TRUST for Puerto Rico Act of 2022
The proposed Territorial Relief Under Sustainable Transitions for Puerto Rico Act of 2022, or the TRUST for Puerto Rico Act, filed
last week seeks to expedite the termination of the PROMESA oversight board by changing the requisites for termination, but it also outlines the transfer of oversight board authority back to the commonwealth for any Title III and Title VI cases pending at the conclusion of the oversight board’s mandate.
The bill would amend the PROMESA statute
so that upon termination of the oversight board, the duties and responsibilities of the oversight board relating to “any pending action” under Title III would be transferred to the “territorial government,” which under PROMESA is defined as “the government of a covered territory, including all covered territorial instrumentalities.” The bill states that this transfer of powers includes the oversight board’s “role and capacity” under section 315 of PROMESA, which provides the oversight board with the power to “take any action necessary on behalf” of the debtor to prosecute a Title III case on the debtor’s behalf. Under section 315, the oversight board files Title III petitions, submitting or modifying a plan of adjustment and serving as the debtor’s representative in the Title III court.
The TRUST for Puerto Rico bill would also amend section 302, which outlines what entity may be a debtor under PROMESA, to state that the territorial government may become a debtor when the oversight board has terminated pursuant to section 209 and the “territorial government has undertaken all duties and responsibilities under this title that were formerly assigned to the Oversight Board.”
The bill also amends section 5(7) that defines “covered territorial instrumentality’’ to specify that a covered entity includes a “territorial instrumentality” that “upon termination of the Oversight Board pursuant to section 20” has been “designated by the covered territory to be subject to such requirements.’’
Similar to its Title III counterpart, Title VI would be changed through the bill to provide for the transfer of the “the duties, responsibilities, and all applicable powers and roles” of the oversight board “with respect to any action taken pursuant to the authorities under [T]itle VI” of PROMESA, including those “under any other provision of such Act relating to such action.” The Title VI role of “administrative supervisor” would be modified to include the “Territory Government Issuer” after the oversight board ceases to exist.
The legislation provides for the termination of the oversight board through the adoption of a resolution by the territory’s Legislature and the governor “setting forth the manner in which such termination shall be implemented.” The measure mandates that oversight board funds, assets and records be transferred to the commonwealth with a copy of all records to Congress.
The bill reduces the number of balanced budgets required by PROMESA to two from four and specifies that a budget may be balanced “without regard to whether the applicable budget provides for the payment of debt service.” It also eliminates a requirement that the commonwealth has market access at reasonable rates.
Commonwealth officials including Gov. Pedro Pierluisi and Resident Commissioner Jenniffer González, a co-sponsor, have expressed support for the measure.
The oversight board reacted to the filing of the measure with the following statement: “The Oversight Board remains committed to its legal mandates of helping Puerto Rico regain access to capital markets and achieve fiscal responsibility. It will continue to comply with PROMESA.”