Court Rules in Favor of New York City and New York State: Con Edison Not Entitled to $1.3 Billion Property Tax Refund

November 22, 2022

Case Continues the Law Department's Successful Defense of Property Tax Bills, Saving Billions

A State Supreme Court in Albany agreed with New York City and New York State that Con Edison was not entitled to a $1.3 billion property tax refund from the City. In lawsuits, Con Edison challenged its property tax bills, alleging the State overvalued its "special franchise property" which is the infrastructure that brings electricity, steam, and gas to City residents and businesses. In a ruling issued on November 21, 2022, the Court dismissed the claims, stating that Con Edison put forth "a false and fictional narrative" to support its position.

New York City Corporation Counsel Sylvia Hinds-Radix said "Con Edison provides critical utility service for millions of New Yorkers, but the billion dollar tax refund it argued for, based on claims that its rate-based income is regulated, was not plausible and contrary to case law. We are pleased the Court recognized that the State's valuation and the taxes assessed were valid and well supported. Avoiding a $1.3 billion tax refund is a big win for New York City because those funds would have come from budgets supporting many important City services."

New York City Department of Finance Commissioner Preston Niblack said "We are pleased that the Court's ruling upheld the State's valuation. I want to thank the Department of Finance's Legal Affairs and Property Divisions for working with the Law Department on this case."

Con Edison has the privilege of placing its conduits, wires, cables, and pipes throughout City streets. By law, for property tax purposes, New York State values these special franchise properties to assure uniformity of valuations throughout the State. It uses the cost approach, which takes into account depreciation, to arrive at a market value.

For the tax years 2013/14 through 2016/17, the State valued Con Edison's total special franchise property from $17 – 21 billion dollars. In four lawsuits filed in Albany County in 2013, 2014, 2015 and 2016, the company claimed the proper valuation should have been 35 - 40% lower because its income is limited by utility rates that are set by the New York Public Services Commission.

Recognizing the potential billion dollar loss that a lower valuation would cost in property tax refunds, the City quickly intervened in the case, and alongside attorneys from the Attorney General's Office, mounted a vigorous defense of the State's valuations. Through extensive legal briefs and following several court conferences and a trial, during which expert witness testimony was presented, the City and State prevailed. In a ruling issued November 21, 2022, Judge Peter Lynch, dismissed Con Edison's claims, finding that it put forth "a false and fictional narrative" to support its position.

The City and State have prevailed in court before in special franchise cases brought by Con Edison. In 2019, an appellate court unanimously affirmed the dismissals of four petitions the company brought alleging overvaluations in tax years 2009/10 through 2012/13. If successful, those cases could have resulted in approximately $800 million in tax refunds.

The case is Consolidated Edison Company of New York, Inc, v. The New York State Department of Taxation and Finance Office of Real Property Tax Services and the City of New York (Consolidated Index No. 904139-16, Hon. Lynch, J.)

The matter was handled by Philip M. Caal of the Law Department's Tax and Bankruptcy Litigation Division, and attorneys from the New York Attorney General's Office.

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Media Contact: pressoffice@law.nyc.gov