Saying that essential construction projects were being held up by a New Jersey Supreme Court review of the constitutionality of nonvoter-approved debt, the administration of Gov. James E. McGreevey last week asked the court to issue an emergency ruling that would clear the way for approximately $1.2 billion in contract bond sales.
Without the court's clarification that appropriation-backed debt in the pipeline could be sold under existing law, important projects, including those critical to the state's antiterrorism efforts, "will be severely limited, if not compromised entirely," according to court papers certified by state Treasurer John McCormac.
Last month, the court ruled that a 2000 law authorizing $8.6 billion in appropriation-backed school construction debt was constitutional, but called for a hearing next month on whether contract borrowing by independent authorities for projects other than school construction violated the state's debt-limitation clause.
The Aug. 21 opinion effectively shut down the market for contract-debt issuance in New Jersey, as bond lawyers, uncertain of the constitutional and statutory basis for the bond sales, could not issue unqualified opinions until the court rendered a final decision, the state said.
McCormac said the uncertainty created by the opinion could result in higher borrowing costs, and has led Moody's Investors Service to express concern whether the ruling casts doubt on the constitutionality of all outstanding contract debt.
Andrew T. Fede, attorney for Bogota Mayor Steven Lonegan and his taxpayer advocacy group who challenged the state's contract bonding, said he would file papers this week opposing the state's motion, which he called an effort to "pre-decide" the case.
"They want to let the horses out of the barn, before the court might close the door," he said. "It would seem that once the court says we're going to be reviewing the precedents upholding contract debt , restraint ought to be in order."
Fede also questioned the urgency of the state's request, noting that re-argument was scheduled next month.
According to the state, the court's opinion could result in half-built roads and partially repaired bridges. Officials planned to sell $650 million over this fiscal year for transportation projects.
In October, the state planned to issue $125 million in appropriation-backed debt through the New Jersey Building Authority to complete a state police facility and finance the construction of a state police emergency operations center.
"Delays ... will have a serious impact on the state's ability to respond to future terrorist threats or attacks," according to McCormac.
Other projects affected included the sale of $175 million in bonds to revitalize Camden, $45 million for libraries, and $17 million to install sprinklers in colleges.
Within 24 hours of the court's opinion in the Lonegan case, several law firms contacted the attorney general's office, asking the state to file continuing disclosure on appropriation-backed debt previously sold because of uncertainty concerning the potential retroactivity of the court's final decision, assistant attorney general Robert A. Romano wrote.
But Fede stressed his client was not contending that any contract debt previously issued should be invalidated.
