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Enourato v. New Jersey Building Authority

Decided: July 22, 1982.


On appeal from the Superior Court, Appellate Division, whose opinion is reported at 182 N.J. Super. 58 (1981).

For affirmance -- Chief Justice Wilentz and Justices Pashman, Clifford, Schreiber, Handler, Pollock and O'Hern. For reversal -- None. The opinion of the Court was delivered by Pashman, J. Schreiber, J., dissenting and concurring. Justice Clifford joins in this opinion. Clifford and Schreiber, JJ., concurring in the result.


[90 NJ Page 398] 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, para. 14, and the separation of powers provision, Art. III, para. 1, of the

New Jersey Constitution. Plaintiff further alleges that the Act violates the State Constitution's debt limitations clause, Art. VIII, § 2, para. 3. For the reasons stated below, we reject plaintiff's claims and uphold the constitutionality of the challenged provisions.


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.


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, para. 1, and the Presentment Clause requirement that "[e]very bill which shall have passed both houses shall be presented to the Governor" for approval or veto. N.J.Const. (1947), Art. V, § 1, para. 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, c. 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 agenc[ies] 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 ...

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