Behnke v. New Jersey Highway Authority

Oliphant, J.

(dissenting). I reluctantly find myself forced to dissent from the views of the majority as expressed in the opinion filed in this case.

Article VIII, Section II, paragraph 1 of the Constitution states “The credit of the State shall not be directly or indirectly loaned in any case.”

The majority opinion holds that this section must be read in conjunction with Article VIII, Section II, paragraph 3 which deals with the creation, beyond certain limits, of debts or liabilities of the State and provides for the submission of any law creating such debt or liability to a vote of the people. These sections deal with two entirely different subjects.

A reading and study of chapter 17 of the Sessions Laws of 1952 poses several questions fundamental to any decision in this ease. The first'is—what is guaranteed under the act? Section 2 thereof states that no bonds shall be guaranteed except bonds that will mature within thirty-five years from their respective dates and bear interest at a rate or rates not exceeding 3% per annum. The total amount of bonds authorized is $285,000,000. This provision of the act attempts to stay within the limitation contained in Article VIII, Section II, paragraph 3 which states “also to pay and discharge the principal thereof within thirty-five years from the time it is contracted.” What is the time fixed by the constitutional provision ? Must it be. a reasonable time after the matter has been approved by the voters or can it be *34 35 years from any period fixed within the next 50 or 75 years ?

While chapter 16, L. 1952, is not directly under attack here its provisions are in pari materia with chapter 17, L. 1952. They are both part of the same statutory scheme. Paragraph 8(a) of the former statute gives the Authority unlimited power to issue from time to time not only original bonds but bonds and notes for the payment of or for refunding the payment of the principal and interest of bonds or the redemption of bonds or notes. Such bonds or notes are payable out of any revenue of the Authority. By paragraph 9 of the same act not only can the tolls be pledged but the proceeds of bonds and notes can be pledged, and the Authority majr also make covenants as to the issuance of additional bonds and notes.

So that it seems to me the guarantee of the State is being extended far into the future, beyond the constitutional limits, and that instead of being a guarantee of a debt as it is called it is in fact permitting an almost unlimited use of the credit of the State for the purpose of furnishing or issuing other bonds in payment of outstanding obligations.

The effect of these two statutes read together indicates that the Authority can use the credit of the State far beyond any period starting from a reasonable time after the approval of the Act by the voters and that is not what I understand to be the meaning of the constitutional provision. The constitutional provision refers to the creation of a debt or liability of the State in any fiscal year, and the 35 year period must run from some date in that fiscal year. My reading of the provisions of chapter 16 of the Laws of 1952 does not comport with that conception of the constitutional provision. ,

Now as to the parts of the old freeway which are already in existence, parts of which are called "The Garden State Parkway.” If the part between Cranford and Woodbridge is to be taken over by the Authority under chapter 16, section 21, it can be leased or conveyed at a price fixed by the State House Commission. But that is not so of the parts *35 in Ocean and Cape May Counties, which, under L. 1952, c. 13, are to be integrated into this parkway, but still remain as a freeway. True, the act says the property of the Authority cannot be mortgaged, but it is a mere play on words to say that the Authority shall have complete dominion over these properties where they take them by lease and then throw all of the tolls raised therefrom into a pool from which the bonds are to be paid. The use of them either by lease for a minimum rental or by the operation of part of them as a freeway without doubt enhances the credit of this Authority insofar as the issuance of its bonds is concerned.

As to the ways and means by which the money is to be derived for the guarantee of the bonds, here again sections 5, 6 and 7 of chapter 17 proceed blithely on their way without any reference to the constitutional 35 year period. Further, by section 4, under which the State must fulfill its guarantee, it only obtains subrogation to the rights of the bondholders and all the bondholder can look to is a pledge of the tolls and the cash on hand from the sale of bonds and notes. Of course, the State may be fortunate since the Authority is authorized to issue its bonds at an interest rate not exceeding 6% per annum. Chap. 16, sec. 8, par. (g).

I doubt that anyone voting for the act in the manner in which it was presented to the electorate or that even some of the prospective bond purchasers realize that the State is only pledging a partial guarantee of the interest on the bonds if the Authority issues them at an interest rate of over 3%; and with the money market as it is at present the pragmatic argument about saving $80,000,000 will rapidly disappear into thin air.

I cannot but conclude that under the act what is being-created is not a debt as contemplated under Article VIII, Section II, paragraph 3 of the Constitution and that the credit of the State is being used contrary to the provision of Article VIII, Section II, paragraph 1, and by ways and means that are not disclosed by the title of the act or by the propositions as submitted on the ballot to the electorate. This act together with chapter 16 exhibits a studied effort to *36 circumvent the prohibition of the Constitution against the use of the State’s credit through the device of and by the creation of another “Authority.”

For affirmance—Chief Justice Vanderbilt, and Justices Heher, Burling, Jacobs and Brennan—5.

For reversal—Justices Oliphant and Waciieneeld—2.