Wisniewski v. Murphy

• Decision Date: 10 May 2018
• Docket Number: A–4693–16T2,A–4698–16T2,DOCKET NOS. A–4689–16T2
• Citation: 186 A.3d 321,454 N.J.Super. 508
• Parties: John S. WISNIEWSKI, as a citizen of New Jersey and a taxpayer, Plaintiff–Appellant, v. Phil MURPHY, Governor of the State of New Jersey; New Jersey Department of the Treasury ; Liz Muoio, Treasurer of New Jersey ; The New Jersey Economic Development Authority; and The State Capitol Joint Management Commission, Defendants–Respondents. In the Matter of the NJEDA/State Lease Revenue Bonds 2017 Series and State Lease Revenue Refunding Bonds 2017 Series (State House Project) and In the Matter of the State Capitol Joint Management Commission Motion Approving the Resolution Authorizing the Renovation of the Executive State House. In the Matter of the Approval of the Resolution Authorizing the Renovation of the Executive State House.
• Court: New Jersey Superior Court — Appellate Division

454 N.J.Super. 508

186 A.3d 321

John S. WISNIEWSKI, as a citizen of New Jersey and a taxpayer, Plaintiff–Appellant,

v.Phil MURPHY, Governor of the State of New Jersey; New Jersey Department of the Treasury ; Liz Muoio, Treasurer of New Jersey ; The New Jersey Economic Development Authority; and The State Capitol Joint Management Commission, Defendants–Respondents.

In the Matter of the NJEDA/State Lease Revenue Bonds 2017 Series and State Lease Revenue Refunding Bonds 2017 Series (State House Project)

and

In the Matter of the State Capitol Joint Management Commission Motion Approving the Resolution Authorizing the Renovation of the Executive State House.

In the Matter of the Approval of the Resolution Authorizing the Renovation of the Executive State House.

DOCKET NOS. A–4689–16T2

A–4693–16T2

A–4698–16T2

Superior Court of New Jersey, Appellate Division.

Argued May 1, 2018

Decided May 10, 2018

John S. Wisniewski, Sayreville, argued the cause for appellant (Wisniewski & Associates, LLC, attorneys; Jason R. Hawrylak, and John S. Wisniewski, Sayreville, of counsel and on the briefs; Carla Zappi, on the brief).

Aaron A. Love, Trenton, Deputy Attorney General, argued the cause for respondents (Gurbir S. Grewal, Attorney General, attorney; (Melissa Dutton Schaffer, Assistant Attorney General, of counsel; Aaron A. Love, Trenton, on the brief).

Before Judges Carroll, Mawla and DeAlmeida

The opinion of the court was delivered by

CARROLL, J.A.D.

These consolidated appeals involve a challenge to decisions by two state agencies to finance a comprehensive renovation of the State Capitol complex. The agencies resolved to issue $300 million in bonds and to repay the bonds with rental payments pursuant to a lease of the State Capitol complex.

Plaintiff John S. Wisniewski, then a state legislator, filed a complaint challenging the agencies' actions on the basis that they violated the Debt Limitation Clause (DLC) of the New Jersey Constitution. At the time the complaint was filed, the bonds had already been sold and distributed into the marketplace. Consequently, the trial court dismissed the complaint as moot.

In No. A–4689–16, plaintiff appeals the court's determination that his complaint is moot. In Nos. A–4693–16 and A–4698–16, he appeals the final agency decisions. We agree the appeals are technically moot. Notwithstanding, we address the merits because the issue raised is a matter of significant public importance that is capable of repetition while evading review. Having considered the parties' arguments in light of the record and applicable legal standards, we affirm the final agency decisions.

I.

The State House Complex (SHC) is composed of an annex plus two wings, the executive (ESH) and the legislative (LSH). ESH houses the offices of the governor, lieutenant governor, governor's counsel, state treasurer and executive staff members. Built in 1772, ESH is a four-story building that includes the most historic and oldest sections of the SHC. It contains historical and architectural pieces such as original wood wainscoting and plaster cornices, portraits, art work and historic objects, and is open to viewing by the public. ESH has not been comprehensively renovated since the 1950s, and it has significant structural problems.

N.J.S.A. 52:31–39(a) provides that the State Capitol Joint Management Commission (JMC) must:

(1) maintain, monitor and preserve the architectural, historical, cultural and artistic integrity of any completed project for the restoration, preservation and improvement of the State capitol complex and to safeguard any related artifacts, documents and objects;

(2) maintain custody of the State capitol complex, with exclusive jurisdiction with respect to its management and operation, including maintenance, repair, renovation, improvement, security, parking, furnishing, artifact displays, and space utilization; ....

Pursuant to N.J.S.A. 52:31–37, the JMC consists of eight members, four from the executive branch and four from the legislative branch.

On April 24, 2012, the JMC approved a $38 million exterior repair of ESH. The repairs were referred to as the "exterior envelope restoration." The State Division of Property Management and Construction (DPMC) made a request for proposals (RFP) for an architectural engineering firm and selected Nelson and Preservation Design Partnership, LLC (Nelson/PDP) to begin work on the envelope in 2013. The envelope repairs were not completed, however, because it became clear that "patchwork" repairs were not sufficient and a more comprehensive renovation was necessary. As of 2015, the repairs that were necessary in 2012 and 2013 had still not been completed.

On January 12, 2017, then–State Treasurer, Ford M. Scudder, reported to the Senate Economic Growth Committee about the need for a comprehensive restoration of ESH that included both exterior and interior repairs. On January 25, 2017, Nelson/PDP submitted a project overview noting the severe deterioration of ESH and proposing a comprehensive renovation. Nelson/PDP's plan proposed to address life safety issues, eliminate waste, and protect and restore the historic integrity of ESH.

On January 31, 2017, the JMC adopted a resolution authorizing a full renovation of the SHC. On April 25, 2017, Nelson/PDP submitted an extensive report detailing the deterioration, the necessary repairs, and the costs of the project. That same day, the JMC adopted a resolution to fully renovate the SHC at a price not to exceed $300 million, and also agreed to enter into a contract with the New Jersey Economic Development Authority (NJEDA) for the lease and leaseback of the SHC. The JMC authorized the State Treasurer to execute the lease and sublease agreements.

The cost of the renovation was $284 million, which included a historic renovation of ESH ($173 million) and modernizing and upgrading the building infrastructure of LSH ($20 million). The project also included $55 million for "contingencies."

Christopher Chianese was a member of the JMC and the Director of the DPMC, which oversees leasing, construction management and construction procurement on behalf of the State. According to Chianese, ESH had not been renovated after the 1950s and, by 2017, had deteriorated significantly. Exterior issues included roofing, inferior structural support, deteriorated windows, chimneys, skylights, foundational problems, HVAC problems, deteriorating cornices that permitted water infiltration, fire hazards, asbestos, and security concerns. Some of these problems required emergency repairs. After the JMC approved the renovation, the NJEDA was required to approve the project's financing.

The lease agreement provided that the JMC would lease ESH to the NJEDA for a term of thirty years for $1.00. The sublease agreement called for the JMC to sublease ESH back from the NJEDA. Debt service on the bonds sold by the NJEDA would be payable from the rent paid by the JMC pursuant to the sublease.

During the events in question, John J. Rosenfeld served as Director of the Bonds and Incentives Department for the NJEDA. Rosenfeld submitted a certification stating it is common practice to issue bonds secured by a lease agreement pursuant to which the State pays rent. In her capacity as Senior Vice president for Governance, Communications, and Strategic Initiatives at the NJEDA, Maureen Hassett described the process used in approving the bond resolution and the lease agreement.

On May 11, 2017, the NJEDA approved the State lease revenue bond resolution to fund the renovation (the bond resolution). The bond resolution authorized the sale of two sets of bonds: (1) State lease revenue refunding bonds 2017 Series A (the Series A bonds) and (2) State lease revenue bonds, 2017 Series B (the Series B bonds) (collectively, the bonds). The following statement appears on the face of the bonds:

Neither the State of New Jersey nor the JMC is obligated to pay and neither the faith and credit nor taxing power of the State of New Jersey is pledged to the payment of, the principal or redemption price, if any, of or interest on the bonds. The bonds are a special, limited obligation of the [NJEDA], payable solely out of the revenues or other receipts, funds or moneys of the [NJEDA]....

The Series A bonds, in the amount of $42.775 million, financed the cost of defeasing or redeeming outstanding bonds that financed previous projects at the SHC. The Series B bonds, in the amount of $300 million, financed the new renovation.

Also on May 11, 2017, the NJEDA entered into a bond purchase contract with RBC Capital Markets, LLC (the underwriter) for the purchase of the bonds. The underwriter had been selected by an RFP. On May 12, 2017, the underwriter sold the bonds to RBC Municipal Products who, in turn, sold the bonds to a trust. The trust then sold the bonds to individual investors. The same day, legislative counsel authored an opinion letter that the bond sale did not violate the New Jersey Constitution.

Plaintiff promptly filed a verified complaint and order to show cause on May 12, 2017, seeking injunctive relief and a declaratory judgment that the agencies' resolutions to sell the bonds and sign the leases were invalid. Plaintiff named as defendants the NJEDA, the JMC, the Governor, the Department of the Treasury and the Treasurer.

At a status conference on May 17, 2017, plaintiff first discovered the bonds had already been issued. On May 26, 2017, defendants filed a motion to dismiss on the basis that the action was moot because the bonds had already been sold. Defendants also contended the trial court lacked jurisdiction over challenges to final agency decisions. Plaintiff opposed the motion and moved to amend his complaint. On June 14, 2017, the trial court denied plaintiff's motion to amend his complaint and granted defendants' motion to dismiss, finding the action was moot because the bonds had already been sold.

In the interim, it was determined that the extensive renovations could not be completed while the building was...