Enourato v. New Jersey Building Authority

448 A.2d 449, 90 N.J. 396, 1982 N.J. LEXIS 2164

• Court: Supreme Court of New Jersey
• Decided: July 22, 1982
• Status: Published

Opinions

The opinion of the Court was delivered by

PASHMAN, J.

Plaintiff is a New Jersey resident and taxpayer who leases land to the State. He challenges the constitutionality of provisions of the New Jersey Building Authority Act (Act), L. 1981, c. 120, N.J.S.A. 52:18A-78.1 to .32, which give the Legislature the power to veto building projects and lease agreements proposed by the New Jersey Building Authority. He alleges that the legislative veto violates the Presentment Clause, Art. V, § 1, ¶ 14, and the separation of powers provision, Art. III, ¶ 1, of the New Jersey Constitution. Plaintiff further alleges that the Act violates the State Constitution’s debt limitations clause, Art. VIII, § 2, ¶ 3. For the reasons stated below, we reject plaintiff’s claims and uphold the constitutionality of the challenged provisions.

I

The Legislature established the New Jersey Building Authority (“Authority”) to build and operate office facilities for state agencies. L. 1981, c. 120, N.J.S.A. 52:18A-78.1 to .32. The Act authorizes the Authority to issue bonds and notes in an amount not to exceed $250,000,000 to be used to build those facilities. N.J.S.A. 52:18A-78.14(a). The bonds and notes are entirely the debt of the Authority, not the State. They must state on their face that they shall not create any indebtedness, liability or obligation of the State or any political subdivision. N.J.S.A. 52:18A-78.14(f).

All actions taken by the Authority must receive the Governor’s approval. No action taken at any Authority meeting has any legal effect if the Governor vetoes the action within 15 days of the meeting. N.J.S.A. 52:18A-78.4(i).

The Act also contains two provisions that allow the Legislature to veto Authority actions. First, to commence any project whose estimated cost exceeds $100,000, the Authority must obtain a concurrent resolution of both houses of the Legislature within 45 days of the submission of the project to the Legislature for approval. N.J.S.A. 52:18A-78.6, -78.8(b). Second, every lease agreement between the Authority and a state agency must be approved by the presiding officer of each house of the Legislature. N.J.S.A. 52:18A-78.9.

On November 24,-1981, plaintiff filed suit in the Superior Court, Law Division, alleging that the Act was unconstitutional. He claimed an interest in the matter as a New Jersey taxpayer and landowner who leased a building and property to the State for use by the Department of Environmental Protection. The Authority had proposed and the Legislature had approved building projects that might eliminate the State’s need for plaintiff’s facility.

The suit was filed one day before the Authority was scheduled to execute a contract for the sale of $135,000,000 in bonds. Over plaintiff’s objection, the trial court granted respondents’ request to schedule a show cause hearing for that same day. At the hearing respondents orally moved to dismiss the complaint. The trial court rejected plaintiff’s constitutional claims and granted the motion.

The following day, November 25,1981, respondents applied to the Appellate Division for an order reducing the time within which plaintiff could appeal the order of dismissal. The Appellate Division granted the motion requiring plaintiff to appeal by November 30, 1981 and submit briefs by December 4, 1981. Plaintiff appealed the dismissal of his complaint and filed a brief in the allotted time. On December 14, 1981 the Appellate Division heard oral argument and affirmed the dismissal. A written opinion followed. 182 N.J.Super. 58 (1981).

Plaintiff filed a notice of appeal with this Court on December 30,1981, and moved for an interim restraint against the Authority’s sale of bonds. The Authority cross-moved for summary affirmance. The Court denied both motions and accelerated the appeal by order dated January 19, 1982.

II

Constitutionality of the Legislative Veto Provisions of the New Jersey Building Authority Act

In General Assembly v. Byrne, 90 N.J. 376 (1982), decided today, the Court holds that the Legislative Oversight Act, L. 1981, c. 27, is unconstitutional. By empowering the Legislature to revoke virtually all. proposed executive agency rules, the Act intruded excessively upon the Executive’s law enforcement authority in violation of the separation of powers. The Act also allowed the legislative branch to effectively amend and repeal existing laws without the participation of the Governor. This violated the separation of powers, N.J.Const. (1947), Art. III, ¶ 1, and the Presentment Clause requirement that “[ejvery bill which shall have passed both houses shall be presented to the Governor” for approval or veto. N.J.Const. (1947), Art. V, § 1, ¶ 14.

However, the Court in General Assembly made clear that the separation of powers leaves room for some legislative oversight and participation in executive action. Not every legislative input into law enforcement impermissably interferes with the Executive’s law enforcement power. Likewise, not every action by the Legislature constitutes law making that requires a majority vote of both houses and presentment to the Governor.

Where legislative action is necessary to further a statutory scheme requiring cooperation between the two branches, and such action offers no substantial potential to interfere with exclusive executive functions or alter the statute’s purposes, legislative veto power can pass constitutional muster. [General Assembly at 395]

The Court finds that the legislative veto provisions in the New Jersey Building Authority Act, L. 1981, c. 120, N.J.S.A. 52:18A-78.1 to .32, fall within the proper scope of legislative oversight of executive action. The Act’s veto power is limited to approval or rejection of proposed building projects and leases that require continuing budget appropriations by the Legislature. Legislative oversight therefore plays a necessary role in ensuring continuing legislative support for these projects.

At the same time, the veto provisions in the Act are limited in scope and do not empower the Legislature to “revoke at will portions of coherent regulatory schemes,” General Assembly, 90 N.J. at 378. The veto therefore cannot substantially disrupt exclusive executive branch functions. Indeed, the Governor has full control over Authority decision making. Further, even repeated use of the veto has little potential to alter the underlying legislative policy of providing capital facilities to meet internal governmental needs. Nor can it subvert the Governor’s role in enforcing the law. The oversight provisions in L. 1981, e. 120, therefore violate neither the Presentment Clause nor the separation of powers.

A. The veto provisions’ role in furthering the statutory scheme.

The New Jersey Building Authority Act created the Authority and authorized it to issue bonds and notes in an amount up to $250,000,000 to provide facilities for state agencies. Those who purchase these bonds and notes become creditors of the Authority alone and not the State. They have no remedy against the State government because the statute provides that the notes and bonds issued by the Authority are entirely its own obligation. The notes must state on their face that

neither the State nor any political subdivision thereof is obligated to pay the principal or interest and that neither the faith and credit nor the taxing power of the State or any political subdivision thereof is pledged to the payment of the principal of or the interest on the bonds or notes. [N.J.S.A. 52:18A-78.14(f)]

The Authority’s creditors depend on the solvency of the Authority for repayment of the money they have lent. To repay the borrowed money, the Authority in turn depends upon rental payments from the state agencies that lease the Authority’s facilities. In fact, the rental fees are calculated to satisfy the Authority’s obligations on its bonds and notes. When it issues those bonds and notes, however, the Authority has no enforceable promise that the state agencies will pay the Authority the rent moneys necessary to reimburse its creditors. The statute provides that

the payment of any and all rentals or other amounts required to be paid by the agencpes] thereunder, shall be subject to and dependent upon appropriations being made from time to time by the Legislature for that purpose .... [N.J.S.A. 52:18A-78.22]

The Authority’s lenders thus depend upon the good faith of the Legislature in appropriating sufficient money each year to pay the rental fees that are used to repay them. The Legislature’s refusal to appropriate the necessary money would not only bankrupt the Authority and force it to default on its obligations, but would also cripple the State’s ability subsequently to borrow money for any purpose. The legislators who passed the Building Authority Act therefore sought to minimize the possibility that any future Legislature would refuse to make such appropriations.

One legislative veto provision in the Act gives either house of the Legislature the power to veto any Authority project estimated to cost over $100,000, N.J.S.A. 52:18A-78.8(b). The other provision enables the presiding' officer of either house to veto any lease agreement, N.J.S.A. 52:18A-78.9. These vetoes advance the crucial purpose of obtaining continued legislative support in two related ways. First, the Act makes certain that every Authority project receives a legislative imprimatur by allowing the Legislature to reject any proposed project at its inception. It follows that if the Legislature does not veto a particular project and thereby approves it, this action will constitute a strong, if not compelling, basis for the Legislature to continue to appropriate sufficient money to support the project.

Second, the legislative veto mechanism can foster close cooperation between the Legislature and the Executive in this area of mutual concern. It can induce the Authority to exercise care in selecting its projects. The veto powers are vested not only in the Legislature but in the Governor as well. N.J.S.A. 52:18A-78.4(i). They thus serve to ensure that the Authority acts prudently. Moreover, veto power is only one part of a broader statutory scheme ensuring fiscal prudence. For example, before the Legislature even has a chance to review a proposed building project, the Governor can veto the proposal at its inception. N.J.S.A. 52:18A-78.4(i). Similarly, the Authority itself faces extensive requirements before commencing any project estimated to cost over $100,000. N.J.S.A. 52:18A-78.6. This includes the preparation of a detailed plan describing the project’s estimated costs and the anticipated appropriations necessary for all lease agreements. N.J.S.A. 52:18A-78.6(a). As a further assurance of fiscal prudence, the Act mandates that the Authority’s board of directors include the State Treasurer, the State Comptroller and the chairman of the State Commission on Capital Budgeting and Planning. N.J.S.A. 52:18A-78.4(b).

The Legislature has the power to fund or not to fund executive agencies and the projects undertaken by those agencies. Each year the Legislature must decide which executive activities it will fund. Legislative oversight has been regarded as particularly important in some situations where legislation authorizes an executive agency to undertake projects that require continued budget appropriations. Cf. Atkins v. United States, 556 F.2d 1028, 1063 (Ct.Cl.1977) (upholding legislative veto power over presidential recommendations for judicial pay increases under the Federal Salary Act of 1967, 2 U.S.C. §§ 351 to 361). The legislative veto provisions in L. 1981, c. 120, enable the Legislature to make those decisions about Authority projects at the most auspicious time possible—before the Authority begins the project. The Legislature’s veto power in L. 1981, c. 120, helps ensure that the Authority will undertake financially sound projects in the way the Legislature envisioned when it passed the Building Authority Act.

We disagree with the dissent’s contention that the argument for the narrow legislative veto in this case would apply equally to all executive programs requiring legislative appropriations. Post at 401-402. Unlike most funding situations, the approval of a building project and lease agreement locks the Legislature, for all practical purposes, into making continued appropriations. By contrast, in most cases a future legislature can discontinue appropriations if it believes the project funded is no longer necessary. Moreover, the Oversight Act’s veto provisions withstand constitutional scrutiny only because they are both necessary to effectuate the statutory scheme and, as discussed below, they offer little potential for interference with executive functions or alteration of the statute’s purpose. General Assembly, 90 N.J. at 395. See post at 405-407.

In sum, the Act’s legislative veto provisions serve a necessary role in effectuating a scheme of cooperation between the Legislature and the Executive to obtain capital facilities for state agencies. They serve to assure that these projects will be soundly planned and will operate efficiently with the Legislature’s continued fiscal support. Our next task is to consider whether the Act constitutes an undue legislative interference with executive functions or improper legislative policy making without the Governor’s participation.

B. The legislative veto’s limited effects on the separation of powers.

The legislative veto provisions in L. 1981, c. 120, serve a necessary legislative oversight purpose in ensuring that the projects approved by the Authority will receive continued legislative support. At the same time, the veto offers little of the potential for improper uses that led the Court to strike down the extremely broad veto provision in General Assembly v. Byrne, supra.

Three significant factors distinguish the veto provisions in the Building Authority Act from those in the Legislative Oversight Act that the Court struck down in General Assembly. First, the Governor’s full control over the selection of Building Authority projects makes it impossible for the Legislature to usurp executive authority in ways that were possible under the Legislative Oversight Act. Pursuant to N.J.S.A. 52-.18A—78.4(i), the Governor has 15 days to veto any Authority decision. The Legislature has absolutely no control over Authority projects unless the Governor first approves them.

A legislative veto in a particular statute may not offend the constitutional allocation of governmental powers if the statute gives the Executive extensive authority in the policy-making process. In Brown v. Heymann, 62 N.J. 1 (1972), this Court upheld the Executive Reorganization Act, which authorized the Governor to prepare an executive reorganization plan and present it to both houses of the Legislature. The Court found no constitutional infirmity in the Legislature’s power to pass a concurrent resolution within 60 days disapproving the plan.¹ See also Atkins v. United States, supra.

Second, because the Legislature’s veto power is limited to the rejection of discrete projects and leases, it has limited potential to interfere with executive action. One significant constitutional defect in the Legislative Oversight Act was its potential for “allowing the Legislature to control agency rulemaking,” 90 N.J. at 385. Executive agencies are charged with designing coherent plans to implement existing statutes. Where the Legislature has the power to veto any portion of a coherent scheme of regulation, it can

undermine performance of that duty by ... nullifying] virtually every existing and future scheme of regulation or any portion of it... . Moreover, the Legislature need not explain its reasons for any veto decision. Its action therefore leaves the agency with no guidance on how to enforce the law. [90 N.J. at 386-387]

By contrast, the veto provision here cannot cause any such disruption. The Legislature cannot veto any arbitrary portion of a proposed Authority project. It must either veto the entire project or let the project proceed. Any “disruption” of Building Authority action in this context is actually part of the legislative scheme and can be considered necessary to further the statutory purpose of ensuring that the Legislature will support the building projects selected.

Moreover, the Legislature cannot coerce the Authority into proposing projects solely on the Legislature’s own terms, since the Governor has veto power over every agency decision. N.J.S.A. 52:18A-78.4(i). The Legislature can forestall Authority action by repeatedly vetoing proposed projects, but it cannot engage in the types of intrusion and disruption that occur when the Legislature has total and arbitrary control.

Third, even repeated use of the veto would not be likely to alter the legislative intent in ways that require presentment to the Governor under the Presentment Clause. N.J.Const. (1947), Art. V, § 1, ¶ 14. In enacting the Building Authority Act, the Legislature clearly did not want the Authority to undertake any project unless it met with both legislative and gubernatorial approval. Exercise of the veto provisions is not inconsistent with the regulatory framework the Legislature has erected to assume tight controls over the selection of Authority building projects and leases.

We recognize that future legislators may veto a particular project that the legislators who passed the Act might have thought desirable. But this type of judgment is fundamentally different from a subsequent legislative nullification of a policy that a former Legislature enacted into law. General Assembly, 90 N.J. at 389. This crucial difference is illustrated in Consumer Energy Council of America, etc. v. Fed. Energy Reg’y Comm’n, 673 F.2d 425 (D.C. Cir. 1982). The potential to interfere with exclusive executive responsibilities or to effectively alter the policy of existing laws without presentment to the Governor, which rendered the Legislative Veto Act in General Assembly unconstitutional, is negligible under the limited veto power in the Building Authority Act.

The above arguments notwithstanding, the legislative veto provisions in the Building Authority Act have some limited potential to interfere with executive functions and allow policy judgments without the participation of the Governor. Although the Legislature clearly intended tight controls over the Authority’s selection of building projects, repeated legislative vetoes conceivably would prevent the Authority from commencing any projects at all. This legislative action would effectively repeal the Act without the constitutionally required presentment to the Governor. However, the mere remote possibility of never-ending legislative vetoes is insufficient to invalidate a veto provision that serves an important governmental purpose.

More troubling is the fact that either house of the Legislature can veto proposed projects. This allocation of power tends to contravene the principle of bicameralism that “[i]n republican government, the legislative authority necessarily predominates [and therefore] ... [t]he remedy ... is to divide the legislature into different branches,” The Federalist No. 51 at 338 (R. Luce ed. 1976) (Hamilton or Madison). A one-house veto frustrates “[t]he overriding objective of bicameralism ... to constrain the exercise of ... legislative power by making sure that the Legislature can act only where representatives of two different constituencies are in agreement.” Consumer Energy, 673 F.2d at 464 (footnote omitted).

The one-person veto provision in N.J.S.A. 52:18A-78.9, which allows either presiding officer to veto a proposed lease agreement, exacerbates this problem of concentrating legislative control. In Opinion of the Justices, 431 A.2d 783 (N.H. 1981), the Supreme Court of New Hampshire invalidated provisions giving legislative veto power to standing committees and the presiding officers of both houses of the Legislature. The court held that although the “legislative veto is not per se unconstitutional ... wholesale shifting of legislative power to such small groups in either house cannot fairly be said to represent the ‘legislative will.’ ” 431 A.2d at 788. Cf. Atkins v. United States, 556 F.2d at 1064 (upholding the veto provisions under the Federal Salary Act, but stating that “[i]t is not as if the ‘veto’ is imposed by one committee of Congress or one member”).

A concentration of authority in one house of the Legislature or in one legislator threatens the separation of powers and the principle of bicameralism unless that power is narrowly circumscribed'. As we have stated, not every legislative action requires the approval of both houses and presentment to the Governor. The more limited the grant of power, the more concentrated it can be without violating the Presentment Clause or the separation of powers. Here, the delegated authority is narrowly limited. No single house or single legislator is empowered to approve new legislation. No danger of precipitate legislative action is posed. To the contrary, the veto provisions of the Act provide additional checks against Building Authority projects which may in the future prove unwise or unduly costly. The presiding officers have power to disapprove the lease agreements only for building projects that the Legislature has already approved. These lease agreements involve no policy determinations whatsoever; they merely establish rental rates sufficient to allow the Building Authority to repay its bondholders. Thus, the Act’s veto provisions, despite their failure to conform with the principle of bicameralism, do not offend the Constitution.

Ill

The Debt Limitation Clause

We also reject plaintiff’s argument that the New Jersey Building Authority Act, L. 1981, c. 120, N.J.S.A. 52:18A-78.1 to .32, violates the debt limitations clause of the State Constitution. N.J. Const. (1947), Art. VIII, § 2, ¶3.

Plaintiff claims that the debts of the Authority resulting from its issuance of notes and bonds are debts of the State, and therefore the procedures in Art. VIII, § 2, ¶ 3 must be followed. The Court rejected this argument in Clayton v. Kervick, 52 N.J. 138 (1968). In that case, as here, the Legislature created an independent authority empowered to borrow money and issue bonds that were not the liabilities of the State or any political subdivision. In Clayton, the New Jersey Educational Facilities Authority built school facilities with the borrowed money and leased them to schools, whose rental payments were used to repay the Authority’s creditors. The Court held that the Authority’s debts were not debts of the State, despite “[t]he fact that the rentals were admittedly geared to satisfy the bonded indebtedness and enable the State ultimately to become the owner of the buildings,” 52 N.J. at 153.

Similarly, in Holster v. Bd. of Trustees of Passaic County College, 59 N.J. 60 (1971), the Court upheld the County College Bond Act, under which a county issued bonds whose repayment was expressly subject to appropriations being made by the Legislature. The Court stated:

Although there is doubtless a strong likelihood that payment of the bonds will in fact be met by legislative appropriations, we find nothing in the statute compelling the State to make such payments as a matter of law. Hence, both issuing counties and purchasing bondholders are on notice that the faith and credit of the State will not be pledged in respect of bonds issued pursuant to this enactment, but that payment on the part of the State will be dependent upon appropriations provided from time to time. [59 N.J. at 66-67]

No relevant distinction exists between the financing schemes upheld in those cases and that in the New Jersey Building Authority Act. The Authority’s bonds and notes are not a debt or liability of the State. They state on their face that the State does not pledge its faith and credit to their payment. N.J.S.A. 52:18A-78.14(f). Although the Act not only contemplates that the State will make the necessary appropriations but also seeks to ensure this result, supra at 402-404, the State is under no legal obligation to do so. The Authority’s creditors have notice that their only remedy lies against the Authority.

Nor does the liability of the State on its lease agreements with the Authority create any debt of the State. Both the statute and the lease make clear that all rent payments from the State are subject to legislative appropriations. Moreover, the State may incur liability for future rentals without violating the debt limitations clause. See Bulman v. McCrane, 64 N.J. 105, 117-18 (1973). Plaintiff does not contend otherwise.

Since the Building Authority Act does not authorize the creation of any debts by the State, the debt limitations clause, N.J. Const. (1947)] Art. VIII, § 2, ¶ 3, does not apply to the Authority’s debts or any obligations of the State on its lease agreements with the Authority. We have already disapproved the contrary result reached by a sharply divided Court in McCutcheon v. State Building Authority, 13 N.J. 46 (1953), and now expressly overrule that case.

IV

For the above reasons, the New Jersey Building Authority Act, L. 1981, c. 120, does not violate the separation of powers, Art. III, ¶ 1, the Presentment Clause, Art. V, § 1, ¶ 14, or the debt limitations clause, Art. VIII, § 2, ¶ 3, of the New Jersey Constitution. The New Jersey Building Authority can issue bonds and notes and negotiate lease agreements with state agencies under the procedures set forth in the Act. The judgment of the Appellate Division is affirmed.

1 The dissent seeks to distinguish Brown on the ground that the Legislature there had to affirmatively wield its veto power to block executive action, while here the executive action takes effect only if the Legislature votes to approve it. We see no relevant distinction for purposes of constitutional analysis since in either instance the Legislature has identical power to impede executive functions.