the Authority that it may 

deem necessary to discharge its duties of ensuring compliance with the Fiscal Plan 

approved pursuant to PROMESA.

(b) If the Authority determines, based on the reports submitted by any 

entity of the Government of Puerto Rico, that current revenues, expenses, and cash 

flow of the entities for the quarter in question are not consistent with the revenues, 

expenses, and cash flow projected and established in the certified Budget for said 

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 18 of 31
18

quarter, the Authority shall request additional information to explain the 

inconsistency within a term to be prescribed by regulations. If a reasonable 

explanation for the inconsistency is not received, the Authority may take corrective 

actions for the corresponding entities of the Government of Puerto Rico including, 

but not limited to the following:

i. To implement the freezing of contracts;

ii. To reduce expenditures that are not designated for debt, in order 

to ensure that quarterly revenues and expenses comply with the Fiscal Plan;

iii. To prohibit the execution of contracts or performance of any 

other financial transaction, including bids, unless the contract or transaction is 

approved by the Authority; and/or

iv. To direct and perform banking transactions on behalf of the 

appropriate entities of the Government of Puerto Rico to make debt service 

payments, among others.

(c) The Authority shall cancel the reductions, freezing of contracts or the 

prohibition on the execution of contracts or performance of financial transactions if 

the Authority determines that the entity of the Government of Puerto Rico in 

question has begun taking the appropriate measures to reduce spending or increase 

revenues in order to guarantee that the entity complies with the Budget certified, or 

Fiscal Plan approved, pursuant to PROMESA.

(d) The Authority may require, at its discretion, the entities of the 

Government of Puerto Rico to appoint a person, within their respective 

organizations, who shall be in charge of furnishing all the information required by 

the Authority to said entity. Said person shall furnish all the information required 

by the Authority along with a sworn certification attesting to the reliability and 

accuracy of the information furnished.

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 19 of 31
19

(e) The Authority may require, at its discretion, the entities of the 

Government of Puerto Rico to appoint a person, within their respective 

organizations, who shall report to the Authority, and be in charge of overseeing 

such entities’ compliance with, and execution of the Fiscal Plan approved and the 

Budget certified pursuant to PROMESA.

(f) The Authority may, at its discretion, appoint a trustee to any entity of 

the Government of Puerto Rico, who shall be in charge of overseeing that any 

entity found to be noncompliant with (i) the certified Budget; (ii) the approved 

Fiscal Plan; and/or (iii) any provision of this Act, complies with the orders or 

corrective measures established by the Authority.

(g) To require any entity of the Government of Puerto Rico to file 

periodic reports of the status of its operations, showing disbursements, obligations, 

balances available in bank accounts or other funds, and projections of expenses or 

any other information that the Authority deems necessary. In addition, the 

Authority may require any entity of the Government of Puerto Rico to allow the 

Authority’s access to information directly from the financial entity where said 

entity keeps its bank accounts in order to monitor balances, obligations, 

disbursements, and any other information that the Authority deems necessary.

(h) To continuously monitor the organization of the entities comprising 

the Government of Puerto Rico to advise the Governor regarding the creation or 

elimination of government entities, the merger thereof, transfer of duties among 

entities and any other measures deemed necessary to improve the direction, 

coordination and operations of the Government of Puerto Rico and its 

subdivisions, for which purpose, the Authority shall be authorized to appoint 

trustees to assist in said processes. 

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 20 of 31
20

(i) To report findings and make recommendations to the heads of the 

entities of the Government of Puerto Rico and the Governor as a result of the 

studies, evaluations, and examinations conducted.

(j) To require any entity of the Government of Puerto Rico to furnish 

reports, materials, data, and any information about the organization, objectives, 

functions, activities, legal basis, regulations, resources, strategies, priorities, action 

plans, and any other managerial or administrative aspects deemed relevant to 

ensure compliance with and the execution of the Fiscal Plan approved pursuant to 

PROMESA by all government bodies of the Government of Puerto Rico.

(k) To conduct hearings, examine documents, make observations, and 

conduct investigations, inspections, or verifications as deemed necessary to 

perform any managerial study, evaluation or audit to ensure compliance with and 

the execution of the Fiscal Plan approved pursuant to PROMESA by all 

government bodies.

(l) To conduct administrative or operational audits of any entity of the 

Government of Puerto Rico to ascertain compliance thereof with the Fiscal Plan 

approved pursuant to PROMESA. If any government entity is under the 

jurisdiction of the Puerto Rico Inspector General, the Authority may require the 

collaboration of the Inspector General to conduct the audits identified in this 

Section. The Authority and the Inspector General are hereby authorized to draft 

regulations to make the coordination of this process feasible.

(m) To direct any entity of the Government of Puerto Rico that is 

noncompliant with the Fiscal Plan approved pursuant to PROMESA to correct any 

deficiencies, restructure the internal organization of the entities within the 

framework of their enabling acts, revise internal procedures and bylaws, and the 

use and allocation of their resources (human, space, equipment, etc.);

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 21 of 31
21

(n) To take any actions or measures as are necessary or convenient to 

discharge its authority to oversee any entity of the Government of Puerto Rico that 

is noncompliant with the Fiscal Plan approved pursuant to PROMESA. 

(o) To take any steps or actions as the Authority may deem necessary to 

ensure that all entities of the Government of Puerto Rico comply with the calendar 

imposed by the Fiscal Oversight Board by virtue of Section 201 of PROMESA. If 

the Authority, at its discretion, determines that any entity of the Government of 

Puerto Rico is not complying or shall not comply with the terms imposed by the 

Fiscal Oversight Board by virtue of Section 201 of PROMESA, the Authority is 

hereby empowered to take any action on behalf of the entity of the Government of 

Puerto Rico to comply with the provisions of PROMESA.

(p) The Authority may—upon a declaration of emergency by the 

Governor to such purposes—repeal, in whole or in part, regulations, administrative 

orders and guidelines of any entity of the Government of Puerto Rico in order to 

comply with the public policy set forth in this Act and to ensure compliance with, 

and execution of the Fiscal Plan approved pursuant to PROMESA. For purposes of 

this provision, the Authority shall be excluded from the provisions of the Uniform 

Administrative Procedures Act, Act No. 170 of August 12, 1988, as amended.

(q) To be the only entity of the Government of Puerto Rico authorized to, 

on behalf of the Government of Puerto Rico or any component thereof, negotiate, 

restructure, and/or enter into Creditors’ Agreements in connection with any debt of 

the Government, the public debt, debt instruments, any other present or future debt 

and/or agreement with the creditors of any of the components thereof.

(r) The Authority may prescribe by regulations or administrative order, 

the requirements for: (i) the timely filing of financial statements or audits of any 

entity of the Government of Puerto Rico; and (ii) the timely filing of the Budgets 

of any entity of the Government of Puerto Rico. The Authority may provide any 

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 22 of 31
22

entity of the Government of Puerto Rico with assistance in the drafting of the 

reports required by this Act and that any of such entities has failed to file as 

required.

(s) The Authority, in conjunction with the Department of the Treasury

and the Office of Management and Budget, may establish by regulations or 

administrative order its position or establish a commission to coordinate the 

policies and processes relating to liquidity and cash management for any entity of 

the Government of Puerto Rico. To such effect, the Authority may establish by 

administrative order which of the unused Budget items of any entity of the 

Government of Puerto Rico, at the end of each fiscal year, shall be credited to the 

Budget of the corresponding entity of the Government of Puerto Rico for a 

subsequent fiscal year or years or shall be allocated as the Authority, at its 

discretion, deems necessary.

(t) The Authority may require and/or direct any entity of the Government 

of Puerto Rico to create trusts and appoint the Authority as the trustee thereof for 

purposes of making debt service payments and take any necessary measures to 

comply with the Fiscal Plan approved pursuant to PROMESA.

(u) The Authority may, at any time, direct the opening, closing, and/or 

consolidation of any bank account of the entities of the Government of Puerto 

Rico. If a bank account cannot be closed and/or consolidated by provision of estate 

or federal law, the Authority may require any disbursement to be made from such 

account to be previously authorized by the Authority. 

(v) The Authority may adopt regulations in relation to the provisions of 

this Section.

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 23 of 31
23

Section 9.- Authority to Revise Contracts and Transactions.-

(a) The Authority is hereby empowered to approve regulations for certain 

proposed contracts and transactions to be executed and carried out, respectively, by 

any entity of the Government of Puerto Rico that require the approval of the 

Authority, in order to guarantee that such contracts and transactions are not 

inconsistent with the Fiscal Plan approved pursuant to PROMESA.

(b) If a contract is inconsistent with the Fiscal Plan approved pursuant to 

PROMESA, the Authority shall take any actions it deems necessary to guarantee 

that said contract does not adversely affect the Government of Puerto Rico’s 

compliance with the Fiscal Plan including, to suspend, cancel or prohibit the 

execution thereof.

(c) The Authority may adopt regulations in relation to the provisions of 

this Section. 

Section 10.- Officials and Employees.-

(a) The Authority’s personnel is hereby exempt from the provisions of 

Act No. 184-2004, as amended, known as the “Public Service Human Resources 

Administration Act of the Commonwealth of Puerto Rico,” or any other successor 

law thereof. Appointments, dismissals, promotions, transfers, layoffs, 

replacements, suspensions, leaves, and changes in classification, remuneration, or 

title of the officials and employees of the Authority shall be made and authorized 

pursuant to the standards and regulations prescribed by the Board, which shall be 

consistent with the merit principles established in the Puerto Rico Public Service 

Personnel Act.

(b) The Executive Director and the officials and employees of the 

Authority shall be entitled to reimbursement for all necessary travel expenses that 

are authorized or approved in accordance with the regulations adopted by the 

Board for the Authority.

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 24 of 31
24

Section 11.- Immunities.-

Unless it is shown that a person has committed gross negligence involving 

reckless disregard of his duties, no person shall be subject to civil or criminal

liability or otherwise to any entity or person and without the need for additional 

notice or order, and shall be held harmless for acts or omissions in his capacity and 

within his authority in connection with, in relation to, arising from, or allowed 

under this Act. The Members of the Board as well as the officials and employees 

of the Authority shall be defended and indemnified by the Authority and held 

harmless from civil liability for acts or omissions in good faith, in their capacity 

and within their authority. 

Section 12.- Collaboration Among Government Entities.-

The Authority may request any of the following entities or any successor 

thereof to provide administrative support and such statistical and professional 

services reasonably necessary for the Authority to fulfill its responsibilities under 

this Act, to wit: the Bank, the Department of the Treasury, the Office of 

Management and Budget, the Puerto Rico Department of Economic Development 

and Commerce, the Institute of Statistics, the Inspector General and any other 

instrumentality of the Government of Puerto Rico. To the extent possible, the 

Authority shall reimburse these entities for such services.

Section 13.- Exemption from other Laws.-

In order to preserve its administrative independence, which is critical to 

carry out the duties entrusted thereto under this Act, the Authority shall be 

excluded from the application of the provisions and laws listed below:

i. Act No. 184-2004, as amended, known as the “Public Service Human 

Resources Administration Act of the Commonwealth of Puerto Rico,” as well as 

any other law succeeding Act No. 184;

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 25 of 31
25

ii. Act No. 197-2002, as amended, known as the “Government Transition 

Process Act”;

iii. Sections 6 through 11 of Act No. 66-2014, as amended, known as the 

“Government of the Commonwealth of Puerto Rico Special Fiscal and Operational 

Sustainability Act”;

iv. Act No. 103-2006, as amended, known as the “Commonwealth of 

Puerto Rico Government Fiscal Reform Act of 2006”;

v. Plan No. 3-2011, as amended, “General Services Administration 

Reorganization Plan of 2011”; and

vi. Act No. 78-2011, as amended, known as the “Puerto Rico Election 

Code for the 21st Century.”

Likewise, the Authority shall be excluded from the application of the 

provisions and laws from which the Bank is currently exempt.

Section 14.- Employees of the Authority and the Bank.-

Permanent, temporary, and/or non-unionized employees of the Bank shall 

become employees of the Authority, to the extent determined by the Board, 

whether in whole or in part. Likewise, in order to comply with the duties of the 

Authority under this Act as well as to discharge its functions of overseeing 

compliance with the Fiscal Plan approved pursuant to PROMESA, the Executive 

Director of the Authority may, in his sole discretion, designate and transfer 

employees from the Authority to the Bank, and said employees shall become 

automatically employees of the Bank.

Section 15.- Continuation of the Effectiveness of Prior Approvals of the 

Bank Relating to Bonds or Similar Obligations or Transactions.

Any resolution adopted by the Bank prior to the date of creation of the 

Authority, approving the terms or the issue of bonds or other similar obligation or 

transaction of the Government of Puerto Rico or any “Unit” of the Government of 

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 26 of 31
26

Puerto Rico (as such term is defined in Act No. 272 of May 15, 1945, as amended) 

and of any municipality, shall be valid and continue in full force and effect 

notwithstanding the approval of this Act or the Authority’s assumption of the 

powers and responsibilities conferred thereto by virtue of this Act, and shall not 

require the Authority to adopt a resolution approving once again the terms or the 

issue of said bonds or similar obligations or transaction, even if said bonds or 

similar obligations are issued, or said transaction is completed, after the date of 

creation of the Authority.

Section 16.- Boards, Committees, Commissions or Councils.-

On the effective date of this Act, the Director of the Authority or his 

representative shall thereafter substitute the President of the Government Bank in 

every Board, Committee, Commission or Council of which the President of the 

Bank is a member by law, Executive Order or Regulations. The Director of the 

Authority shall automatically become the legal successor of the President of the 

Bank. Moreover, any Law, Executive Order, or Regulations designating the 

President of the Bank as member, shall be deemed to be tacitly amended to 

substitute the President of the Bank for the Director of the Authority.

Notwithstanding the foregoing, the Executive Director of the Authority may assign 

his position in any Board, Committee, Commission or Council of the entities of the 

Government of Puerto Rico to the President of the Bank, or to his representative.

Furthermore, the Executive Director of the Authority, or his representative, 

shall be a member of every Board, Committee, Commission or Council of the 

entities of the Government of Puerto Rico that are considered “covered territorial 

instrumentalities” under PROMESA. However, the Executive Director of the 

Authority may assign his position in said Board, Committee, Commission or 

Council of the entities of the Government of Puerto Rico that are considered 

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 27 of 31
27

“covered territorial instrumentalities” under PROMESA to the President of the 

Bank, or to his representative.

Section 17.- Relation to Constitutional Provisions; Supremacy over 

other Laws.-

This Act has been promulgated pursuant to, and in accordance with, the

police powers of the Government of Puerto Rico. In the event that the provisions of 

this Act are in conflict with the provisions of any other state law, the provisions of 

this Act shall prevail.

Section 18.- Budget.-

For the remainder of Fiscal Year 2016-2017, the Authority shall have the

available balance of the budget in effect approved for the Fiscal Agency and 

Financial Advisory Authority created in Chapter VI of the Puerto Rico Emergency 

Moratorium and Rehabilitation Act, Act No. 21-2016, for 2016-2017. 

Subsequently, the budget of the Authority shall be that appropriated by the 

Legislative Assembly from the General Fund, Special Appropriations, and/or any 

other income received.

Section 19.- Repeal of Chapter 6 of Act No. 21-2016.-

Chapter 6 of Act No. 21-2016, as amended, known as the “Puerto Rico 

Emergency Moratorium and Rehabilitation Act,” is hereby repealed.

Section 20.- Repeal of Act No. 208-2015.-

Act No. 208-2015, known as the “Puerto Rico Fiscal Oversight and 

Economic Recovery Organic Act,” is hereby repealed.

Section 21.- Transitory Clause.-

For all intents and purposes, the property or any interest thereon, records, 

files, and documents; funds already appropriated or to be made available in the 

future, including, surplus, assets, and liabilities of any kind; obligations and 

contracts of any kind; licenses, permits, and other authorizations; and the personnel 

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 28 of 31
28

of the Puerto Rico Fiscal Agency and Financial Advisory Authority created in Act 

No. 21 are hereby transferred to the Authority. The personnel transferred to the 

Authority shall keep all their vested rights as of the effective date of this Act, as 

well as the rights, privileges and obligations and status with respect to any existing 

pension or retirement system, or savings and loans fund, in which they are 

enrolled.

Without construing the foregoing provisions as a limitation, it is hereby 

provided that:

(1) this Act shall not invalidate any agreement duly executed by the

Puerto Rico Fiscal Agency and Financial Advisory Authority created by virtue of 

Chapter VI of Act No. 21-2016 or any agreement executed by the Bank and 

assumed by said Authority by virtue of Act No. 21, which shall continue in effect 

until the date agreed for their termination, unless the terms thereof are inconsistent 

with the provisions of this Act or are cancelled on a prior date if the agreement in 

question so allows; and

(2) any regulations, orders, approvals, resolutions, circular letters, and 

other administrative documents of the Puerto Rico Fiscal Agency and Financial 

Advisory Authority by virtue of Chapter VI of Act No. 21, shall become 

regulations, orders, resolutions, circular letters, or administrative documents of the 

Authority, and shall continue in effect until they are amended, supplemented, 

repealed, or rendered ineffective by the Authority.

Section 22.- Severability Clause.-

If any clause, paragraph, subparagraph, sentence, word, letter, article, 

provision, section, subsection, title, chapter, subchapter, heading, or part of this 

Act were held to be null or unconstitutional, the ruling, holding, or judgment to 

such effect shall not affect, impair, or invalidate the remainder of this Act. The 

effect of said holding shall be limited to the clause, paragraph, subparagraph, 

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 29 of 31
29

sentence, word, letter, article, provision, section, subsection, title, chapter, 

subchapter, heading, or part of this Act thus held to be null or unconstitutional. If 

the application to a person or a circumstance of any clause, paragraph, 

subparagraph, sentence, word, letter, article, provision, section, subsection, title, 

chapter, subchapter, heading, or part of this Act were held to be null or 

unconstitutional, the ruling, holding, or judgment to such effect shall not affect or 

invalidate the application of the remainder of this Act to such persons or 

circumstances where it may be validly applied. It is the express and unequivocal 

will of this Legislative Assembly that the courts enforce the provisions and 

application thereof to the greatest extent possible, even if it renders ineffective, 

nullifies, invalidates, impairs, or holds to be unconstitutional any part thereof, or 

even if it renders ineffective, invalidates, or holds to be unconstitutional the 

application thereof to any person or circumstance. This Legislative Assembly 

would have approved this Act regardless of any determination of severability that 

the Court may make.

Section 23.- Effectiveness.-

This Act shall take effect immediately after its approval.

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 30 of 31
30

CERTIFICATION

I hereby certify to the Secretary of State that the following Act No. 2-2017 (S. B. 211) 

of the 1

st Regular Session of the 18th Legislative Assembly of Puerto Rico:

AN ACT to create the Puerto Rico Fiscal Agency and Financial Advisory Authority 

(FAFAA) in order to empower the Authority to oversee compliance with 

the certified budget and fiscal plan approved pursuant to the Puerto Rico 

Oversight, Management, and Economic Stability Act of 2016; delegate to 

the Authority the power to revise matters including, but not limited to, 

agreements, transactions, and regulations of the agencies and 

instrumentalities of the Government of Puerto Rico;[...]

has been translated from Spanish to English and that the English version is correct.

In San Juan, Puerto Rico, on this 19th day of July, 2017.

Orlando Pagán Ramírez

Acting Director

Case:17-03283-LTS Doc#:3961-35 Filed:09/21/18 Entered:09/21/18 21:28:34 Desc:

Exhibit HH to Declaration Page 31 of 31