Jul 23, 2021

Bergen County Improvement Authority Cannot Use the Local Redevelopment and Housing Law as a "Cloak" for the Local Public Contracts Law

By Joseph R. Haftek, Jr., Esq.

In a recent, published decision by the Appellate Division, the Court curtailed the ability of the County of Bergen (the “County”) and the Bergen County Improvement Authority (“BCIA”) to utilize the Local Redevelopment and Housing Law (“LRHL”) to obviate the need for public bidding pursuant to the Local Public Contracts Law (“LPCL”) and fast-track the significant renovation and redevelopment of the Bergen County Courthouse (the “Courthouse Project”). In the end, the three-judge panel held that the BCIA, as redevelopment entity for the Courthouse Project, could not “avoid the requirements of public bidding for ‘goods and services’ covered by the LPCL simply by cloaking itself in a rubric of a redevelopment entity under the LRHL and designating the general contractor for the project as a ‘redeveloper’.” The Court’s decision provides crucial insight into the interplay of several key laws that govern redevelopment and public contracting, and prospective developers and respondents need to have a fully-formed understanding of the requirements, and potential outcomes and consequences, when submitting responses to public requests for proposals/qualifications.

At issue was whether the BCIA, having been designated by the City of Hackensack (“Hackensack”) as the “redevelopment entity” for the Courthouse Project, could then select a “redeveloper” without adhering to the strictures of the LPCL. The LPCL mandates that a contracting unit (a county, municipality or similar, public entity) award a contract for goods or services by resolution of the governing body of the contracting unit, to the lowest responsible bidder after public advertising for bids when the cost or price of a contract awarded by the contracting agent exceeds certain threshold amounts. The LRHL contains a unique carve-out to the public bidding requirements of the LPCL, in that upon adoption of a redevelopment plan, a municipality or redevelopment entity may contract directly with redevelopers for the construction or undertaking of any project or redevelopment work, or any part thereof. This is significant because if the BCIA was acting as a redevelopment entity pursuant to the LRHL, the BCIA could retain complete control and discretion as to which (sub)contractor(s) would be hired to perform work on the Courthouse Project, and the BCIA could also directly negotiate the price it would pay for goods and services related to the Courthouse Project. However, if the BCIA were to bid the Courthouse Project pursuant to the LPCL, the BCIA would have no “control” over the (sub)contractors, and any contracts for goods and services would be awarded to the “lowest responsible bidder”.    

By way of background, in 2011, Hackensack designated its downtown as an area in need of rehabilitation, and in 2019, the BCIA adopted a resolution that authorized the issuance of up to $60 million in guaranteed revenue bonds to finance the Courthouse Project. In 2020, Hackensack designated the BCIA as the redevelopment entity for the Courthouse Project, and later in 2020, the BCIA issued a “Request for Qualifications or Redevelopment/Rehabilitation Services for the Substantial Rehabilitation of the Bergen County Justice Complex” (the “RFQ”). The RFQ detailed that the County already retained a company to serve as construction manager, and that the RFQ sought a general contractor and value engineering contractor to provide engineering, construction, and administration and general contracting services for the Courthouse Project. In the winter of 2020, the BCIA selected four (4) respondents to proceed to the next phase of the procurement process – of which Plaintiffs were not included. DOBCO, Inc., and separately, a principal of DOBCO, Inc. (collectively, the “Plaintiffs”) filed Complaints challenging the RFQ issued by the BCIA for a general contractor or “redeveloper” of the Courthouse Project, which ultimately would be paid with public funds to provide goods and services for the Courthouse Project. Initially, the trial court dismissed Plaintiffs’ Complaints and accepted the BCIA and County of Bergen’s arguments that since the BCIA was acting as the redevelopment entity pursuant to the LRHL, the BCIA, therefore, did not have to comply with the LPCL. 

The Trial Court dismissed Plaintiffs’ complaints with prejudice for failure to state a claim, on the basis that the Courthouse Project was not subject to the LPCL since it was designated as a redevelopment project procured by the LRHL. Plaintiffs sought leave from the Appellate Division for a stay pending an appeal on emergent basis, which was granted. On appeal, the Appellate Division affirmed the dismissal of the DOBCO, Inc. Complaint, holding that DOBCO, Inc. could not challenge a proposal process in which it willingly participated. 

As to the second plaintiff, a principal of DOBCO, Inc. and a resident taxpayer of Bergen County, the Appellate Division first rejected the BCIA and County’s argument that the second plaintiff came forward with unclean hands simply because he is a principal of DOBCO, Inc, and he was under no obligation to disclose DOBCO, Inc.’s response to the request for qualifications in his complaint. Next, by the plain language of the LPCL, the Court noted that the LPCL requires a county improvement authority to publicly bid the hiring of a general contractor to rehabilitate its property if the work contemplated exceeds the bid threshold. Last, after a lengthy analysis of the LRHL, LCPL and the County Improvement Authorities Law, the Court held that, while the LRHL permits a redevelopment entity such as the BCIA to lease or convey property to any party without public bidding, no other section of the LRHL would relieve the BCIA from the requirements of the LPCL. Moreover, the Court determined that the plain language of the LRHL does not allow a contract wherein the BCIA would be imposed with the cost for financing, construction, management or operation of any redevelopment project. Therefore, the BCIA could not avoid the public bidding of goods or services covered by the LPCL. As a result, the matter was reversed and remanded to the Trial Court for an order permanently restraining the BCIA from proceeding with the procurement process as contemplated by the RFQ.

While the LRHL is a powerful tool for the redevelopment of properties, the instant decision shines a clarifying light on the importance of reining in the prospective uses of the LRHL to those instances specifically delineated – i.e., that direct contracting between redevelopment entities and private parties is allowable in the context of the sale of property, but not for the procurement of goods and services to further redevelopment efforts. Developers and other potential respondents to public bids should be mindful of the interplay between legislation such as the LRHL and LPCL that, while working together, share similar, overarching objectives, but will need to be scrutinized when implemented by redevelopment entities either individually, or in conjunction with one another, in furtherance of redevelopment efforts.  

To discuss the decision, or obtain a copy of it, contact Joseph Haftek.

 DISCLAIMER: This Alert is designed to keep you aware of recent developments in the law. It is not intended to be legal advice, which can only be given after the attorney understands the facts of a particular matter and the goals of the client.