Christie Wins Legal Battle to Renovate State House

By Salvador Rizzo • 06/14/17

Observer

The New Jersey state house dates to 1792.

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A state judge has dismissed several lawsuits challenging Gov. Chris Christie’s decision to renovate the New Jersey state house at a cost of more than $300 million, making it unlikely that any further legal action could stop the demolition and restoration work scheduled to begin within days.

After hearing oral argument Wednesday, Superior Court Judge Mary Jacobson said the bipartisan group of lawmakers challenging Christie’s plan — Assemblyman John Wisniewski and state Sens. Kip Bateman, Richard Codey, Mike Doherty and Ray Lesniak — raised important public concerns about the way the Christie administration sold bonds to cover the high cost of the restoration without legislative or voter approval.

But Jacobson said the court could not provide any meaningful relief, since the $300 million in bonds for the renovation project were sold shortly after the state Economic Development Authority voted to authorize them on May 11.

She called it a “very significant transaction with all sorts of ramifications,” as well as “IRS implications.”

“In my view, there are issues of public importance here,” Jacobson said from the bench. “But the court finds that there’s no effective relief that can be issued.”

New Jersey’s constitution under a 2008 amendment requires that voters approve any major debt issues through a ballot referendum, which must be authorized by the Legislature.

But Christie’s administration structured the renovation deal through a series of complex maneuvers, routing it through the state Economic Development Authority, which was formed by statute before the 2008 amendment and which the governor’s attorneys argued was therefore free to bond money without voter approval.

Assistant Attorney General Jean Reilly argued for the administration that the lawsuits filed by lawmakers were moot “because the bonds have been sold multiple times” in at least seven transactions since May 11, and possibly more. An escrow agreement had been executed for $39 million in bond proceeds, which were deposited in an irrevocable trust to defease prior bonds, she added, and U.S. Bank has been appointed trustee and paying agent.

She argued that unwinding all those moves would amount to “chaos” and “havoc” and have an “extreme adverse effect” on the state’s credit rating. The first lawsuit, she added, was filed by Wisniewski a day after the bond sale was executed. But before the EDA went through with the sale on May 11, the lawmakers had 16 days to file suit after the State Capitol Joint Management Commission separately voted to approve the renovation.

“These plaintiffs didn’t file suits, they filed press releases instead,” Reilly said, gesturing at Lesniak (D-Union) and Wisniewski (D-Middlesex), who were in court to argue their side.

Lesniak argued that the bond sale was an attack on the separation of powers in the state constitution, allowing Christie to circumvent the Legislature’s domain over appropriations. Christie, he said, had placed lawmakers in a “Sophie’s choice” scenario: They now have the option of not paying the interest on the bonds, which could tank New Jersey’s battered credit rating — or they could pay the yearly borrowing costs and tacitly condone the executive branch’s actions by paying for “something we didn’t vote for in the first place.”

“Every single purchaser of these bonds was put on notice about the [legal] claims that were going to be made, so they took the risk … and nevertheless went ahead and purchased the bonds,” Lesniak said. “These can easily be unraveled. This is a private sale, which means there’s less than 100 purchasers.”

Wisniewski argued that the Christie administration’s position would render meaningless the debt-limitation clause in the state constitution, which was drafted so as not to bind future legislative majorities to debts they did not agree to incur. Borrowing costs on the $300 million could add $20 million to $25 million a year over the lifespan of the bonds, according to state Treasury Department estimates. That would hike the price tag on the restoration closer to $700 million or $750 million, according to court filings.

Christie, Wisniewski said, had arranged the same-day bond sale through the EDA to get around the debt-limitation clause and saddle lawmakers with years’ worth of bills they never agreed to pay.

“While the race may go to the swift, the constitutional interpretation should not go to the swift,” he argued.

Wisniewski urged the court to decide the constitutional questions, but Jacobson declined and said she would leave that to higher courts. However, the appeals process could drag on for months and outlast the actual renovation work scheduled to begin imminently.

Reilly pointed out that the nonpartisan Office of Legislative Services agreed in a legal opinion that the state could bond the $300 million without voter approval. “There’s nothing wrong with acting quickly or efficiently,” she argued. “Plaintiffs can’t point to any procedural requirement that the state omitted. We followed everything.”

But Jacobson did seem a bit miffed when Reilly argued that under state Supreme Court case law, the state cannot be considered to be in default if and when lawmakers decline to make payments on appropriation-backed debt.

“Then where does the money come from?” the judge asked. “You can say something is not something, but if there’s no money … I don’t know how there would be payments.”

After the hearing, Lesniak and Wisniewski said the judge had prioritized the needs of bondholders and “Wall Street” over those of state taxpayers. An appeal could be filed soon, they said. Jacobson said she was bound by case law, namely the state Supreme Court’s 1997 decision in Spadoro v. Whitman.

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