House Natural Resources Committee Approves the Puerto Rico Relief Bill
House Natural Resources Committee
Markup of the Puerto Rico Oversight, Management, and Economic Stability Act
Tuesday, May 24 – Wednesday, May 25, 2016
Key Topics & Takeaways
- Approval: The Committee approved the Puerto Rico Oversight, Management, and Economic Stability Act in a 29-10 vote.
- Oversight Board: The committee approved amendments that would set certain considerations for the oversight board to be established by PROMESA, and rejected proposed amendments to entrench the prioritization of full faith and credit bonds in any restructuring.
- Congressional Task Force for Economic Growth: The Committee approved amendments that clarified the composition and mission of the Congressional Task Force for Economic Growth in Puerto Rico.
Legislation Considered
- H.R. 5278, the Puerto Rico Oversight, Management, and Economic Stability Act
Opening Statements
In his opening statement, Chairman Rob Bishop (R-Utah) noted that the Committee has held multiple hearings and many meetings with stakeholders in crafting H.R. 5278, the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). He called arguments that the bill is a bailout of Puerto Rico “disingenuous” and commented that mainstream institutional bondholders have repeatedly said such legislation is needed. Bishop also warned that if Congress does not pass PROMESA, it will be faced with the prospect of a real bailout later.
Ranking Member Raul Grijalva (D-Ariz.) said a combination of unfair federal policies, opportunistic and predatory hedge funds, mismanagement, and desperate budget cuts has destroyed Puerto Rico’s economy and that there is “no question” Congress must act. He admitted that PROMESA is not the bill he would have crafted, stating his concerns that the oversight board is too powerful, that minimum wage and overtime provisions should not have a place in the bill, and that other provisions such as pension protections are missing. However, he stressed that PROMESA will allow Puerto Rico to “get back on the right footing” and that it is the compromise “with the best hope” of passing Congress.
Rep. Don Young (R-Alaska) spoke in support of PROMESA, insisting that it is not a bailout. He acknowledged that the bill is not perfect, but stated that Puerto “has no time to wait for the perfect bill.”
Resident Commissioner Pedro Pierluisi (D-P.R.) said the first step to resolving Puerto Rico’s problems is to stabilize the situation, and that PROMESA can accomplish this. He said the bill is necessary, but not sufficient, and called for an end to Puerto Rico’s second class treatment by the federal government. He said he would never support a bill that authorized a restructuring mechanism that was unfair to public pension systems, and defended that PROMESA does not do this. Overall, he said the benefits of the bill vastly outweigh its negatives.
Rep. Doug Lamborn (R-Va.) stated that Puerto Rico’s debt burden is a “stark example” of the pitfalls of unchecked government. He said PROMESA will provide meaningful improvements to reduce the size of Puerto Rico’s government, but lamented that it should have done more in pushing pro-growth reforms.
Rep. Tom McClintock (R-Calif.) criticized the bill for undermining the reliability of constitutional full faith and credit guarantees for the states, warning that if Congress is willing to undermine such guarantees for Puerto Rico today, there is no question it can consider state guarantees tomorrow. He cautioned that this will cause bonds to devalue and raise the interest rates that states and municipalities pay for debt. McClintock said he would offer an amendment to remove constitutional debt from the bill altogether.
Amendments
Oversight BoardAmendments
Amendment Offered By Reps. Graves and Beyer (Graves #046)
Reps. Garrett Graves (R-La.) said his amendment would provide the oversight board with discretionary authority to investigate the selling practices and representations made to investors in Puerto Rican debt offerings. Beyer said this would be in the interest of both investors and the Puerto Rican government and noted concerns regarding possible improprieties in the marketing of some bonds.
The amendment was accepted in a voice vote.
Amendment Offered By Rep. Hice (Hice #022)
Rep. Jody Hice (R-Ga.) said his amendment would encourage free market competition in Puerto Rico by allowing the oversight board to establish policies to require approval of contracts given to public entities rather than private enterprises.
The amendment was accepted in a voice vote.
Amendment Offered By Rep. Fleming (Fleming #091)
Rep. John Fleming (R-La.) proposed an amendment that would require the oversight board to give priority to bonds issued with full faith and credit guarantees, insisting that if Congress “changes the rule” now, then all future bonds issuances will be more expensive for borrowers.
The amendment was rejected in a voice vote.
Amendment Offered By Rep. Fleming (Fleming #090)
Fleming offered an amendment that would require Puerto Rico’s legislature to adopt a resolution requesting an oversight board before one could be established.
Grijalva called this amendment a “poison pill” designed to stop PROMESA entirely. Bishop similarly opposed the amendment “out of practicality.”
The amendment was rejected in a 5-33 vote.
Amendment Offered By Rep. MacArthur (MacArthur #055)
Rep. Tom MacArthur (R-N.J) proposed an amendment striking the provision that would allow the creation of oversight boards in the other territories, arguing that leaving this possibility open could threaten their own access to capital.
Grijalva opposed the amendment because it might open PROMESA as a whole to litigation. Bishop also opposed the amendment, but suggested that he would look into similar language that would not threaten the bill.
MacArthur withdrew his amendment.
Amendment Offered By Rep. Fleming (Fleming #091)
Fleming offered an amendment that would require the oversight board to “comply with” the prioritization of full faith and credit bonds. He warned that as written, the bill only states that the oversight board must “respect” this prioritization, which does not give enough protection to general obligation bonds.
Pierluisi opposed the amendment, arguing that all bondholders should be brought to the negotiating table.
The amendment was rejected in a 16-23 vote.
Amendment Offered By Rep. Fleming (Fleming #080)
Fleming said his amendment would require that Puerto Rico certify that it will abide by its constitutional requirement for a balanced budget and that unless it does so, the oversight board would be terminated after two years.
Grijalva said it will take more than two years to balance the budget, and stated that the amendment is “intended to kill the legislation.”
The amendment was rejected in a voice vote.
Amendment Offered By Rep. Fleming (Fleming #092)
Fleming offered an amendment he said would clarify the relative priority of pensions by instructing the oversight board to provide “adequate funding or reasonable alternatives” to satisfy contribution liabilities to public pension systems, but solely to the extent that such contributions are due under the terms of the applicable pension plan, which may be restructured.
The amendment was rejected in a voice vote.
Congressional Task Force on Economic Growth in Puerto Rico Amendments
Amendment Offered By Reps. Polis and Benishek (Polis #173)
Rep. Jared Polis (D-Colo.) introduced an amendment that would clarify the makeup of the Congressional Task Force on Economic Growth in Puerto Rico and require it to provide a status update on its work in September.
The amendment was accepted in a voice vote.
Amendment Offered By Rep. Gallego (Gallego #046)
Rep. Ruben Gallego (D-Ariz.) explained that his amendment would stipulate that if the Task Force is to hold any hearings, at least one will be held in Puerto Rico to ensure that Puerto Rican voices are heard.
The amendment was accepted in a voice vote.
Amendment Offered By Rep. Gallego (Gallego #045)
Gallego then offered an amendment requiring the Task Force to consider access to federal healthcare programs as part of its mission to identify pro-growth policies.
Rep. Raul Labrador (R-Idaho) warned that such a provision that could encourage the Task Force to consider sending more money to Puerto Rico could look like a federal bailout. Bishop dismissed this concern, stressing that it is just a study.
The amendment was accepted in a 19-18 vote.
Amendment Offered By Rep. MacArthur (McArthur #050)
MacArthur added an amendment that would ask the Task Force to look into pro-growth tax relief.
The amendment was accepted in a voice vote.
Amendment Offered By Rep. Zinke (Zinke #1)
Rep. Ryan Zinke (R-Mont.) offered an amendment allowing the Task Force to submit recommendations to reform a Puerto Rican tax aimed at the supplement industry.
The amendment was accepted in a voice vote.
Other Amendments
Amendment Offered By Reps. Graves and Polis (Graves #1)
Graves and Polis offered an amendment instructing the Government Accountability Office to study what led to Puerto Rico’s crisis and to make recommendations to avoid this type of situation in the future.
The amendment was accepted in a voice vote.
Amendment Offered By Rep. Bishop (Bishop #1)
Bishop offered an amendment with technical fixes to the bill that was accepted in a voice vote.
Amendment Offered By Reps. Torres (Torres #023)
Rep. Norma Torres (D-Calif.) said her amendment would strip the provision of the bill allowing Puerto Rico’s minimum wage to be lowered for as long as the oversight board is in place. She warned that such a provision will lead young people to leave the island and cause greater economic problems in the long-run for the island.
Bishop insisted on a point of order because the amendment was out of the scope of the Committee’s jurisdiction.
Amendment Offered By Rep. Polis (Polis #168)
Polis offered an amendment that he said would incentivize U.S. companies to manufacture in Puerto Rico with the knowledge that their money can be kept on the mainland.
Bishop insisted on a point of order because the amendment was out of the scope of the Committee’s jurisdiction.
Amendment Offered By Rep. Polis (Polis #169)
Polis offered another amendment that would give the benefit of Historically Underutilized Business Zones (HUBZones) to all businesses in Puerto Rico.
Bishop insisted on a point of order because the amendment was out of the scope of the Committee’s jurisdiction.
Amendment Offered By Rep. Polis (Polis #170)
Polis proposed an amendment that would strike Puerto Rico’s exemption from the Department of Labor’s new overtime rule.
Bishop insisted on a point of order because the amendment was out of the scope of the Committee’s jurisdiction.
Amendment Offered By Rep. Fleming (Fleming #076)
Fleming noted that in 2010, Puerto Rico created a corporate levy that “sucks dollars out of the U.S. Treasury” in the form of an excise tax for which companies get a foreign tax credit in the U.S. He offered an amendment that would require the Treasury Department to issue guidance on this before any provisions of PROMESA can be implemented
Grijalva and Pierluisi opposed the amendment because it would lengthen the time it takes for the bill’s provisions to take effect.
The amendment was rejected in a 12-26 vote.
Amendment Offered By Rep. Fleming (Fleming #079)
Fleming offered an amendment that would strike Section 405 of the bill and eliminate the stay of lawsuits, saying it deprives U.S. citizens of access to the judicial process to defend their property.
Grijalva said an orderly restructuring process is one of the main drivers to the bill as a whole, and that without the stay, there is “little point to the bill at all.”
The amendment was rejected in a 6-33 vote.
Amendment Offered By Rep. Fleming (Fleming #093)
Fleming suggested an amendment that would prohibit any federal funds from being used to purchase or guarantee obligations, issue lines of credit, or provide grants in aid to Puerto Rico.
Bishop insisted on a point of order because the amendment was out of the scope of the Committee’s jurisdiction.
Amendment Offered By Rep. Graves (Graves #2)
Graves offered his own amendment that would restrict the use of federal funds authorized within PROMESA from being used to pay any liability of Puerto Rico, which he explained would directly clarify that the bill is not a bailout.
The amendment was accepted in a voice vote.
Amendment Offered By Rep. McClintock (McClintock #094)
McClintock said his amendment would exempt any constitutionally-issued debt from the provisions of the bill, stressing that its inclusion would undermine the reliability of full faith and credit bonds in the states.
Grijalva stressed that the amendment would make lengthy litigation more likely, and Pierluisi recalled testimony that claimed the legislation would have no impact on the broader municipal market.
The amendment was rejected in a 12-27 vote.
Amendment Offered By Rep. Labrador (Labrador #043)
Labrador offered and then withdrew an amendment that he said would specify what “adequate funding” for pension benefits would entail.
Amendment Offered By Rep. Bishop (Bishop #2)
Bishop’s amendment would ensure that the voluntary agreement already reached between the Puerto Rico Electric Power Authority and its Creditors would remain in place.
The amendment was accepted in a voice vote.
The Committee approved PROMESA in a 29-10 vote.
For more information on this hearing, please click here.
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House Natural Resources Committee
Markup of the Puerto Rico Oversight, Management, and Economic Stability Act
Tuesday, May 24 – Wednesday, May 25, 2016
Key Topics & Takeaways
- Approval: The Committee approved the Puerto Rico Oversight, Management, and Economic Stability Act in a 29-10 vote.
- Oversight Board: The committee approved amendments that would set certain considerations for the oversight board to be established by PROMESA, and rejected proposed amendments to entrench the prioritization of full faith and credit bonds in any restructuring.
- Congressional Task Force for Economic Growth: The Committee approved amendments that clarified the composition and mission of the Congressional Task Force for Economic Growth in Puerto Rico.
Legislation Considered
- H.R. 5278, the Puerto Rico Oversight, Management, and Economic Stability Act
Opening Statements
In his opening statement, Chairman Rob Bishop (R-Utah) noted that the Committee has held multiple hearings and many meetings with stakeholders in crafting H.R. 5278, the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA). He called arguments that the bill is a bailout of Puerto Rico “disingenuous” and commented that mainstream institutional bondholders have repeatedly said such legislation is needed. Bishop also warned that if Congress does not pass PROMESA, it will be faced with the prospect of a real bailout later.
Ranking Member Raul Grijalva (D-Ariz.) said a combination of unfair federal policies, opportunistic and predatory hedge funds, mismanagement, and desperate budget cuts has destroyed Puerto Rico’s economy and that there is “no question” Congress must act. He admitted that PROMESA is not the bill he would have crafted, stating his concerns that the oversight board is too powerful, that minimum wage and overtime provisions should not have a place in the bill, and that other provisions such as pension protections are missing. However, he stressed that PROMESA will allow Puerto Rico to “get back on the right footing” and that it is the compromise “with the best hope” of passing Congress.
Rep. Don Young (R-Alaska) spoke in support of PROMESA, insisting that it is not a bailout. He acknowledged that the bill is not perfect, but stated that Puerto “has no time to wait for the perfect bill.”
Resident Commissioner Pedro Pierluisi (D-P.R.) said the first step to resolving Puerto Rico’s problems is to stabilize the situation, and that PROMESA can accomplish this. He said the bill is necessary, but not sufficient, and called for an end to Puerto Rico’s second class treatment by the federal government. He said he would never support a bill that authorized a restructuring mechanism that was unfair to public pension systems, and defended that PROMESA does not do this. Overall, he said the benefits of the bill vastly outweigh its negatives.
Rep. Doug Lamborn (R-Va.) stated that Puerto Rico’s debt burden is a “stark example” of the pitfalls of unchecked government. He said PROMESA will provide meaningful improvements to reduce the size of Puerto Rico’s government, but lamented that it should have done more in pushing pro-growth reforms.
Rep. Tom McClintock (R-Calif.) criticized the bill for undermining the reliability of constitutional full faith and credit guarantees for the states, warning that if Congress is willing to undermine such guarantees for Puerto Rico today, there is no question it can consider state guarantees tomorrow. He cautioned that this will cause bonds to devalue and raise the interest rates that states and municipalities pay for debt. McClintock said he would offer an amendment to remove constitutional debt from the bill altogether.
Amendments
Oversight BoardAmendments
Amendment Offered By Reps. Graves and Beyer (Graves #046)
Reps. Garrett Graves (R-La.) said his amendment would provide the oversight board with discretionary authority to investigate the selling practices and representations made to investors in Puerto Rican debt offerings. Beyer said this would be in the interest of both investors and the Puerto Rican government and noted concerns regarding possible improprieties in the marketing of some bonds.
The amendment was accepted in a voice vote.
Amendment Offered By Rep. Hice (Hice #022)
Rep. Jody Hice (R-Ga.) said his amendment would encourage free market competition in Puerto Rico by allowing the oversight board to establish policies to require approval of contracts given to public entities rather than private enterprises.
The amendment was accepted in a voice vote.
Amendment Offered By Rep. Fleming (Fleming #091)
Rep. John Fleming (R-La.) proposed an amendment that would require the oversight board to give priority to bonds issued with full faith and credit guarantees, insisting that if Congress “changes the rule” now, then all future bonds issuances will be more expensive for borrowers.
The amendment was rejected in a voice vote.
Amendment Offered By Rep. Fleming (Fleming #090)
Fleming offered an amendment that would require Puerto Rico’s legislature to adopt a resolution requesting an oversight board before one could be established.
Grijalva called this amendment a “poison pill” designed to stop PROMESA entirely. Bishop similarly opposed the amendment “out of practicality.”
The amendment was rejected in a 5-33 vote.
Amendment Offered By Rep. MacArthur (MacArthur #055)
Rep. Tom MacArthur (R-N.J) proposed an amendment striking the provision that would allow the creation of oversight boards in the other territories, arguing that leaving this possibility open could threaten their own access to capital.
Grijalva opposed the amendment because it might open PROMESA as a whole to litigation. Bishop also opposed the amendment, but suggested that he would look into similar language that would not threaten the bill.
MacArthur withdrew his amendment.
Amendment Offered By Rep. Fleming (Fleming #091)
Fleming offered an amendment that would require the oversight board to “comply with” the prioritization of full faith and credit bonds. He warned that as written, the bill only states that the oversight board must “respect” this prioritization, which does not give enough protection to general obligation bonds.
Pierluisi opposed the amendment, arguing that all bondholders should be brought to the negotiating table.
The amendment was rejected in a 16-23 vote.
Amendment Offered By Rep. Fleming (Fleming #080)
Fleming said his amendment would require that Puerto Rico certify that it will abide by its constitutional requirement for a balanced budget and that unless it does so, the oversight board would be terminated after two years.
Grijalva said it will take more than two years to balance the budget, and stated that the amendment is “intended to kill the legislation.”
The amendment was rejected in a voice vote.
Amendment Offered By Rep. Fleming (Fleming #092)
Fleming offered an amendment he said would clarify the relative priority of pensions by instructing the oversight board to provide “adequate funding or reasonable alternatives” to satisfy contribution liabilities to public pension systems, but solely to the extent that such contributions are due under the terms of the applicable pension plan, which may be restructured.
The amendment was rejected in a voice vote.
Congressional Task Force on Economic Growth in Puerto Rico Amendments
Amendment Offered By Reps. Polis and Benishek (Polis #173)
Rep. Jared Polis (D-Colo.) introduced an amendment that would clarify the makeup of the Congressional Task Force on Economic Growth in Puerto Rico and require it to provide a status update on its work in September.
The amendment was accepted in a voice vote.
Amendment Offered By Rep. Gallego (Gallego #046)
Rep. Ruben Gallego (D-Ariz.) explained that his amendment would stipulate that if the Task Force is to hold any hearings, at least one will be held in Puerto Rico to ensure that Puerto Rican voices are heard.
The amendment was accepted in a voice vote.
Amendment Offered By Rep. Gallego (Gallego #045)
Gallego then offered an amendment requiring the Task Force to consider access to federal healthcare programs as part of its mission to identify pro-growth policies.
Rep. Raul Labrador (R-Idaho) warned that such a provision that could encourage the Task Force to consider sending more money to Puerto Rico could look like a federal bailout. Bishop dismissed this concern, stressing that it is just a study.
The amendment was accepted in a 19-18 vote.
Amendment Offered By Rep. MacArthur (McArthur #050)
MacArthur added an amendment that would ask the Task Force to look into pro-growth tax relief.
The amendment was accepted in a voice vote.
Amendment Offered By Rep. Zinke (Zinke #1)
Rep. Ryan Zinke (R-Mont.) offered an amendment allowing the Task Force to submit recommendations to reform a Puerto Rican tax aimed at the supplement industry.
The amendment was accepted in a voice vote.
Other Amendments
Amendment Offered By Reps. Graves and Polis (Graves #1)
Graves and Polis offered an amendment instructing the Government Accountability Office to study what led to Puerto Rico’s crisis and to make recommendations to avoid this type of situation in the future.
The amendment was accepted in a voice vote.
Amendment Offered By Rep. Bishop (Bishop #1)
Bishop offered an amendment with technical fixes to the bill that was accepted in a voice vote.
Amendment Offered By Reps. Torres (Torres #023)
Rep. Norma Torres (D-Calif.) said her amendment would strip the provision of the bill allowing Puerto Rico’s minimum wage to be lowered for as long as the oversight board is in place. She warned that such a provision will lead young people to leave the island and cause greater economic problems in the long-run for the island.
Bishop insisted on a point of order because the amendment was out of the scope of the Committee’s jurisdiction.
Amendment Offered By Rep. Polis (Polis #168)
Polis offered an amendment that he said would incentivize U.S. companies to manufacture in Puerto Rico with the knowledge that their money can be kept on the mainland.
Bishop insisted on a point of order because the amendment was out of the scope of the Committee’s jurisdiction.
Amendment Offered By Rep. Polis (Polis #169)
Polis offered another amendment that would give the benefit of Historically Underutilized Business Zones (HUBZones) to all businesses in Puerto Rico.
Bishop insisted on a point of order because the amendment was out of the scope of the Committee’s jurisdiction.
Amendment Offered By Rep. Polis (Polis #170)
Polis proposed an amendment that would strike Puerto Rico’s exemption from the Department of Labor’s new overtime rule.
Bishop insisted on a point of order because the amendment was out of the scope of the Committee’s jurisdiction.
Amendment Offered By Rep. Fleming (Fleming #076)
Fleming noted that in 2010, Puerto Rico created a corporate levy that “sucks dollars out of the U.S. Treasury” in the form of an excise tax for which companies get a foreign tax credit in the U.S. He offered an amendment that would require the Treasury Department to issue guidance on this before any provisions of PROMESA can be implemented
Grijalva and Pierluisi opposed the amendment because it would lengthen the time it takes for the bill’s provisions to take effect.
The amendment was rejected in a 12-26 vote.
Amendment Offered By Rep. Fleming (Fleming #079)
Fleming offered an amendment that would strike Section 405 of the bill and eliminate the stay of lawsuits, saying it deprives U.S. citizens of access to the judicial process to defend their property.
Grijalva said an orderly restructuring process is one of the main drivers to the bill as a whole, and that without the stay, there is “little point to the bill at all.”
The amendment was rejected in a 6-33 vote.
Amendment Offered By Rep. Fleming (Fleming #093)
Fleming suggested an amendment that would prohibit any federal funds from being used to purchase or guarantee obligations, issue lines of credit, or provide grants in aid to Puerto Rico.
Bishop insisted on a point of order because the amendment was out of the scope of the Committee’s jurisdiction.
Amendment Offered By Rep. Graves (Graves #2)
Graves offered his own amendment that would restrict the use of federal funds authorized within PROMESA from being used to pay any liability of Puerto Rico, which he explained would directly clarify that the bill is not a bailout.
The amendment was accepted in a voice vote.
Amendment Offered By Rep. McClintock (McClintock #094)
McClintock said his amendment would exempt any constitutionally-issued debt from the provisions of the bill, stressing that its inclusion would undermine the reliability of full faith and credit bonds in the states.
Grijalva stressed that the amendment would make lengthy litigation more likely, and Pierluisi recalled testimony that claimed the legislation would have no impact on the broader municipal market.
The amendment was rejected in a 12-27 vote.
Amendment Offered By Rep. Labrador (Labrador #043)
Labrador offered and then withdrew an amendment that he said would specify what “adequate funding” for pension benefits would entail.
Amendment Offered By Rep. Bishop (Bishop #2)
Bishop’s amendment would ensure that the voluntary agreement already reached between the Puerto Rico Electric Power Authority and its Creditors would remain in place.
The amendment was accepted in a voice vote.
The Committee approved PROMESA in a 29-10 vote.
For more information on this hearing, please click here.