Court Opinion

ID: 4230071
Source: CourtListenerOpinion
Date Created: 2017-12-19 14:19:03.758655+00
Date Added: 2024-06-11T08:37:29.736223
License: Public Domain

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This opinion is uncorrected and subject to revision before
publication in the New York Reports.
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No. 130
In the Matter of Prometheus
Realty Corp., et al.,
            Respondents,
        v.
New York City Water Board, et
al.,
            Appellants.

         Melanie T. West, for appellants.
         Michael Berengarten, for respondents.
         Natural Resources Defense Council et al., amici curiae.

FAHEY, J.:
         The New York City Water Board collects revenues to keep
the City's water and sewer systems financially self-sustaining.
Since the early 1990s, to serve the goal of water conservation,
the Water Board has been ushering in a transition from flat-rate
fees based on property frontage to a metered rate proportional to

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actual water usage.   To provide relief from increased charges to
the owners of larger residential buildings, the Board soon
introduced a temporary Frontage Transition Program, whereby
owners of buildings containing six or more units were permitted
to continue frontage-based billing.   In addition, some owners of
buildings containing four or more units have benefitted from a
Multi-Family Conservation Program, which set a fixed annual rate
in return for owner investment in low-consumption plumbing
fixtures and the like.   Owners of smaller residential buildings
than these did not enjoy similar benefits related to the
transition to metered billing.
          The Water Board leases the infrastructure of the water
supply and wastewater systems from the City, pursuant to an
agreement providing that rental payments are required "only to
the extent requested by the city in each Fiscal Year."
Historically, the rent was tied to what the City owed on its
water- and sewer-related general obligation bonds, but in 2003
the metric whereby the rent was calculated was changed pursuant
to the lease, and in time the rent began to exceed the City's
debts on these general obligation bonds.   The increased payments
to the City coincided with a period of regular annual increases
in water rates, including double-digit increases from 2007 to
2011.   The City and the Board received complaints from ratepayers
that the City was enjoying a windfall.
          In early April 2016, the Water Board and the New York

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City Department of Environmental Protection (DEP), which acts as
administrator and billing agent for the Board, published a rate
proposal notice for Fiscal Year 2017, with a rate increase of
2.1%, to fund a $76 million gap between projected needs and
revenues.    The Water Board and DEP also proposed the extension of
a Home Water Assistance Program for low-income, senior, and
disabled homeowners; the establishment of a new Multi-family
Water Assistance Program for owners of affordable housing,
providing a per-unit credit not to exceed $250; and a rate freeze
for account-holders using less than 95 gallons of water per day.
            At a press conference on April 25, 2016, the Mayor of
the City of New York announced that the City would forbear
collecting rents from the Water Board through Fiscal Year 2020,
resulting in a saving of $122 million in Fiscal Year 2017.    At
the same time, the Mayor proposed that the Board issue a one-time
bill credit of $183 for the fiscal year to all account holders
that owned properties identified by the City as belonging to Tax
Class 1, a category to which almost 80% of the Water Board's
account holders belong.    The New York City Department of Finance
defines a Tax Class 1 property as "[m]ost residential property of
up to three units (family homes and small stores or offices with
one or two apartments attached), and most condominiums that are
not more than three stories."    The Mayor further proposed that in
Fiscal Years 2018-2020 the savings from the rent forbearance
would be passed on to all account holders.

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         The Water Board accepted the Mayor's proposal and
issued a revised notice for Fiscal Year 2017.   On May 20, 2016,
following public hearings, the Board adopted a resolution
approving both the 2.1% rate increase and the bill credit, as
well as the assistance programs and low-consumption rate freeze.
The Board published a rate schedule effective July 1, 2016.
         Petitioners -- various landlords not eligible for the
bill credit and a landlords' not-for-profit association --
commenced this CPLR article 78 proceeding against the Water Board
and DEP, challenging the resolution and rate schedule.   They
assert that the Water Board's determinations were irrational,
arbitrary and capricious, and exceeded the Board's authority.
         In reply, respondents submitted an affidavit of Steven
W. Lawitts, Acting Commissioner of DEP and Acting Executive
Director of the Water Board, explaining the rationale for the
bill credit and simultaneous rate increase.   The $183 credit "was
directed to class 1 properties in a manner similar to already
established programs for multi-unit apartments, seniors, and
low-income households."   Lawitts added that elimination of the
one-time credit would not obviate the need for a significant rate
increase, because the Board, by long-standing practice, sets
water rates to maintain rate stability over at least a five-year
forecast, as is standard in the public water supply industry.     He
stated that even if the bill credit were eliminated and the
rental forbearance dedicated to across-the-board rate mitigation,

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there would only be "a relatively small reduction" in the rate
increase, from 2.1% to 1.9% in Fiscal Year 2017.    Petitioners did
not offer expert proof challenging the affidavit.
         Supreme Court granted the petition on the basis that
increasing the rates while simultaneously giving a bill credit
"amounts to an impermissible tax" (54 Misc. 3d 745, 751 [Sup Ct,
NY County 2016]).   The court held that the resolution and rate
schedule were "ultra vires and exceeded the Water Board's
statutory authority" (id. at 762, citing CPLR 7803 [2]) and
"unreasonable, arbitrary, capricious and an abuse of discretion"
(id., citing CPLR 7803 [3]); vacated the resolution and rate
schedule; enjoined respondents from implementing the rate
increase or bill credit; and ordered that the Fiscal Year 2016
water and wastewater rate schedule remain in effect until further
action by respondents.
         The Appellate Division, with one Justice dissenting,
affirmed Supreme Court's judgment (147 AD3d 519 [1st Dept 2017]).
The court rejected the claim that the Water Board's action was
ultra vires, but upheld the lower court on the ground that there
was no rational basis for adopting the one-time credit at the
same time as a water rate increase (see id. at 521–22).     The
Appellate Division reasoned that Tax Class 1 owners were not
"more needy than other ratepayers," and that the one-time credit
"does not in any manner take into consideration an owner's
ability to pay or customers' need for this benefit, solely

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relying on the classification of the property for tax purposes"
(id. at 523).    The Appellate Division further stated that the
credit lacked a rational basis because it could not be reconciled
with the projected budget shortfall for the year in which the
credit was given (see id.).
           The dissent focused on the standard of review, noting
petitioners' "heavy burden of making a prima facie showing that
the Water Board's determination was purely arbitrary and without
any reason, however insufficient, or support in the record" (id.
at 532 [Kahn, J., dissenting]).   The dissenting Justice would
have held that "the Water Board's approval of the credit furthers
the economic and public policy goal of providing financial relief
to the low and middle-income homeowners comprising many, if not
most, of the class 1 property owners," by "reduc[ing] the
disproportionate share of the burden of payment of water bills
that has been placed on class 1 property owners in recent years,
largely due to recent Water Board programs . . . that provide
credits only to ratepayers other than class 1 property owners"
(id. at 532-534).
           The Appellate Division granted respondents leave to
appeal, certifying the question whether its order was properly
made.    Following a mootness inquiry, we retained jurisdiction
over the appeal.1   We now reverse.

     1
       Respondents assured us that, pending appeal, they would
not take any action to supersede the Fiscal Year 2016 rate
schedule. Our adjudication of the merits will result in

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         Our case law holds that a utility has "unfettered
discretion to fix [rates] as it will so long as invidious illicit
discriminations are not practiced and differentials are not
utterly arbitrary and unsupported by economic or public policy
goals, as it reasonably conceives them" (Carey Transp. v
Triborough Bridge & Tunnel Auth., 38 NY2d 545, 553 [1976]
[emphasis added]).   A petitioner's task in demonstrating that the
rate-setting agency's determination is unreasonable is
appropriately described as a "heavy burden" (see generally Matter
of Nazareth Home of the Franciscan Sisters v Novello, 7 NY3d 538,
544 [2006]; Matter of Consolation Nursing Home v Commissioner of
N.Y. State Dept. of Health, 85 NY2d 326, 331 [1995]).
         It is clear from the governing statutes that water and
sewer rates may be determined in accordance with public policy
goals, and not only economic goals.   The Water Board "may take
into consideration the views and policies of any elected official
or body, or other person" and ultimately "appl[ies] independent
judgment in the best interest of the authority, its mission and
the public" (Public Authorities Law § 2824 [1] [g]).    Moreover,
the statutory scheme gives the Board leeway to charge more than
the bare minimum necessary for revenue recovery, by stating that
the rates are to generate "revenues which, together with other
revenues available to the board, if any, shall be at least
sufficient at all times so that such system or systems shall be

immediate and practical consequences to the parties.

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placed on a self-sustaining basis" (Public Authorities Law
§ 1045-g [4] [emphasis added]).   In short, New York City's "Water
Board is granted broad authority to set rates for water usage"
(Matter of Village of Scarsdale v Jorling, 91 NY2d 507, 515
[1998]).
           Here, we cannot say that respondents' actions were
"utterly arbitrary and unsupported by economic or public policy
goals, as it reasonably conceives them" (Carey Transp., 38 NY2d
at 553).   Notably, Tax Class 1 owners as a class had been
excluded for years from rate relief programs such as the Frontage
Transition Program, and had enjoyed other benefits only if
individually eligible based on income or usage.   The decision to
allocate the relatively modest gain from the rent forbearance so
as to be meaningful to this very large category of ratepayer,
without requiring a complex eligibility and application process
that would entail administrative costs, was not irrational.     The
pre-existing Tax Class classifications, singling out
single-family households and owners of small apartment buildings,
served this purpose.
           Nor would respondents have been wholly irrational to
conclude that a division among all account holders, yielding a
smaller one-time credit, would have had a negligible impact for
owners of large apartment buildings and may not have been passed
on to tenants.   Moreover, contrary to the Appellate Division's
intimation, there was no burden on respondents to show that the

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beneficiaries of the one-time credit were, in terms of their
personal finances, "more needy" in comparison with other
landowners (147 AD3d at 523).
          In short, the distinction between beneficiaries and
others did not have to be drawn with surgical precision (see
generally Carey Transp., 38 NY2d at 554; Elmwood-Utica Houses v
Buffalo Sewer Auth., 65 NY2d 489, 495 [1985]), and must be upheld
in the absence of invidious discriminations or a differential
that is entirely unsupported by rational goals.
          A separate question is whether the rate increase was
justified, given the rental forbearance.      Petitioners contend
that by using the $122 million in rental forgiveness to dispense
the same amount in credits, respondents recreated the funding gap
it had identified in the original budget.      This argument is
undermined by Lawitts's affidavit.      He states that elimination of
the one-time credit would not remove the need for the rate
increase, because the Water Board sets water rates to maintain
revenue stability over at least a five-year forecast.      The
decision to preserve the original planned rate increase was not
entirely irrational.   This is particularly true in light of the
fact that the Board would have kept the rate increase at around
2% per year.   The Board is not obliged to set the lowest possible
rate every year; it can balance rate-setting with other needs and
goals.   Applying the well-established deferential standard of
review, we conclude that respondents' actions fell short of being

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utterly arbitrary and unsupported by rational goals.
          Finally, we agree with the Appellate Division in one
significant respect: respondents did not act ultra vires or levy
a tax.   As respondents point out, "any rate variance can be
framed as a decrease in some ratepayers' charges at the expense
of other ratepayers," but such a disparity does not amount to
impermissible taxation where, as here, the rate increase was tied
to a utility's forecast of the cost of furnishing a service (see
generally Watergate II Apts. v Buffalo Sewer Auth., 46 NY2d 52,
58-59 [1978]).
          Accordingly, the order of the Appellate Division should
be reversed, with costs, the petition dismissed, and the
certified question not answered as unnecessary.

                              - 10 -
In the Matter of Prometheus Realty Corp. et al.
v New York City Water Board et al.

No. 130

RIVERA, J.(dissenting):
          We are called upon to consider the propriety of a New
York City Water Board (Board) decision granting a water bill
credit to one service class while simultaneously imposing a
system-wide rate increase affecting all users.    As a general
matter, the Board has authority to issue credits, as well as to
increase water bill rates, as it deems necessary and proper to
further its statutorily-defined economic and public policy goals.
The Board's decisions, however, must be based on the exercise of
independent judgment, and are subject to meaningful judicial
review to ensure that they are not unreasonable, unsupported by
evidence, or arbitrary and capricious.   Our review is narrow, but
we abdicate our role as the final check on administrative process
if we merely rubberstamp the Board's decisions.    I disagree with
the majority that the Board's action here survives our scrutiny,
because there is no evidence before us that the Board acted
rationally in approving the credits and rate increase.
          The Board is an independent public entity with broad
responsibility for regulating the provision of water to New York
City residents.   It is organized under our state's Public

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Authorities Law as a public benefit corporation,1 charged with
acting "for the benefit of the people of the city and the state,
[and] for the improvement of their health, welfare and
prosperity" (Public Authorities Law §§ 1045-f [9], 1046).    It is
composed of seven members, appointed by the mayor, at least one
of whom must have "experience in the science of water resource
development" (id. § 1045-f [2]).   The Board's independence is
assured by for-cause removal protection for its members, who
serve defined two-years terms, are bound by various conflict-of-
interest provisions, and enjoy statutorily-guaranteed
reimbursement for expenses incurred in the performance of their
duties (id. §§ 1045-f [2]-[5]).
          The Board helps ensure residents of New York City have
continuous and plentiful access to clean water.   It works in
partnership with the City of New York and the New York City
Municipal Water Finance Authority to finance and construct water
projects (id. § 1045-i [1]), and it retains exclusive authority
to set rates for the use of New York City's water and sewerage
system (id. §§ 1045-f [1], 1045-j [9]; see also Matter of Village
of Scardsale v Jorling, 91 NY2d 507, 515 [1998] ["the Water Board
. . . is the sole entity which may (set water rates) with regard

     1
       According to its enabling statute, the Board is "a body
corporate and politic, constituting a corporate municipal
instrumentality of the state" (Public Authorities Law § 1045-f
[1]). This unusual phrase seems to appear only in the public
utility context, and does not serve to distinguish the Board from
other public authorities.

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to City users"]).
         Although the Board has "broad authority to set rates
for water usage" (Matter of Village of Scarsdale, 91 NY2d at
515), it must exercise informed judgment in doing so.   Thus, its
actions are cabined by its legislatively-defined public health
mission, as well as notice and comment requirements that
encourage public participation in the rate-setting process.
Public Authorities Law § 1045-f sets forth specific, detailed
procedures and limitations to which the Board must adhere as it
sets New York City water rates.   The rate schedule must be "at
least sufficient at all times so as to provide funds in an amount
sufficient together with other revenues available to the board"
to cover the Board's many expenses, which include servicing the
water system's debt, paying the City for maintaining and
administering the water system, making capital improvements to
the water system, accumulating needed financial reserves, and
meeting responsibilities under any agreements the Board may enter
into (Public Authorities Law § 1045-f [1]; see also Matter of
Village of Scardsale, 91 NY2d at 514-515; Giuliani v Hevesi, 90
NY2d 27, 34 [1997] ["The Board's main function is to provide
sufficient funds -- through fixing and collecting water and sewer
charges and other revenues -- for the City to operate and
maintain the Water System and for the Authority to service water
and sewer debt"]).   Before setting rates, the Board must hold
public hearings, noticed according to statute, in every borough

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of New York City (Public Authorities Law §§ 1045-j [3], [9-a]).
All affected users wishing to testify must be heard (id. § 1045-j
[3]).   The Board's subsequent determination must be made in
writing, made available for public inspection, and widely
publicized before new rates may go into effect (id.).
          We review the Board's rate-setting under the standard
applicable to all public benefit corporation rate-setting
activities.    As a general matter, "in the operation of its
facilities[, a rate-setting entity] may fix tolls and charges
which in its judgment will best serve its economic goals and
public policy goals" (Carey Transp. v Triborough Bridge & Tunnel
Auth., 38 NY2d 545, 550 [1976]).   This can include treating
different categories of users differently -- so-called "economic
differentiation" -- so long as the classification adopted does
"not involve[] any of the invidious discriminations condemned by
statute or Constitution, or some utterly arbitrary discrimination
not related to economic considerations or some accepted public
goal" (id.).   Rates need not be determined with "mathematical
nicety" and will not be set aside simply "because in practice
[they] result[] in some inequality" (Elmwood-Utica Houses v
Buffalo Sewer Auth., 65 NY2d 489, 495 [1985] [internal quotation
marks omitted]).
          All rates and rate classifications must nevertheless
pass rational basis review (see Murphy v New York State Div. of
Housing and Community Renewal, 21 NY3d 649, 652 [2013]; Elmwood-

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Utica Houses, 65 NY2d at 495-496; see also Carey Transp., 38 NY2d
at 556 [subjecting the Triborough Bridge and Tunnel Authority's
rate classifications to rational basis review]).    It is,
admittedly, a "heavy burden" to show that a rate-setting
methodology "is unreasonable and unsupported by any evidence"
(Matter of Nazareth Home of the Franciscan Sisters v Novello, 7
NY3d 538, 544 [2006]).   Still, courts must assess public
authority rate determinations to ensure that they are not
arbitrary or capricious.   In reviewing an authority's rate
schedule, then, courts must scrutinize authority action to make
certain that it complies with all applicable statutes, does not
violate any protections imposed by statute or the Constitution,
and has a rational basis (Carey Transp., 38 NY2d at 550; Elmwood-
Utica Houses, 65 NY2d at 495).   It is axiomatic that an agency
cannot have acted rationally if it fails to engage in a reasoned
assessment of the facts and issues before pronouncing judgment.
         The record of events in this case establishes that the
Board's decision to issue a one-time $183 credit to class one
property owners while simultaneously imposing a 2.1% rate
increase is not a result of the exercise of independent judgment
and was therefore irrational.    The credit, payable only to owners
of one, two, and three family homes, re-created a budgetary
shortfall that had been more than eliminated by the City's
forbearance of $122 million in Board-owed rental payments.    The
Board nevertheless kept its proposed 2.1% rate increase for

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Fiscal Year 2017, but changed its justification, claiming that
the rate increase was necessary to close the gap the Board itself
created with its credit.   As the administrative procedural
history of the Board's decision illustrates, this new rate
schedule, to the extent it provided for the credit and rate
increase, lacked a rational basis as required by law.
          In the recent past, the Board has imposed relatively
high rate-increases, including a 14.5% increase in 2009.    In
accordance with Public Authorities Law § 1045-f (1), the revenue
generated by these rates has been used to pay for maintenance,
debt service on capital projects and improvements, and, pursuant
to an agreement with the City of New York, annual lease payments
to New York City for rental of the City's water system.    The
rate-setting process for Fiscal Year 2017 began with an April 8,
2017 Board meeting, at which the Board's members discussed a 2.1%
rate increase, along with four specific proposals to extend and
expand Board programs to provide rate relief and encourage water
conservation among particular categories of users.2   That same
day, the Board issued public notice that its new rates and

     2
       The four class-based programs considered at the April 8
meeting included: (1) "[a] freeze of the minimum charge for
meter-billed customers"; (2) "[a]n increase in the annual credit
. . . and an expansion of program eligibility to include
additional senior property owners" for the "Home Water Assistance
Program"; (3) "a credit not to exceed $250 per unit for qualified
multi-family affordable housing properties"; and (4) "an
extension of the grace period for [properties that were
automatically enrolled in the Multi-family Conservation Program]
. . . and a change in the charge for non-compliance."

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program changes would go into effect on July 1, 2016, and laid
out a schedule of public hearings at which they would be
discussed.   The minutes from the April 8 Board meeting
conclusively establish that the 2.1% rate increase was necessary
to "fill the [projected] $76 million funding gap" for the
upcoming year.   Those projections included a $122 million rental
payment to the City.
          Approximately two weeks later, on April 25, 2016, the
Mayor of the City of New York, acting within authority conferred
on him by the agreement between the Board and the City for the
lease of the water system, announced that he would not request
any of the $244 million rental payment due under the lease and
that this forbearance would apply through Fiscal Year 2020.3   In
the same speech, the Mayor proposed that the uncollected rental
payments go directly to a one-time $183 credit on water and sewer
bills for each of the approximately 664,000 account-holders in
class one -- one, two, and three family homeowners.   As the Mayor
saw it, "[f]or decades the City has been using the water bill as
a cash cow for the general treasury," which, he believed was "not
right."   This credit was intended "to give something back to so
many hardworking homeowners all over this city who deserve a
break."
          Two days after the Mayor's announcement, on April 27,

     3
       The Mayor had announced earlier that, in Fiscal Year 2017,
the City only planned to seek 50% of the rent it was owed.

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2016, the Board issued a new notice for public hearings on its
Fiscal Year 2017 rate schedule.    This new announcement included
the same 2.1% rate-hike proposed and discussed at the April 8
meeting, and was otherwise identical to the prior rate schedule
notice, with a single exception.    Without explanation, the new
notice included a new Board project: an added proposal for "[a]
bill credit based on the F[iscal] Y[ear] 2017 elimination of the
rental payment."   On May 20, 2016, over objections from various
elected officials and certain users, the Board adopted the new
rate schedule as proposed, including the "one-time bill-credit of
$183 based on the elimination of the F[iscal] Y[ear] 2017 rental
payment for each water and sewer account identified by [the
Department of Finance] as a Tax Class 1 property."
          Even under the most charitable reading of this
chronology, only one conclusion is possible: the Board failed to
adhere to its statutory requirements and did not engage in an
independent assessment of the potential impact of the rent-
forbearance on the Board's legislatively-mandated economic and
public policy goals.   Yet that is exactly what the Board must do.
Of course, the Board has broad authority to set rates that will
cover debt service and ensure that the water system is self-
sustaining (see Public Authorities Law §§ 1045-j [1], 1045-g
[4]).   This requires that the Board consider costs, liabilities,
future project expenses, and payment burdens on financially
vulnerable service users, as well as prospective revenues.

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However, there is no record support here that the Board did any
of these types of analyses.   The Board's two-day turnaround on
the second notice of its proposed rate schedule and its immediate
adoption of the Mayor's proposed credit -- down to the exact
dollar, without any suggestion of a Board plan for how to
capitalize on the City's announced multi-year forbearance --
shows no evidence that the Board gave this proposal the
consideration that rate-setting requires, particularly where
there is nothing to suggest that the Board had previously
considered whether to provide class-one homeowners with specific
relief distinct from that provided to other classes of users.
Such action does not entitle the Board's rate-setting decision to
judicial deference, because the Board did not "apply . . .
judgmental considerations based upon the expertise and experience
of the agency" (Matter of Catholic Med. Ctr. of Brooklyn & Queens
v Department of Health of State of N.Y., 48 NY2d 967, 968-969
[1979]; see also Matter of Consolation Nursing Home v
Commissioner of N. Y. State Dept. of Health, 85 NY2d 326, 331
[1995] ["An administrative agency's exercise of its rule-making
powers is accorded a high degree of judicial deference,
especially when the agency acts in the area of its particular
expertise"]; see generally 23 Carmody-Wait 2d § 145:35 [noting
that New York courts defer to agency determinations that fall
within the agency's area of expertise]).
         The City argues that the Board was entitled to take the

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Mayor's proposal into account in reaching its rate-setting
determination.   Assuming the City and majority are correct that
Public Authorities Law § 2824 (1) (g) entitles Board members to
"take into consideration the views and policies of any elected
official or body" (majority op at 7), the same statutory
provision requires that Board members "ultimately apply
independent judgment in the best interest of the authority, its
mission and the public."   There is simply no record support for
the proposition that the Board did so here.
         The Mayor's forbearance of rental payments through 2020
to address what he identified as an unfair burden caused by the
City's demand for rental payments directed to the general
treasury, rather than solely to the City's water needs, is a
laudable goal.   It is not, however, the Board's prerogative to
cure what the City perceives as inequities in the manner proposed
by the Mayor unless the Board engages in its own considered
assessment that leads it to conclude that, in furtherance of its
own statutory mandate and goals, it should grant a credit of its
own volition, in the same amount, to the same class of users.
         As it has in the past, the Board acts within its
authority and mission by setting rates and adopting programs that
promote conservation, encourage modernization of the water
system, and promote equity by providing financial relief to
seniors and low-income customers (see Public Authorities Law §§
1045-j [1], 1045-g; James Bonbright, Principles of Public Utility

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Rates, Chapter 8: Social Principles of Ratemaking [2d 1998];
Brief of Amici Curae Natural Resources Defense Council and the
Public Utility Law Project of New York, Inc. at 19).    Here, the
Board provided no rational basis for how the credit fits within
these goals, as it provided no analysis about how it reached the
same conclusion as the Mayor -- i.e. that a $183 credit to a
class of homeowners addressed a historically-unfair burden.
         An agency's departure from a settled course of behavior
may suggest the absence of informed reasoning or arbitrary
decisionmaking (see Motor Vehicle Mfrs Ass'n of U.S. Inc., v
State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 41-42 [1983]).
Critically, the credit departs from the Board's prior programs of
economic differentiation.   Those rate-differentials and special
programs had distinguished between users on the basis of
financial need, as measured by specific defined criteria, or in
the interest of implementing programs encouraging user behavior
that furthered the Board's long-term conservation and
modernization goals.   Here, the Board did not even attempt to fit
the credit into this framework.
         The Board's additional explanations for the 2.1%
increase are post-hoc justifications that are not substantiated
by the record.   The Board seeks to apply the same analysis it
relied on at the April 8 meeting, before the announcement of the
rent forbearance, to support a rate hike that was no longer
necessary.   Yet, the record lacks any reasoning for reinstating a

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budgetary shortfall, since there was money available to close
this fiscal gap.   By statute, the Board must fix its fees and
rates "in such amount sufficient at all times so as to provide
funds in an amount sufficient together with other revenues
available to the board" to pay its obligations, service water
system debt, and generally "place[ the water system] on a self-
sustaining basis" (Public Authorities Law §§ 1045-j [1], 1045-g
[4]).   This mandate does not, and cannot, include increasing a
shortfall without explanation when funds are available to pay it
down.
          This is not to say that the Board, in furtherance of
the public interest, cannot seek to provide customer relief
through special programs.   For example, in the past it has
implemented a reduced, alternative rate schedule for certain
multi-family dwellings and class two property owners with
buildings containing six or more units (the "Frontage Transition
Program"), offered bill credits to account holders participating
in Department of Environmental Protection lead and copper
monitoring programs, and passed on administrative savings to
account holders who switch to e-billing.   Similarly, the four
proposals included in the Board's proposed Fiscal Year 2017 rate
schedule focused on specific categories of users in need of
assistance, targeting meter-billed customers, seniors with
incomes below $50,000, multi-family affordable housing
properties, and account holders still in the process of

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                                  - 13 -                             No. 130

transitioning to more efficient water usage.            Certainly it is for
the Board to determine how best to deploy resources to address
the disparate circumstances of those who use its services.            What
it cannot do is change course from its original proposed rate
schedule to reinstate a shortfall without first considering how
using the forbearance as a credit to a class of homeowners
comports with its own statutorily-defined economic and public
policy goals.
            While the Court may not substitute its judgment for
that of the Board, we cannot ignore our responsibility to ensure
the Board's rate increase is based on its independent rational
judgment.    As I see it, the record lacks any indicia that the
Board exercised any judgment at all.           I dissent.
*   *   *     *   *   *   *   *     *      *    *   *    *   *   *    *   *
Order reversed, with costs, petition dismissed, and certified
question not answered as unnecessary. Opinion by Judge Fahey.
Judges Stein, Garcia, Wilson and Feinman concur. Judge Rivera
dissents in an opinion, in which Chief Judge DiFiore concurs.

Decided December 19, 2017

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