## Facts

- A New Jersey taxpayer sued the State Treasurer and other state officials to block a plan to obtain a records storage and printing facility through private construction and a long-term lease.
- The plan called for a private developer to construct a building on state-owned land and lease it to the State for 25 years with periodic rental payments.
- The State had options to purchase the building at fixed, declining prices during the 10th, 15th, and 20th years.
- If the State did not exercise a purchase option, title to the building would pass to the State at the end of the lease term.
- The lessor would pay taxes and perform major external maintenance; the State would handle interior maintenance.
- The Chancery Division held the arrangement violated the New Jersey Constitution’s debt-limitation clause, treating it as an installment purchase rather than a true lease.
- The New Jersey Supreme Court granted direct review and addressed constitutional, statutory authority, and public bidding objections.

## Issues

1. Whether the 25-year lease with purchase options and end-of-term title transfer created unconstitutional state “debt” under the New Jersey Constitution’s debt-limitation clause.
2. Whether the involved state agencies had statutory authority to enter into the transaction.
3. Whether the arrangement violated statutory requirements governing advertising for bids for public contracts.

## Decision

- The New Jersey Supreme Court reversed the Chancery Division and upheld the transaction.
- The Court held the arrangement was a bona fide lease and did not violate the constitutional debt-limitation clause.
- The Court held state officials had sufficient statutory authority to execute the transaction, conditioned on its validity as a lease.
- The Court rejected the public bidding challenge, reasoning that the controlling characterization of the arrangement was a lease rather than a construction purchase contract.

## Legal Principles

- A long-term state lease does not create unconstitutional “debt” when the government’s obligation is structured as periodic rent for use and occupancy rather than a fixed, irrevocable capital repayment obligation.
- Purchase options and an end-of-term transfer of title do not, by themselves, convert a lease into an installment purchase; the controlling question is the transaction’s substance.
- Statutory authority and bidding-law objections that depend on recharacterizing a lease-financing arrangement as a purchase contract fail when the arrangement is found to be a bona fide lease.

## Conclusion

The court sustained a lease-financing plan for a state facility, holding that periodic rental obligations under a bona fide lease—despite purchase options and eventual title transfer—do not constitute unconstitutional state debt, and that the responsible agencies acted within statutory authority without violating bidding statutes.


Bulman v. McCrane, 64 N.J. 105, 312 A.2d 857 (N.J. 1973)