Topic: Education — Higher
Subject: Economics and public finance
Date: 2015-11-19 00:00:00

(This measure has not been amended since it was passed by the House on June 9, 2016. The summary of that version is repeated here.)

Puerto Rico Oversight, Management, and Economic Stability Act or PROMESA 

This bill addresses Puerto Rico's debt by establishing an oversight board, a process for restructuring debt, and expedited procedures for approving critical infrastructure projects.

(Sec. 2) The effective date of this bill is the date of enactment. Title III (Adjustments of Debts) only applies to cases commenced under it on or after the date of enactment. Titles III and VI (Creditor Collective Action) apply to all debts, claims, and liens, regardless of the creation date.

(Sec. 3) If any provision of the bill is held invalid, the remainder of the bill is not affected. Title III is not severable from Title I (Establishment and Organization of Oversight Board) and Title II (Responsibilities of Oversight Board), and Titles I and II are not severable from Title III.

(Sec. 4) This bill prevails over any provision of territory law, state law, or regulation that is inconsistent with this bill. (The territories referred to in this bill include Puerto Rico, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands.)

(Sec. 5) This section defines terms used in this bill.

(Sec. 6) This section specifies where the bill should be placed in the U.S. Code.

(Sec. 7) Nothing in the bill should be construed as impairing or relieving a territorial government or instrumentality from compliance with federal laws or requirements or territorial laws and requirements implementing a federally authorized or federally delegated program protecting the health, safety, or environment of persons in the territory.

TITLE I--ESTABLISHMENT AND ORGANIZATION OF OVERSIGHT BOARD

(Sec. 101) This section establishes a Financial Oversight and Management Board for Puerto Rico. The purpose of the board is to provide a method for a covered territory to achieve fiscal responsibility and access to the capital markets. The board must be created as an entity within the territorial government for which it is established and must not be considered to be a part of the federal government.

This section provides the board with authority to oversee territorial instrumentalities. The bill specifies that a territorial instrumentality is any political subdivision, public agency, instrumentality, or public corporation of a territory, and that term should be broadly construed to effectuate the purposes of the bill.

The board may require instrumentalities to establish fiscal plans and budgets in accordance with this bill. The board may also require the governor to submit reports regarding instrumentalities and include the budgets of certain instrumentalities in the territory budget.

This section sets forth procedures and requirements for the board regarding:

 the appointment and qualifications of members of the board, designating a chair, terms of service, and filling vacancies. This section also specifies procedures for adopting bylaws for conducting the business of the board. An affirmative vote of the majority of the board is required to approve a fiscal plan or a budget, cause legislative acts not to be enforced, or approve or disapprove an infrastructure project as a critical project.

The governor of a territory or a designee is an ex officio member of the board without voting rights. With the approval of a majority of its members, the board may conduct its business in an executive session that is closed to the public and consists solely of voting members and any professionals that the board determines to be necessary.

(Sec. 102) The board must have an office in the covered territory and additional offices as it deems necessary. Federal agencies may provide facilities and equipment for the board.

(Sec. 103) The board may hire an executive director and staff. Federal agencies and territorial governments may detail employees to the board. The executive director and staff of the board may be appointed and paid without regard to territorial or federal laws governing appointments and salaries. The board is exempt from procurement laws of the covered territory.

(Sec. 104) The powers of the board include:

 holding hearings and sessions to take testimony and receive evidence; obtaining official data from the territorial and federal government; obtaining creditor information; accepting gifts, bequests, and devises of services or property; issuing subpoenas; entering into contracts; enforcing territorial laws prohibiting public sector employees from participating in a strike or lockout; certifying voluntary agreements between creditors and debtors; protecting certain preexisting voluntary restructuring agreements; filing a petition to restructure or to submit or modify a plan of adjustment on behalf of a debtor; seeking judicial enforcement of its authority; imposing penalties for violations of valid orders of the board; ensuring prompt and efficient payment of taxes through electronic reporting, payment, and auditing technologies; requesting administrative support services from federal agencies; and investigating the disclosure and selling practices in connection with the purchase of bonds issued by a covered territory. (Sec. 105) The board, its members, and its staff are exempt from liability resulting from actions taken to implement this bill.

(Sec. 106) Except for actions arising out of Title III or out of the board's issuance of a subpoena, any action arising out of this bill must be brought in the U.S. district court for the covered territory or the U.S. District Court for the District of Hawaii if the territory does not have a district court. The bill sets forth requirements for appeal, the timing of relief, and expedited consideration for matters relating to this bill. The U.S. district court does not have jurisdiction to review challenges to the board's certification determinations.

(Sec. 107) The board must submit an annual budget to the President, Congress, and the territory's governor and legislature. The territorial government must provide specified initial funding for the board and designate a dedicated funding source for the board that is not subject to subsequent legislative appropriations.

(Sec. 108) The territorial government may not exercise control over the board or enact, implement, or enforce any legislation, policy, or rule that would impair the purposes of this bill.

(Sec. 109 The members and staff of the board are subject to federal conflict of interest and financial disclosure requirements.

TITLE II--RESPONSIBILITIES OF OVERSIGHT BOARD

This title establishes the process for the submission, approval, and certification of fiscal plans and budgets for Puerto Rico and its territorial instrumentalities.

(Sec. 201) The board must provide the governor of the territory with a schedule for the process of development, submission, approval, and certification of fiscal plans. A plan must cover a period of at least five years and provide a method to achieve fiscal responsibility and access to the capital markets.

The fiscal plan must:

 provide specified estimates, forecasts, and analysis of revenues, expenditures, and debt; ensure the funding of essential public services; provide adequate funding for public pension systems; provide for the elimination of structural deficits; provide for a debt burden that is sustainable in years in which a stay under this bill is not in effect; improve fiscal governance, accountability, and internal controls; enable the achievement of fiscal targets; provide for capital expenditures and investments necessary to promote economic growth; adopt appropriate recommendations submitted by the board; include additional information the board deems necessary; prevent certain transfers or loans of assets, resources, or funds of a territorial instrumentality; and respect lawful priorities and liens in effect prior to the enactment of this bill. This section establishes procedures for the review, approval, and certification of the fiscal plan by the board. If the governor fails to submit a fiscal plan that satisfies the requirements, the board may develop and submit the fiscal plan to the governor and legislature. The governor and board may also work collaboratively to develop a fiscal plan.

(Sec. 202) The board must submit to the governor and legislature revenue forecasts and a schedule for developing, submitting, approving, and certifying budgets. The budget must be developed in accordance with the fiscal plan and certified by the board. If the governor and legislature fail to develop certifiable budgets within the established deadline, the board must develop the budget for the territory or territorial instrumentality for that fiscal year. The board, the governor, and the legislature may also work collaboratively to develop a budget.

(Sec. 203) The governor must submit to the board quarterly reports including the actual revenues, expenditures, and cash flow of the territorial government. If the data is inconsistent with the certified budget, the board must notify the governor and provide the territorial government with an opportunity to explain or correct the inconsistency. If the government fails to correct the inconsistency within an established timeframe, the board must make budget reductions to ensure the quarterly budget aligns with the certified budget.

(Sec. 204) The governor must submit each enacted territorial law to the board with a cost estimate and a certification that the law is consistent with the fiscal plan. If the law is inconsistent with the plan or is missing a cost estimate, the board may take such actions as it considers necessary, including preventing the enforcement or application of the law.

The board must work with the territorial government to promote compliance with laws that require agencies and instrumentalities of the territorial government to maintain a registry of all contracts executed. The board may establish policies to require prior board approval of certain contracts, executive orders, rules, and regulations.

A territory may not enact new laws authorizing budgetary transfers between instrumentalities during the time between the enactment of this bill and the appointment of the board. Transfers that occur during this period are subject to review and reversal by the board.

 Upon appointment of its members, the board may review and, in its discretion, rescind certain territorial laws that were enacted during specified time periods and alter pre-existing priorities of creditors in a manner outside the ordinary course of business or inconsistent with the territory's constitution or laws as of specified dates.

The board may not impede territorial actions taken to implement certain federal programs, requirements, and standards.

(Sec. 205) The board may submit recommendations to the governor or the legislature for actions to ensure compliance with the fiscal plan, or to otherwise promote the financial stability, economic growth, management responsibility, and service delivery efficiency of the territorial government. The governor or legislature must notify the board as to whether it will adopt the recommendations, provide an implementation plan for recommendations that will be adopted, and provide an explanation for the recommendations that will not be adopted.

(Sec. 206) Prior to issuing a debt restructuring certification regarding an entity, the board must determine that:

 the entity has made good-faith efforts to reach a consensual restructuring with creditors; the entity has adopted procedures necessary to deliver timely audited financial statements, and made public draft financial statements and other information sufficient for any interested person to make an informed decision with respect to a possible restructuring; a fiscal plan certified by the board is in place; and either no order approving a qualifying modification has been entered into or an order has been entered into and the entity is unable to make its debt payments notwithstanding the modification. (Sec. 207) A territorial government may not issue debt, guarantee debt, or enter into other transactions with respect to its debt without the approval of the board.

 (Sec. 208) The board must submit to the President, Congress, the governor, and the legislature annual reports that describe the progress the territorial government has made in meeting the objectives of the bill, the assistance provided by the board to the territorial government, recommendation for changes to federal laws, the use of funds by the board, and any other activities the board deems necessary. The board must also submit specified reports regarding discretionary tax abatement agreements and cash flow.

(Sec. 209) The board terminates when it certifies that: (1) the territorial government has adequate access to short- and long- term credit markets at reasonable rates to meet its borrowing needs; and (2) for at least four consecutive years, the government has developed its budgets using modified accrual accounting standards and has achieved balanced budgets.

(Sec. 210) The full faith and credit of the United States is not pledged for any bond issued by the covered territory while an oversight board is in effect. Any claim to which the United States is determined to be liable is subject to the appropriations process. No federal funds are authorized by this bill for the payment of any liability of the territorial government.

(Sec. 211) If the board determines that a pension system of the territorial government is materially underfunded, the board must conduct an analysis prepared by an independent actuary of the pension system to assist the board in evaluating the fiscal and economic impact of the pension cash flows.

(Sec. 212) The board may intervene in any litigation filed against the territorial government and seek injunctive relief, including a stay of litigation.

TITLE III--ADJUSTMENTS OF DEBTS

This title establishes a process for the adjustment of debts by a territorial government or an instrumentality of a territorial government.

(Sec. 301) This section makes specified sections from the federal bankruptcy code applicable to this title and defines terms.

(Sec. 302) A territory or territorial instrumentality is eligible to be a debtor under this title if it is subject to an oversight board and has been certified by the board.

(Sec. 303) Subject to the limitations set forth in Titles I and II, this title does not prohibit a territory from exercising political and governmental powers over itself and its instrumentalities. This section prohibits territorial laws prescribing a method of composition or moratorium on the indebtedness of the territory or its instrumentalities to a non-consenting creditor. It also preempts unlawful executive orders that: (1) alter, amend, or modify the rights of holders of debt; or (2) divert funds from a territorial instrumentality to either the territory or another territorial instrumentality.

(Sec. 304) The board may initiate a proceeding to restructure the debt of an entity by filing a petition in district court. The filing of a petition constitutes an order for relief. This section permits the joint filing of petitions for debtors if the debtors are affiliated and provides for joint administration of affiliated debtor cases.

(Sec. 305) Unless the board consents or the actions are permitted in the plan of adjustment, a court may not interfere with the political or governmental powers of the debtor, the property or revenues of the debtor, or the use or enjoyment by the debtor of any income-producing property.

(Sec. 306) This section establishes original and exclusive jurisdiction for any case under Title III of this bill with the federal district courts, subject to specified exceptions. The courts may oversee any additional claim or civil cause of action in which the party is involved for which the overseeing court has jurisdiction. The section also establishes procedures and requirements for removal, remands, transfers, and appeals.

(Sec. 307) Venue for restructuring under this title is the federal district court for the covered territory (or territorial instrumentality) or the U.S. District Court for the District of Hawaii if a territory does not have a district court. Subject to the discretion of the board, venue for the case may also be the district court for the jurisdiction in which the board maintains an office that is located outside of the territory.

(Sec. 308) The Chief Justice of the United States must designate a district court judge to preside over the case if the debtor is a territory. For cases in which the territory is not a debtor, the chief judge of the court of appeals must designate a district court judge to conduct the case.

(Sec. 309) A district court may abstain in the interests of justice from hearing a particular proceeding arising in or related to a case under this title.

(Sec. 310) The Federal Rules of Bankruptcy Procedure apply to a case under this title and related civil proceedings.

(Sec. 311) This section exempts a lease to a territory from being treated as an executory contract or unexpired lease solely because the lease is subject to termination for failure of a debtor to appropriate rent.

(Sec. 312) This section specifies that only the board may file a plan of adjustment of the debts of the debtor once it has issued a certification.

(Sec. 313) The board may change or modify a plan of adjustment before the plan is confirmed, as long as the modification meets the requirement of this title.

(Sec. 314) A special taxpayer may object to confirmation of a plan. (Under current law, a special taxpayer is a record owner or holder of title to real property against which a special assessment or special tax has been levied the proceeds of which are the sole source of payment of an obligation issued by the debtor to defray the cost of an improvement relating to the real property.)

A court must confirm the plan if:

 the plan complies with the applicable provisions of the federal bankruptcy code and this title; the debtor is not legally prohibited from undertaking any actions necessary to carry out the plan; the holders of claims will receive cash equal to the allowed amount of the claim unless there is another agreement; any necessary legislative, regulatory, or electoral approvals necessary to carry out a provision of the plan have been obtained or the provision is conditioned on the approval; the plan is feasible and in the best interest of the creditors; and the plan is consistent with the fiscal plan certified by the board. (Sec. 315) This section designates the board as the representative of the debtor and authorizes the board to take any action necessary on behalf of the debtor including the filing of a petition, submitting or modifying a plan of adjustment, or submitting other filings with the court.

(Sec. 316) The court may authorize reasonable payments to professionals connected with a Title III proceeding.

(Sec. 317) A court may permit payment to professionals while the Title III case is pending.

TITLE IV--MISCELLANEOUS PROVISIONS

(Sec. 401) Nothing in the bill is intended to: limit the authority of Congress over the territories; authorize the issuance of subpoenas by the board to judicial officers or employees of territorial courts; or to alter, amend, or abrogate agreements, treaties, or covenants affecting the Northern Mariana Islands or American Samoa.

(Sec. 402) Nothing in this bill restricts Puerto Rico's right to determine its future political status, including by conducting the plebiscite authorized under current law.

(Sec. 403) The bill amends the Fair Labor Standards Act of 1938 to permit the governor of Puerto Rico, subject to the approval of the board, to set a minimum wage less than the federal minimum wage for employees who are under the age of 25 and hired after the enactment of this bill for a period of up to four years or until the termination of the board.

(Sec. 404) This section exempts Puerto Rico from Department of Labor regulations published on July 6, 2015, regarding overtime pay for executive, administrative, professional, outside sales, and computer employees, until: (1) Government Accountability Office (GAO) assesses the impact of applying the regulations to Puerto Rico, and (2) Labor certifies that the rule will not have a negative impact on the economy of Puerto Rico.

(Sec. 405) This section automatically stays all litigation against Puerto Rico and its instrumentalities, as well as any other judicial, administrative or other action or proceedings to enforce or collect claims until the later of six months after the date of enactment or February 15, 2017, subject to specified extensions which may be approved by the board or the U.S. District Court for the District of Puerto Rico.

A district court may grant relief from the stay for parties subject to irreparable damage because of the imposition of the stay. The stay does not authorize the government of Puerto Rico to stop payments on any liability. If the board determines it is feasible, the government must continue to make scheduled interest payments during the stay.

(Sec. 406) This bill amends the Omnibus Insular Areas Act of 1992 to permit the government of Puerto Rico to make purchases through the General Services Administration.

(Sec. 407) Upon the conclusion of the stay, creditors may sue if the government of Puerto Rico transfers property encumbered by liens or security interests between instrumentalities during the tenure of the board in violation of any agreement or applicable law.

(Sec. 408) The GAO must report to Congress on the application and utilization of Small Business Administration (SBA) contracting activities (including contracting activities relating to the SBA's Historically Underutilized Business Zone Empowerment Contracting [HUBZone] program in Puerto Rico).

(Sec. 409) This section establishes within the legislative branch a Congressional Task Force on Economic Growth in Puerto Rico to submit a specified report to Congress.

(Sec. 410) The GAO must submit to Congress a report describing the conditions that led to the level of debt per capita, how the actions of the territorial government improved or impaired the territory's financial conditions, and recommendations to avert future indebtedness of territories and states.

(Sec. 411) The GAO must report to Congress on the public debt of each territory, and the government of each territory must provide the GAO with any materials necessary to carry out this section.

(Sec. 412) This section amends the Small Business Act to exempt Puerto Rico from the 20% population cap that applies to the designation of qualified census tracts in Puerto Rico's metropolitan statistical areas under the SBA HUBZone program. The exemption applies until the earlier of ten years after the SBA begins implementing it, or the date on which the oversight board ceases to exist.

The SBA must develop and implement criteria and guidance on using a risk-based approach to requesting and verifying information from entities applying to be designated or recertified as qualified HUBZone small business concerns. The GAO must assess the SBA's criteria and guidance.

(Sec. 413) Nothing in this bill may be interpreted to restrict: (1) the ability of the Puerto Rico Commission for the Comprehensive Audit of the Public Credit to file its reports, or (2) the review and consideration of the commission's findings by Puerto Rico's government or the oversight board.

TITLE V--PUERTO RICO INFRASTRUCTURE REVITALIZATION

This title establishes a process to provide an expedited permitting and review process for certain infrastructure projects in Puerto Rico.

(Sec. 501) This section provides definitions for terms commonly used in Title V of this bill.

(Sec. 502) This section establishes the position of Revitalization Coordinator under the board. The bill requires the governor to appoint the Revitalization Coordinator based on nominations submitted by the board.

(Sec. 503) The Revitalization Coordinator may recommend to the board projects to be designated as critical projects. To be considered as a critical project, a project sponsor must submit to the Revitalization Coordinator an application including:

 the impact the project will have on an emergency, the availability of immediate private capital, the cost of the project and the amount of government funds needed, the environmental and economic benefits, the status of the project if it is existing or ongoing, and any additional criteria the Revitalization Coordinator may require. The Revitalization Coordinator may require additional details for energy projects. Critical projects approved by the oversight board are eligible for an expedited permitting and review process.

(Sec. 504) This section establishes the Interagency Environmental Subcommittee to evaluate environmental documents required under Puerto Rico law for any critical project within the expedited permitting process established by the Revitalization Coordinator pursuant to this bill.

Puerto Rico's legislature and governor may not hinder the expedited permitting process authorized under this bill. Project sponsors may petition the board if the Revitalization Coordinator or Puerto Rico agencies fail to expedite the project as envisioned by this title. If the coordinator or an agency has failed to comply with the process, the board may direct officials to comply with the process and take necessary enforcement actions.

Critical projects approved prior to the termination of the board must continue to receive expedited service after the termination of the board.

(Sec. 505) At the request of the Revitalization Coordinator, each federal agency with jurisdiction over the permitting, or administrative or environmental review of private or public projects in Puerto Rico must designate a liaison to the Revitalization Coordinator and expedite to the greatest extent possible the completion of any required federal action connected to a critical project.

(Sec. 506) This section provides an expedited judicial review process for any claim brought under Title V.

(Sec. 507) Nothing in this title is intended to change or alter federal legal requirements or laws.

TITLE VI--CREDITOR COLLECTIVE ACTION

(Sec. 601) This section establishes a voluntary process for debt restructuring by debtors and creditors in a territory or territorial instrumentality covered by this bill. The board must divide creditors into pools based on the characteristics of the debt, and each pool may vote on a plan to restructure the debt known as a qualifying modification. If at least two-thirds of the outstanding principal amount of a pool agrees with the plan, the pool may file a petition in court to bind the dissenting bondholders to the modification.

(Sec. 602 This section specifies that in any judicial proceeding regarding this title, U.S. laws apply without regard to any law of any international or foreign jurisdiction.

TITLE VII--SENSE OF CONGRESS REGARDING PERMANENT, PRO-GROWTH FISCAL REFORMS

(Sec. 701) This section expresses the sense of the Congress that any durable solution for Puerto Rico's fiscal and economic crisis should include permanent, pro-growth fiscal reforms that feature, among other elements, a free flow of capital between U.S possessions and the rest of the United States.