Lawmakers Fume Over Private Bond Sale for $300M NJ State House Renovation

Caught off-guard by Christie administration’s speedy move on financing of controversial project, four legislators vow to continue to try to block it

Credit: AP Photo/Julio Cortez, Pool
Sen. Raymond Lesniak
State lawmakers who are suing Gov. Chris Christie’s administration in a bid to block a controversial $300 million renovation of the State House in Trenton say they plan to keep up their legal challenge even after learning yesterday that bonds have already been sold to finance the rehab project.

The group of four lawmakers found out during a scheduling meeting held yesterday with a state Superior Court judge that the bond sale actually took place last week — and just hours after the state Economic Development Authority gave final approval to the Christie administration’s finance plan.

The project’s bond financing was conducted as a “private placement,” a type of transaction that isn’t offered up to the public, and it was not made clear in agency documents made public last week that the closing was imminent.

“It’s shocking,” said Sen. Ray Lesniak (D-Union), one of the four lawmakers who are suing Christie’s administration to halt the project on the grounds that the executive branch doesn’t have the authority to finance the renovation without direct oversight from lawmakers and the public.

Governor ‘has no shame’

“The governor has no shame, but the EDA commissioners ought to be ashamed of themselves,” said Lesniak, a veteran lawmaker who is running for governor this year to replace the term-limited Christie.

Even Christie’s lieutenant governor, Kim Guadagno, was also apparently caught off-guard by the quick closing on the bonds, according to a spokesman for Guadagno, a Republican who is also running for governor this year and has been a vocal critic of the plan to spend $300 million on the State House.

“Like the rest of New Jersey, the lieutenant governor wasn’t informed of the bond sale,” said Ricky Diaz, Guadagno’s campaign spokesman. “She actually publicly urged the governor to halt the project a few days ago, arguing that because this has long-term ramifications to the state’s finances he should let the next governor to assess the project’s true cost and necessity.”

Christie, a second-term Republican, announced the renovation project in late November, saying it would be the first in decades for a section of the building that houses the signature gold-leaf dome, its rotunda, and several executive-branch offices, including the governor’s. This original part of the State House, located near the Delaware River on West State Street in Trenton, was built in 1792, and Christie said its current condition is “an embarrassment to the people of the state.”

Yet instead of going through the New Jersey Building Authority, which at one point was overseeing a $38 million renovation effort, oversight of the expanded renovation project was shifted earlier this year to the little-known State Capitol Joint Management Commission, a panel made up of both legislative and executive branch appointees. The commission voted late last month to approve the project’s finance plan, which also involves a lease-back arrangement with the EDA that will effectively make the agency the landlord of the State House while the bonds are being paid off using rent money to be provided through the annual state budget.

Requires legislative, public approval?

But according to a lawsuit filed earlier this week by Lesniak and Sens. Christopher “Kip” Bateman (R-Somerset) and Michael Doherty (R-Warren), the Christie administration doesn’t have the right on its own to finance the renovation project with such an arrangement without getting approval from lawmakers and the public. The senators’ suit — and a similar complaint filed last week by Assemblyman John Wisniewski (D-Middlesex) — also makes the case that the financing violates the state constitution’s appropriations and debt-limitation clauses by binding future legislatures to paying off a bond issue that will measure more than 1 percent of the current state budget, which is $34.6 billion. That claim comes after state Treasurer Ford Scudder conceded during a recent legislative hearing that the cost of the project, once principal and interest payments tied to the long-term financing are calculated, could increase to $500 million or more.

Documents distributed during the EDA’s meeting in Trenton last week indicated the financing for the renovation would involve a “variable interest rate,” with RBC Capital Markets serving as underwriter. But spokespeople for the EDA and Treasury did not respond yesterday when asked for the specific terms of the bond sale, including the interest rate and period of repayment.

Lesniak said he’s now planning to ask Mercer County Assignment Judge Mary Jacobson to essentially cancel the bond sale and send a refund to any investors.

“These are extraordinary circumstances,” Lesniak said. “This is a transaction that can be easily unraveled.”

Doherty called the immediate sale of the bonds “a clear sign that the Christie Administration didn’t want to give legislators or the public even a moment to review or challenge this expensive State House renovation.”

Bateman: ‘outrageous project’

“We’re going to continue our efforts on behalf of New Jersey taxpayers to fight this outrageous project,” Bateman said.

And Wisniewski, who is also running for governor this year, said it’s the Legislature’s “fiduciary responsibility” to review such transactions. “Aside from the contempt toward voters, the process was so quick that it raises significant red flags and leaves multiple questions about how the process played out,” Wisniewski said.

The state Attorney General’s Office, which is defending the Christie administration in court, declined comment yesterday. The Treasury released a statement that said “the bond issuance was legal and appropriate,” and a spokeswoman for the EDA said documents released to the public made clear the bonds would be sold to RBC Capital.

Christie’s office referred to general comments the governor made yesterday about the lawsuit after a news conference in Newark to announce a new safety initiative for New Jersey Transit buses. “I think the arrangement between the Joint Management Commission of the State House and the EDA is one that is not only appropriate, but necessary,” Christie said. “All parties and all branches of government were represented in that process. I think it’s the right thing to do and we’re going to continue forward with it.”

But Christie has taken a far more forceful position on the general issue of state borrowing in the past, including in late 2009 while he was the governor-elect. Official figures that were released at the time showed New Jersey’s total debt burden had grown to a record $34 billion under Democrat Jon Corzine.

Scudder: ‘we’ve done everything appropriately’

“Any projections of future borrowing that is scheduled to happen after Jan. 19, if you’re the investment bank on that, don’t spend the fees yet,” Christie said as he was preparing to take office in early 2010 after beating Corzine in November.

“We’re going to reevaluate everything and make sure that we have folks look at it and tell me whether or not this is something that is absolutely necessary in light of that burgeoning debt problem,” Christie said at the time.

The latest official state debt report, released by the Christie administration earlier this year, indicated total bonded debt had risen to nearly $43 billion as of the end of the 2016 fiscal year.

And while the lawmakers who are suing the Christie administration said they didn’t learn about the bond sale until yesterday morning, Scudder had actually referred to the closing during a hearing held the day before by the Senate Budget and Appropriations Committee. His statements, however, were overshadowed by news that was released at the same time about a projected $527 million revenue shortfall.

Scudder was also pressed by lawmakers during a similar budget hearing in Trenton yesterday to explain what would happen if the judge ultimately sides with Lesniak and his colleagues.

“In our assessment, and bond counsel’s assessment, and the Attorney General’s Office’s assessment, we’ve done everything appropriately, following statute, so I wouldn’t expect such a scenario to play out,” the treasurer said.