[Senate Report 107-116]
[From the U.S. Government Publishing Office]
Calendar No. 269
107th Congress Report
SENATE
1st Session 107-116
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WORLD TRADE CENTER ATTACK CLAIMS ACT
_______
December 7, 2001.--Ordered to be printed
_______
Mr. Jeffords, from the Committee on Environment and Public Works,
submitted the following
R E P O R T
[to accompany S. 1624]
[Including cost estimate of the Congressional Budget Office]
The Committee on Environment and Public Works, to which was
referred a bill (S.1624), to establish the Office of World
Trade Center Attack Claims to pay claims for injury to
businesses and property suffered as a result of the attack on
the World Trade Center in New York City that occurred on
September 11, 2001, and for other purposes, having considered
the same, reports favorably thereon with an amendment and
recommends that the bill, as amended, do pass.
Background
On September 11, 2001, terrorists attacked the Pentagon and
the World Trade Center. These horrible events marked the first
time since the 1941 attack on Pearl Harbor that the United
States has suffered a foreign attack on domestic soil. The
magnitude and enormity of these attacks are unprecedented in
our Nation's history. Thousands of innocent people lost their
lives. Tens of thousands more lost their homes, their
businesses, their jobs, their livelihoods as a result of this
attack.
In New York, the attack left in its wake a mountain of
debris, damaged buildings and inaccessible businesses and
residences. New York City will lose an estimated $105 billion
as a result of the attacks over the next two years. The attack
damaged or destroyed nearly 25 million square feet of office
space, roughly equivalent to 20 percent of all the office space
in downtown New York. The attack physically displaced some 850
businesses and over 125,000 workers, and an additional 9,000
businesses and over 145,000 people have only restricted access
to their property.
Before the work of rebuilding lower Manhattan can begin,
crews must remove over a million tons of debris from the site,
a process that will likely take more than a year. Physical
reconstruction of destroyed buildings is most likely years
away. Many businesses and individuals do not have adequate
insurance or resources to sustain themselves in the near term
or to rebuild their businesses and lives in the long term.
S. 1624, the ``World Trade Center Attack Claims Act,''
responds to the overwhelming needs of the businesses and the
people of lower Manhattan, those directly and seriously
impacted by the recent attacks. The bill would provide
compensation for residential and business losses suffered by
injured persons as a result of the events of September 11th.
The bill would create an Office of World Trade Center Attack
Claims (Office) within the Federal Emergency Management Agency
(FEMA). The Office would process and pay claims at the
discretion of the Director of the Federal Emergency Management
Agency (Director) acting in accordance with the legislation and
regulations promulgated by FEMA.
Section-by-Section Analysis
Section 1. Short Title
The World Trade Center Attack Claims Act.
Section 2. Findings and Purposes
Summary
Section 2 sets out the Congressional findings and purposes
of the legislation.
Discussion
The purpose of the legislation is to compensate certain
individuals and businesses located within a specific geographic
region within lower Manhattan suffering injury as a direct
result of the attack. It is not the intent of this committee to
create an entitlement to disaster relief funds made available
under this Act. Nor is it the intent of this committee to
compensate claimants for losses that bear no relation to the
September 11th attack. The intent of the legislation is to
allow the Director to determine and to make discretionary
awards on a case-by-case basis for qualifying business and
residential loss caused by the September 11th attacks until the
Office exhausts funds authorized and appropriated under this
Act. For businesses and residences located in a specific
geographic region in Lower Manhattan prior to September 11,
2001, this Act provides aid to assist attack victims to
continue, replace, start, establish, or locate their business
or residence in New York City.
Section 3. Definitions
Section 3 defines the following terms for purposes of the
legislation.
Affected area.--The term ``affected area'' means the area
in lower Manhattan, New York City, that is comprised of the
area located on or south of Canal Street, on or south of East
Broadway (east of its intersection with Canal Street), or on or
south of Grand Street (east of its intersection with East
Broadway).
Attack.--The term ``attack'' means the attack on the World
Trade Center in New York City that occurred on September 11,
2001.
Claim.--The term ``claim'' means a claim by an injured
person under this Act for payment for injury suffered by the
injured person as a result of the attack.
Claimant.--The term ``claimant'' means an injured person
that submits a claim under section 5(b) of the bill.
Director.--The term ``Director'' means--
(A) the Director of the Federal Emergency Management
Agency; or
(B) if an Independent Claims Manager is appointed under
section 4(d)(4) of the bill, the Independent Claims
Manager.
Injured person.--
(A) In General.--The term ``injured person'' means an
individual, corporation, partnership, company,
association, cooperative, joint venture, limited
liability company, estate, trust, or nonprofit
organization that
(i) suffered injury as a result of the attack;
and
(ii) resides or maintains a place of business
in the affected area.
(B) Exclusions.--The term ``injured person'' does not
include
(i) a lender that holds a mortgage on or
security interest in real or personal property
affected by the attack; or
(ii) a person that holds a lien on real or
personal property affected by the attack.
Office.--The term ``Office'' means the Office of World
Trade Attack Claims established in section 4 of the
legislation.
Section 4. Office of World Trade Center Attack Claims
Summary
Section 4 establishes within FEMA an Office of World Trade
Center Attack Claims. This section also authorizes the Director
to appoint an Independent Claims Manager to head the Office and
to assume the duties of the Director under this Act.
Discussion
The purpose of the Office is to receive, to process, and to
pay claims in accordance with the provisions set out in section
5 of the bill. The Office will not diminish FEMA's authority or
funding under the Stafford Act. Funding for the Office will
come from funds authorized through this legislation, and not
from the Disaster Relief Fund or other FEMA sources. But the
committee does not intend to prohibit FEMA from utilizing
Stafford Act resources in the administration of the program on
a cost reimbursable basis provided that the use of those
resources does not substantially affect FEMA's ability to carry
out its Stafford Act mission. Examples of Stafford Act
resources that FEMA might use in administering the Office
include FEMA's National Processing Service Centers, its
information technology capabilities, and its cadre of
experienced, customer-service oriented disaster assistance
employees. The Director may also hire temporary personnel to
staff the Office, and other Federal agencies may detail, on a
reimbursable basis, personnel to assist in carrying out the
duties of the Office.
The committee does not view the Office established under S.
1624 as duplicative of other Federal programs currently
available to victims of the September 11th attack. Recent news
accounts concerning various relief agencies and their slow and
sometimes ineffectual administration of disaster assistance
shows that many directly affected victims are not receiving the
necessary funds to restart their lives and their businesses.
The intent of S. 1624 is to provide direct and timely
assistance to victims who qualify under this Act.
Section 5. Compensation for Victims of the Attack
Summary
Section 5 establishes the framework for the processing and
payment of claims by the Office of World Trade Center Attack
Claims and places the burden of substantiating loss on the
claimant. Section 5 also establishes a claimant appeals
process.
Discussion
Processing Claims
In processing claims and making payment decisions, the
Director will have complete discretion to determine disposition
of each claim in accordance with the provisions of this
legislation and with regulations promulgated by FEMA for the
purpose of processing claims under this Act. The Director will
publish final interim regulations in the federal register not
later than 45 days after enactment of this legislation. Not
later than two years after the publication of the final interim
regulations, an injured person may file a claim for injury
suffered as a result of the September 11th terrorist attacks.
Qualifying claims fall into two categories of compensable
loss residential loss and business loss. Residential losses
include uninsured or underinsured property loss, damage to or
destruction of physical infrastructure, insurance deductibles,
temporary living or relocation expense, debris removal and
other cleanup costs, or any other type of related injury that
Director determines appropriate.
Business loss may include uninsured or underinsured
property loss, damage to or destruction of tangible assets or
inventory, business interruption loss, overhead costs, employee
wages for work not performed, insurance deductibles, temporary
relocation expenses, debris removal and cleanup costs, and any
other type of injury that the Director determines appropriate.
Business loss claims are subject to an additional limitation.
An injured person may receive compensation for business loss
only if the injured person's business facility has suffered
disruption of power, disruption in telecommunications capacity,
damage to or destruction of physical infrastructure, or
disruption in physical access by employees or customers to the
business facility.
Any qualifying claim is subject to a payment ceiling and
other offsets. Payment on a claim submitted by an injured
person may not exceed the amount necessary to compensate for
injuries suffered during the 18-month period following the
September 11th attack. Also, payment on an injured person's
claim may not exceed $500,000, except in those instances where
the Director determines a greater amount is appropriate.
To prevent recovery by a claimant in excess of the
equivalent of actual compensatory damages, the committee
anticipates that insured claimants will seek redress from their
insurance companies first. The committee expects that the
Office will require insured claimants to file claims with their
insurance companies first and to disclose the extent of their
insurance coverage to the Office. However, it is not the
committee's intent that insured claimants wait for insurance
companies to fully process their claims before filing a claim
or receiving payment under this Act.
In calculating the amount of any compensable claim, the
committee expects the Office will consider expected insurance
proceeds an injured party may receive. Awards are also offset
by other benefits received through FEMA's individual and public
assistance benefits program and other government programs as a
result of the September 11th attacks. But the office should not
offset awards by the amount of any government loan received by
the claimant.
It is important to note that the intent of the committee is
not to eliminate or to supplant the duty owed by individual
insurance companies to their policyholders. To the maximum
extent possible, the committee expects that insured claimants
will seek redress under existing insurance policies first. The
intent of the legislation is to provide a secondary source of
remuneration for actual compensatory damages suffered as a
direct result of the attack.
Burden of Proof
Under this section, the claimant has the burden of
substantiating loss. If documentary evidence substantiating the
injury is not available, the Director may pay a claim based on
an affidavit or other documentation provided by the claimant.
Payment of Claims
Once an injured person has submitted a claim for loss to
the Office, the Director, to the maximum extent practicable,
will process the claim within 180 days. If the Director
determines the injured party has suffered compensable loss
under this section, the Director will pay the claim subject to
the limitations set out in this section. The Director may give
processing priority to certain claims based on the claimants'
assessed needs and any other criteria the Director deems
appropriate. In determining the validity of a claim, the
Director will determine whether the claimant is an injured
person, whether the injuries suffered resulted directly from
the attack, the amount, if any, to be paid under this section,
and the person or persons entitled to receive payment.
Again, in considering the amount of a claim, the Director
will reduce the award by the amount of any payments on
insurance policies made as a result of the September 11th
attack. The Director will also reduce the award by the amount
of any benefits received in response to the September 11th
attack under the public assistance program or any other FEMA
program. But the Director will not reduce the award by the
amount of any government loan received by the injured person.
The United States may recover any portion of a payment
improperly paid to the claimant because of fraud or
misrepresentation on the part of the claimant, a material
mistake on the part of the United States, insurance benefits
not properly accounted for, or failure of the claimant to
cooperate with an audit.
The Director may make one or more advance or partial
payments before the final settlement of the claim.
Appeals
If the claimant does not agree with the Director's
disposition of a claim, the claimant may appeal the decision in
accordance with the appellate process regulations jointly
promulgated by FEMA and the Small Business Administration. The
claimant must file the notice of appeal no later than 60 days
after the date the Director notifies the claimant that the
claim will or will not be paid. The Administrator of the Small
Business Administration will consider the business loss
appeals, and in the case of residential loss, the Director will
consider the appeal. In either case, appellate decisions must
be rendered not later than 90 days after receipt of the notice
of appeal.
Debt Collection Requirements
Section 5 also includes a provision stating that the Debt
Collection Act shall not preclude the payment of any claim.
Injured persons cannot assign claims paid under this Act, and
this bill exempts paid claims from creditors. However, the
Director may require repayment of Small Business Administration
disaster loans from the proceeds of claims paid under this Act.
Section 6. Acceptance of Services of Other Agencies and Volunteers;
Gifts
Section 6 allows the Director to accept and to use the
facilities or employees of any State or local government or
agency with the consent of the government. The Director may
also accept voluntary and uncompensated services by individuals
or organizations and gifts of supplies, equipment, and
facilities as needed.
Section 7. Relationship to Federal Entitlement Programs
Summary
Section 7 states that nothing in the bill prevents an
injured person from seeking benefits under any Federal
entitlement program. Further, calculation of eligibility for
any Federal benefit or entitlement program should not include
any compensation received under this Act.
Discussion
Section 7 is necessary to prevent injured persons receiving
compensation under this Act from being excluded from receiving
benefits under Federal entitlement programs. Asset calculations
for programs such as the food stamp program under the Food
Stamp Act of 1977 (7 U.S.C. 2011 et seq.) and any program
established under the Social Security Act (42 U.S.C. 301 et
seq.) should not include monetary compensation for compensable
loss under this Act.
This section insures that injured persons can receive
compensation from the Office without fear of losing essential
Federal entitlements.
Section 8. Reports and Audits
Summary
Section 8 mandates that the Director submit to Congress a
report describing the claims submitted under this Act during
the year preceding the report. Section 8 also directs the
Comptroller General to conduct an annual audit of the payment
of all claims submitted under this Act and to report the
results to Congress.
Discussion
Not later than one year after the promulgation date of
final interim regulations and annually thereafter, the Director
must submit to Congress a report describing the claims
submitted under this Act during the preceding year. The report
should include information on each claim including the amount
claimed and a brief description of the nature and status of
each claim including any payment on the claim.
The Comptroller General must complete the first annual
audit not later than 120 days after the Director submits the
first claims report to Congress, and annually thereafter. The
purpose of the audit is to ascertain adherence to the
requirements and standards of this Act, particularly with
regard to the qualifications of the applicants.
The committee expects that FEMA's Office of Inspector
General will maintain a full-time presence in the Office of
World Trade Center Attack Claims to deter fraud and to promote
efficiency, consistent with its obligations under the Inspector
General Act of 1978, as amended.
Section 9. Authorization of Appropriations
Summary
Section 9 authorizes $2 billion for the purposes of
carrying out this Act.
Discussion
The section authorizes $100 million for administrative
expenses and $1.9 billion for the payment of claims. The
committee anticipates that these funds will be part of the
President's proposed $20 billion relief package for New York.
These will remain available until expended. The Director will
not spend disaster relief funds to carry out this Act.
Section 10. Termination of Authority
The authority of this Act terminates 42 months after the
date of enactment of this Act.
Legislative History
Senator Hillary Rodham Clinton introduced S. 1624, ``The
World Trade Center Attack Claims Act,'' on November 1, 2001.
The committee held a legislative hearing to take testimony on
the proposed legislation on November 1, 2001. The committee
reported the bill, with an amendment in the nature of a
substitute, on November 8, 2001 by voice vote.
Hearings
On November 1, 2001, the committee held a legislative
hearing on S. 1624, a bill to establish the Office of World
Trade Center Attack Claims to pay claims for injury to
businesses and property suffered as a result of the attack on
the World Trade Center in New York City that occurred on
September 11, 2001, and for other purposes, receiving testimony
from Michael Brown, Deputy Director, Federal Emergency
Management Agency; Joe Moravec, Commissioner, Public Building
Service, General Services Administration; Dr. David Sampson,
Assistant Secretary for Economic Development, Economic
Development Administration, U.S. Department of Commerce;
Richard Meserve, Chairman, Nuclear Regulatory Commission;
Herbert Mitchell, Associate Administrator for Disaster
Assistance, Small Business Administration; and Marianne L.
Horinko, Assistant Administrator. Office of Solid Waste and
Emergency Response, Environmental Protection Agency.
Rollcall Votes
The Committee on Environment and Public Works met to
consider S. 1624 on November 8, 2001. By voice vote, the
committee agreed to amendment offered by Sentor Clinton in the
nature of a substitute. In addition, the committee adopted a
second degree amendment offered by Senator Clinton by voice
vote. The committee then agreed to report S. 1624, as amended,
by voice vote with Senator Bond recorded as voting ``no.''
Regulatory Impact Statement
In compliance with section 11(b) of rule XXVI of the
Standing Rules of the Senate, the committee makes evaluation of
the regulatory impact of the reported bill.
The bill does not create any additional regulatory burdens,
nor will it cause any adverse impact on the personal privacy of
individuals.
Mandates Assessment
In compliance with the Unfunded Mandates Reform Act of 1995
(Public Law 104-4), the committee finds that S. 1624 would
impose no unfunded mandates on local, State, or tribal
governments.
Cost of Legislation
Section 403 of the Congressional Budget and Impoundment
Control Act requires that a statement of the cost of the
reported bill, prepared by the Congressional Budget Office, be
included in the report. That statement follows:
U.S. Congress,
Congressional Budget Office,
Washington, DC, December 5, 2001.
Hon. James Jeffords, Chairman,
Committee on Environment and Public Works,
U.S. Senate, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has prepared
the enclosed cost estimate for S. 1624, the World Trade Center
Attack Claims Act. If you wish further details on this
estimate, we will be pleased to provide them.
The CBO staff contact is Julie Middleton, who can be
reached at 226-2860.
Sincerely,
Dan L. Crippen.
----------
Congressional Budget Office Cost Estimate
S. 1624, World Trade Center Attack Claims Act, As ordered reported by
the Senate Committee on Environment and Public Works on
November 8, 2001.
SUMMARY
S. 1624 would authorize the Federal Emergency Management
Agency (FEMA) to establish the Office of World Trade Center
Attack Claims to process and pay claims for injury to
businesses and property suffered as a result of the September
11, 2001, terrorist attack in New York. The bill would
authorize the appropriation of $2 billion for this purpose.
Under this bill, FEMA would be authorized to issue claims for
residential and business losses, though each individual claim
could not exceed $500,000 except under certain circumstances.
(The funding authorized by this legislation would not be used
for compensation to injured individuals or families of
individuals killed in the terrorist attack. That compensation
will be provided under Public Law 107-42, the Air
Transportation Safety and System Stabilization Act.)
Under S. 1624, residential losses would include an
uninsured or under-insured property loss, damage to or
destruction of physical infrastructure, an insurance
deductible, temporary living or relocation expenses, and clean-
up costs. In addition, business losses would include all of
those listed as residential losses as well as damage to or
destruction of assets or inventory, a business interruption
loss, overhead costs, and employee wages for work not
performed. Any amounts awarded would be net of insurance claims
that the person or business receives. Such claims would also be
net of any public assistance provided by federal, state, or
local agencies. Under the bill, the authority to approve claims
would end 42 months after enactment.
Assuming appropriation of the authorized amount, CBO
estimates that implementing S. 1624 would cost $2 billion over
the 2002-2006 period. S. 1624 would also have an insignificant
effect on receipts by establishing a new civil penalty;
therefore, pay-as-you-go procedures would apply.
S. 1624 would exempt the compensation awarded under the
bill from the attempts of creditors to collect outstanding
debts. That is, the bill would prohibit public and private
creditors from making claims against awards made to individuals
or businesses who qualify for compensation under the bill. This
prohibition would be both an intergovernmental and private-
sector mandate as defined in the Unfunded Mandates Reform Act
(UMRA). CBO estimates, however, that any costs to comply with
that mandate would be negligible.
ESTIMATED COST TO THE FEDERAL GOVERNMENT
The estimated budgetary impact of S. 1624 is shown in the
following table. The costs of this legislation fall within
budget function 450 (community and regional development).
By Fiscal Year, in Millions of Dollars
------------------------------------------------------------------------
2002 2003 2004 2005 2006
------------------------------------------------------------------------
CHANGES IN SPENDING SUBJECT TO
APPROPRIATION
Authorization Level............. 1,925 25 25 25 0
Estimated Outlays............... 385 500 510 410 195
------------------------------------------------------------------------
BASIS OF ESTIMATE
For this estimate, CBO assumes S. 1624 will be enacted
early in fiscal year 2002. The bill would authorize the
appropriation of $2 billion to pay business and property-loss
claims related to the September 11, 2001, terrorist attack in
New York. According to a report issued by the New York City
Office of the Comptroller, the city estimates the level of
uninsured property loss and damage as a result of the terrorist
attack will be about $17 billion. Under that information, CBO
assumes that there would be strong demand for the grants
offered under this program and that all of the funds authorized
to be appropriated would be spent. Under the process
established in the bill, CBO assumes that it would take five
years to resolve all of the claims submitted to FEMA.
Consequently. we estimate that implementing S. 1624 would cost
$2 billion over the 2002-2006 period, assuming appropriation of
the authorized amounts.
S. 1624 would establish a ci viI penalty for lawyers who
overcharge victims for their services. Collections of civil
fines are recorded in the budget as governmental receipts
(revenues). CBO expects that any additional receipts would be
less than $500,000 because the number of cases involved is
likely to be small.
PAY-AS-YOU-GO CONSIDERATIONS
The Balanced Budget and Emergency Deficit Control Act sets
up pay-as-you-go procedmes for legislation affecting direct
spending or receipts. CBO estimates that enacting S. 1624 would
increase revenues by less than $500,000.
INTERGOVERNMENTAL AND PRIVATE-SECTOR IMPACT
S. 1624 would exempt the compensation awarded under the
bill from the attempts of creditors to collect outstanding
debts. That is, the bill would prohibit public and private
creditors from making claims against awards made to individuals
or businesses who qualify for compensation under the bill. This
prohibition would be both an intergovernmental and private-
sector mandate as defined in UMRA. Because the compensation
would be new income generated under the bill, creditors would
not lose access to funds that they could have made claims
against in the absence of the bill. Consequently, CBO estimates
that the costs to comply with the mandate would be negligible,
if any, and would fall well below the annual thresholds
established by UMRA ($56 million for intergovernmental mandates
and $113 million for private-sector mandates in 2001, adjusted
annually for inflation).
Estimate Prepared by: Federal Costs: Julie Middleton (226-
2860); Impact on State, Local, and Tribal Governments: Leo Lex
(225-3220); Impact on the Private Sector: Lauren Marks and
Patrice Gordon (226-2966).
Estimate Approved by: Peter H. Fontaine, Deputy Assistant
Director for Budget Analysis.
Changes in Existing Law
Section 12 of rule XXVI of the Standing Rules of the
Senate, provides that reports to the Senate should show changes
in existing law made by the bill as reported. Passage of this
bill will make no changes to existing law.