Legal Bid to Stop $200M State Bonds for Controversial Trenton Construction

Opponents try to block Christie administration from issuing debt to finance new office buildings at same time as under-the-radar panel give thumbs-up to project

A crowd gathered for yesterday's crucial meeting of the State Leasing and Space Utilization Committee; only lawmakers were allowed to testify.
A group of Trenton residents that includes a top city official, a sitting state lawmaker and the city’s former mayor is suing Gov. Chris Christie’s administration in a bid to block the state from issuing more than $200 million in new debt to finance the construction of government office buildings in Trenton.

The suit was filed in Superior Court in Mercer County yesterday, just as the building project was getting a final sign-off inside the State House from a little-watched panel of lawmakers and executive-branch officials.

The project’s opponents have faulted both the design of the proposed new buildings and the state’s under-the-radar approval process but the lawsuit specifically challenges whether the Christie administration has the legal authority to issue $215 million in new debt to pay for the buildings without first getting voters’ approval.

Without voter approval

The lawsuit names 10 plaintiffs in all, including City Council President Zachary Chester, Assemblyman Reed Gusciora (D-Mercer) and former Mayor Doug Palmer. Without first getting voter approval, the lawsuit argues the proposed bond issue is “illegal and violates public policy and should be preliminarily and permanently restrained along with any expenditure of any monies so raised.” The suit also seeks an injunction against the state to prevent the Christie administration from using any bond proceeds until the matter is resolved.

Depending on how quickly the court takes up the issue, the lawsuit has the potential to block the proposed financing from going to market even if a judge ultimately rules against the plaintiffs in the case. That’s because Christie, a second-term Republican, is due to leave office next month, and it’s unclear whether Gov.-elect Phil Murphy approves of the project or its finance plan.

The case also has the potential to establish a new legal precedent on the issue of state borrowing without voter approval since the Christie administration has maintained it is legal to issue bonds through the Economic Development Authority even though the state constitution was amended by voters in 2008, seemingly to make it much harder to issue such debt without a referendum.

Although planning for the new government office buildings started in 2014, Christie first announced the project in September 2016. Under the latest version of the plans, the project will involve the construction of two new office buildings in downtown Trenton to house the Department of Health and the Department of Treasury’s Division of Taxation.

Governor predicts economic boost

The plans also call for demolition of the existing building Health employees currently use and for that area to be turned into parking space once the new construction is complete. The existing Taxation building will be put out to bid as a redevelopment opportunity for the private sector, officials said, though it too could eventually be demolished.

Christie touted the building plans as a way to reduce the state footprint in Trenton, and has predicted it will generate more economic development and private-sector investment in the city, which has struggled in the wake of the Great Recession. The buildings are also considered to be obsolete, and some city officials have welcomed the Christie administration’s decision to make a significant investment in the city.

But several Trenton residents and local business owners, including members of a group called Stakeholders Allied for the Core of Trenton, faulted the state for not locating the new buildings in the city’s core downtown district, and for not including a mixed-use element that would encourage more downtown foot traffic. The Christie administration has also been criticized for not taking advantage of public-private partnership opportunities that would increase the city’s ratable base, and for advancing the project without first having a completed impact statement from the Capital City Redevelopment Corporation.

The framework of the building project calls for it to be financed using state bonds issued by the Economic Development Authority under a lease-lease back arrangement with Treasury. That feature of the proposal required the project to get approval from the little-watched State Leasing and Space Utilization Committee in Trenton, which came yesterday during a meeting held in the State House.

Only lawmakers allowed to testify

State officials maintained during the meeting that the building plans have already been changed due some of the concerns that have been raised about the project, including by removing a cafeteria to ensure state workers will still need to visit downtown businesses to buy lunch. They also said doing the project as a public-private partnership could add as a much as $200 million to the final tab.

The building project also won praise yesterday from Assemblyman Wayne DeAngelo (D-Mercer), who argued it will generate much-needed jobs for members of the building trades in the region. “This is an enormous amount of work for the men and women of the building trades,” DeAngelo said.

But only lawmakers were allowed to testify during the hearing even as dozens of residents and labor representatives had shown up hoping they would also have an opportunity to weigh in. Instead, Sen. Nicholas Scutari (D-Union) told them that they would only be allowed to tell the panel whether they supported or opposed the building projects that were on the agenda, which included two proposed Juvenile Justice Commission facilities for Ewing and Winslow.

Not a ‘sign of disrespect’

“Please do not take it as a sign of disrespect,” Scutari said. “We know what your positions are. We understand the ‘for’ and ‘against’ (arguments).”

Despite passage of the 2008 constitutional amendment that limited state borrowing without voter approval, Christie administration officials have argued that the EDA’s borrowing authority was not affected by that amendment.

But Bruce Afran, a Princeton attorney who filed the lawsuit yesterday, said in an interview with NJ Spotlight that since the bonds would be paid off using rent payments funded with money raised by the state, the debt is not the EDA’s, but is actually the state’s.

“It’s really an evasion of the obligation of the state to go to the voters,” Afran said. “A bond repayment called rent is still a bond repayment.”

Assemblyman John Wisniewski (D-Middlesex) testifies before the committee.
The plaintiffs’ legal argument echoes those made earlier this year by Assemblyman John Wisniewski (D-Middlesex) and several other lawmakers, who tried unsuccessfully to block the Christie administration from issuing $300 million in debt to finance a controversial renovation of the oldest sections of the State House. Their lawsuit was filed after the Christie administration issued the bonds for the State House work, and the judge in the case ultimately ruled against Wisniewski and the other lawmakers, citing a 1997 state Supreme Court precedent that determined such challenges are moot when the bonds were already sold.

Since the state has yet to go to market to secure financing for the proposed Trenton buildings, that could mean the ruling in the case will generate a legal precedent on what some have called the “EDA loophole.” Asked yesterday when the latest bond sale would be held, Treasury spokesman Willem Rijksen said “EDA anticipates issuing approximately $380 million in bonds early in 2018.” The total includes both the funding for the new buildings in Trenton and the two Juvenile Justice facilities.

Rijksen did not comment on the opponents’ lawsuit.

Wisniewski, who is still appealing the lower court ruling on the State House bonds, said during the committee hearing yesterday that he opposes the finance plan for the new buildings on the same grounds.

“This is a way around having the voters authorize it, and I think it needs to be said every time we engage in it,” Wisniewski said.