New York City residents are receiving utility bills — particularly for electricity — showing a 300% increase in cost based on a natural gas energy surcharge. In addition, Con Edison is seeking up to 19% in permanent rate increases from the New York State Public Utility Commission. This comes on top of recent news reports that middle- and working-class homeowners and condominium and cooperative unit owners are paying more than their fair share of property taxes, thereby subsidizing owners of massive private homes.
The irony is that those being unfairly hit with excess property taxes, including many condominium and cooperative units, are actually being hit unfairly a second time because much of the rate increase sought by Con Edison is to pay New York City property taxes.
Examination of the New York City budget and spending is beyond the purview of this column but suffice it to say we cannot afford ineffective wasteful programs like NYC Thrive. This billion-dollar program has produced little or no useful results. Overtime for city workers is another area that should be investigated. Mayor Eric Adams appears aware of the problem; he has created an initiative to identify and eliminate wasteful spending.
Leaving aside the question of whether the New York City budget should be or can be reduced, the financial pressures for cooperative and condominium units is about to become more intense. Cooperative and condominium units are generally Class 2 for property tax purposes. Significantly, cooperative and condominium units represent just under 18% of the value of the property in New York City but pay just over 20% of the total property taxes. Already paying more than their fair share of property taxes outright, now cooperative and condominium owners will have higher utility bills and higher common charges to cover the excess property taxes charged to the utilities.
From time to time, I have urged cooperative and condominium boards and managers to invest in lowering utility costs. At this time, that is more urgent than ever before. Common area lighting should only be on when the areas are in use. For example, overnight, when most people are sleeping, except for emergency lighting, hallway, laundry room and trash room lighting should be off and only be triggered by residents’ motion. That should be the practice — non-emergency lights are off unless triggered by motion. Similarly, light bulbs should all be LED, if possible; LED bulbs last for years and use a fraction of the energy required by either fluorescent or incandescent. There is no need to use anything but LED lighting in common areas.
In addition, cooperative and condominium boards and managing agents should be exploring other methods for reducing electrical use in common areas. For example, developers often tried to reduce construction costs by putting the lights for common areas, such as lobbies, mailrooms and closets, on one circuit. Separating the circuiting for those areas will allow more flexibility in using motion detectors to keep lights off when no one is in a particular area. During the summer months, turning off lights reduces the heat that needs to be dissipated by air conditioning.
Some boards and managing agents have taken the view that the cost of creating separate circuits, putting lighting on motion detectors or substituting with LEB bulbs is too expensive when considered against the savings. The hard reality is that energy costs are climbing, and that trend is continuing. These increases in electricity costs, arising out of property taxes and investments in alternative energy sources, are likely to continue.
The variation of rates charged to unit owners based on the cost to Con Edison to produce electricity also seems likely to continue an upward trend, such that the view that it is too expensive to invest in energy reduction may no longer be rational.
Consider that in New York City that we are looking at 300% increases, but at one point in Texas, the cost per megawatt hour increased from $50 to $9,000. In light of all the facts and trends, there may be some fluctuation, but electrical costs will be increasing, such that conservation measures may now be essential for effective and efficient building management and the long-term well-being of New York City.
This column presents a general discussion. This column does not provide legal advice. Consult your attorney for specific legal advice.
Carol A. Sigmond
Greenspoon Marder LLP
590 Madison Ave., Suite 1800
New York, NY 10022
carol.sigmond@gmlaw.com
(212)524-5074
