On appeal from Superior Court, Chancery Division.
For reversal -- Justices Jacobs, Hall, Sullivan, Pashman and Clifford and Judges Conford and Collester. For affirmance -- None. The opinion of the court was delivered by Conford, P.J.A.D., Temporarily Assigned.
The Chancery Division struck down as offensive to our constitutional debt limitation provision, Const. of 1947, Art. VIII, Sec. II, Par. 3, a proposed arrangement by the State to take a 25 year lease on a building to be erected by a developer on state-owned land and to be used by the State as a records storage center and printing facility. 123 N.J. Super. 213 (1973). We certified the case prior to its consideration by the Appellate Division. 63 N.J. 505 (1973).
The State was to have the option to purchase at fixed, progressively declining figures during the 10th, 15th and 20th years of the lease, failing which, title to the building would revert to the State at the end of the term. The terms and conditions of the integrated transaction for construction of the building and lease thereof to the State, to be effected on behalf of the State by the Division of Building and Construction and the Division of Purchase and Property, both in the Department of the Treasury, are accurately summarized in the reported Chancery Division opinion and need not be repeated here.
At the outset we state our concurrence in the conclusion arrived at by the Chancery Division in response to the contention of respondent that the State officials named above were without statutory power to enter into the transaction. The determination was that there was ample such power "if the transaction now before the court is a bona fide lease not in contravention of the constitutional debt limitation". 123 N.J. Super. at 220. We agree with and adopt the reasons advanced by the Chancery Division in that regard. Id. at 220-221. And since, for the reasons hereinafter set forth, we find the lease a bona fide one free from constitutional defect, we reject the plaintiff's contention of absence of statutory power. We further dismiss the contention of plaintiff that the arrangement for the construction of the building violates the statutes pertaining to advertising
for bidding, N.J.S.A. 52:32-2; 34-8. Here, again, the controlling question is whether the basic transaction is a lease. If so, as we are here holding, the bidding statute is irrelevant. See N.J.S.A. 52:34-9(c). It is noteworthy, however, that the State did advertise for bids and awarded the contract to a responsible bidder who was the lowest of four bidders on the square foot rental rate.
Before turning our attention to what we regard as the major issue -- whether the basic transaction here is a lease -- we must consider the Attorney General's alternative argument on behalf of the State, rejected by the Chancery Division, that the transaction did not involve an amount of money large enough to come within the constitutional proscription: "* * * a debt or debts, liability or liabilities of the State, which together with any previous debts or liabilities shall exceed at any time one per centum of the total amount appropriated by the general appropriation law for that fiscal year, * * *." (Emphasis added.)
The Attorney General points out that the total potential liability of the State under the lease is $3,644,075, which is less than one percent of the fiscal 1972-1973 legislative appropriation of $2,047,934,209. His legal contention is that the approximate $1,200,000,000 in presently outstanding State bonds is not to be included within the text, "any previous debts or liabilities," in the excerpt italicized above, within the true meaning of the Constitution. The implied position is that once the people have voted on specific items of funded debt pursuant to the constitutional mandate the policy underlying the debt limitation provision is met as to such debts and thereafter only new debts aggregating in excess of the one percent limitation are of constitutional concern.*fn1 In refusing to entertain that position, the trial
court described it as "far-fetched" and as creative of a "financial bonanza" of which one would have expected the State to take advantage before if sound. (123 N.J. Super. at 239). It seems to us that a more substantial argument against the position is that the constitutional language does appertain to "any" previous debt, etc., and that approval by the people at previous referenda of $X in debts does not necessarily signify satisfaction by them with a total outstanding debt of $X plus $Y. But a rejoinder is suggested by the circumstance that the people in voting on a particular debt are not informed by the ballot what the prior outstanding debts are, nor is the question of their satisfaction with the grand debt total required by the Constitution to be submitted to them.
It is also noteworthy that under plaintiff's position every new State debt, no matter how small, must be submitted to popular referendum once previous debts, although approved, pass the one per centum limitation. In the present state of New Jersey's existing bonded indebtedness, the mentioned situation would continue for the foreseeable future.
We think this issue of constitutional interpretation raised by the Attorney General is a substantial one. Unfortunately, however, it was not adequately researched for us by either side. No case on point is cited. Our own independent search of the 1844 and 1947 constitutional proceedings has revealed no significant light as to the framers' intent in the respect under contention. See Proceedings of the New Jersey State Constitutional Convention of 1844 (1942) at 135, 185, ...