By Jonathan Stempel

A divided appeals court in Manhattan has rejected New York City's plan to give small homeowners a $183 credit on their water and sewer bills, a defeat for Mayor Bill de Blasio.

The Appellate Division, First Department of the State Supreme Court ruled 3-1 that the city's water board lacked a rational basis to award the credit to owners of one- to three-family homes, while leaving other property owners ineligible.

De Blasio had last April promoted the one-time credit, to be funded with a water board surplus, to cut annual water and sewer bills by 17 percent to 40 percent for about 664,000 homeowners.

His proposal also included a 2.1 percent rate increase, and was to take effect last July 1.


But real estate companies and the Rent Stabilization Association trade group objected. They called it unfair to subject larger landlords, and in turn their tenants, to the rate hike, while denying them the credit.

The appeals court said the credit "cannot be reconciled" with the city's budgetary needs, and the water board had no basis to conclude that small homeowners were "more needy" than other property owners or paid too much relative to them.

De Blasio's office had no immediate comment.

"This was a flat giveaway to a broad class of property owners, regardless of need, without any legitimate water-related purpose," Michael Berengarten, a partner at Herrick Feinstein representing the objecting landlords, said in a phone interview.

"Board members are appointed by the mayor, and abdicated their responsibilities to achieve the mayor's political goals," he added.

De Blasio is widely expected to seek re-election this year.

Thursday's unsigned decision upheld a June 2016 ruling by State Supreme Court Justice Carol Edmead in Manhattan.

Justice Marcy Kahn dissented, saying the water board had authority to help "overburdened" lower and middle-class homeowners, including the elderly, facing rising water rates.

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