Murphy Holds to Christie’s Controversial Funding of State House Rehab

As a candidate, governor said ‘citizens ought to be outraged’ by complicated and secretive planning of project. Administration now says ‘undoing the deal’ not feasible

Renovation underway at the State House
Once a loud critic of the $300 million State House renovation launched by his predecessor, Gov. Phil Murphy is now carrying on the rehab effort, and his administration is also sticking with the project’s controversial finance plan.

Since Murphy took over for former Gov. Chris Christie earlier this year, the State House work has been moving forward as originally planned, with interior investigations, demolition work and debris removal occurring right on schedule and on budget.

In fact, Murphy administration officials outlined the progress that workers have been making during a tour last week of the oldest section of the State House, which dates to the 1790s and has been shuttered to the public since last summer. They led reporters past original beams that have been exposed in the basement and also showed off dramatic great rooms with elaborate cornices and wainscoting on upper levels that were long-ago partitioned into more mundane office spaces.

State House NJ renov
“We open up walls, we dig holes, we learn stuff, and we go back to the drawing table,” said Raymond Arcario, executive director of the New Jersey Building Authority. About 80 percent of the work is still left to complete, and the project is about to enter a more intensive environmental-remediation phase, he said.

Meanwhile, the latest state budget documents indicate the Murphy administration is also sticking with the project’s complicated bonding plan, which Murphy once suggested he may undo if elected governor. Instead, the financing is on schedule to be finalized later this year, with nearly $30 million being set aside for initial debt service in fiscal year 2019. A lengthy legal challenge of the project’s bonding — that Murphy inherited from the Christie administration — was also recently shot down by the Superior Court’s Appellate Division, putting that issue to rest, at least for now.

Christie: ‘an embarrassment’

Christie, a Republican, first announced the large-scale renovation of the State House in November 2016, saying it would be the first in decades for a section of the building known as the executive State House that features the signature gold-leaf dome, rotunda, and several executive-branch offices, including the governor’s. Though it’s the nation’s second-oldest State House still in continual use, Christie said the building’s deteriorating conditions had become “an embarrassment to the people of the state,” and his administration estimated it was costing $8 million to $10 million annually just to maintain the building.

But, rather than putting a finance plan for the rehab project directly before lawmakers or voters for approval, it was instead guided through the little-watched State Capitol Joint Management Commission, a panel made up of both legislative and executive branch appointees. The JMC voted in April 2017 to approve the project and its finance plan, which involves a complicated lease-leaseback arrangement with the Economic Development Authority that relies on rent money coming each year out of the state budget.

Last May, the EDA board approved the bond financing for the project. Then, within hours, it quietly moved ahead with a “private placement” transaction with RBC Capital that initially involved the issuance of short-term notes that were eventually sold to individual investors. It was that step in the financing that drew the strongest criticism from then-candidate Murphy, a Democrat who said at the time that “citizens ought to be outraged” by how the transaction was done “under the cover of night, (with) no transparency.”

But after taking office in January, the Murphy administration has decided to stick with the original plan
of converting the short-term notes into longer-term bonds to be issued later this year. Another option would have been to earmark funds to cover the entire project in just one annual budget.
Treasury Department spokeswoman Jennifer Sciortino suggested on Friday that reversing course after the financing had already been set in motion by Christie would likely have only added to the total cost of the project.

‘Costly and complicated’ to undo deal

“The Governor’s original concerns were valid and widely held,” Sciortino said of Murphy. “Unfortunately, undoing a bond deal of this magnitude can be both costly and complicated, especially if a portion of the proceeds from the deal are already spent.”

“The State House has many undeniable structural, safety and efficiency issues that must be addressed and a significant amount of work has already been completed,” she added.

Also seemingly resolved at this point is a legal case that former Democratic state Assemblyman John Wisniewski of Middlesex County launched last year. Having spent more than two decades working inside the State House, Wisniewski isn’t against the renovation work itself, but believes the finance plan should have been put before voters since the state constitution generally prohibits the issuance of significant long-term debt without voter approval.

“I think it would have passed overwhelmingly,” he said during an interview Friday. “They chose not to, for whatever reason.”

Wisniewski and several other lawmakers lost an initial push to block the financing on constitutional grounds in Superior Court last year. Earlier this month, the Appellate Division also ruled in favor of the Murphy administration, which took over defense of the State House financing from Christie. Wisniewski, who ran against Murphy unsuccessfully in last year’s Democratic gubernatorial primary, said he has yet to determine whether he will appeal that ruling to the state Supreme Court.

Big bonds

Barring intervention by the high court, documents posted online by the nonpartisan Office of Legislative Services shed light on how the finance plan will be finalized by the Murphy administration later this year. The initial short-term notes are set to mature on December 17, 2018, and the EDA is planning to convert that financing into a longer-term bond issue “prior to the end of calendar 2018,” according to the OLS documents. Murphy’s fiscal year 2019 budget plan also sets aside $27.4 million to cover an initial debt payment, according to the documents.

Meanwhile, Arcario, the building authority leader, said the renovation project itself — which has moved the governor’s office and press row to other locations on State Street — is about to shift into the environmental-remediation phase, and by early next year, the Murphy administration should be ready to award a general contract for the bulk of the renovation work. The current target date for completion is “sometime in 2022,” Arcario said, which would be just in time for the start of a possible second term in office for Murphy.