NYC Property Tax Hike May Shock Utility Bills, but Con Ed Holds the Fuse

Higher property taxes may leave New Yorkers not just out of pocket on their homes, but poorer each month on their energy bills too.

In a city famed for its vertiginous cost of living, New Yorkers learned last week that both their property tax and their monthly utility bills may soon ascend further, scaling heights more familiar to the skyline than to residents’ wallets. The cause: a 9.5% hike in the city’s property tax rate, proposed by Mayor Zohran Mamdani as part of a $127bn preliminary budget, and the domino effect it threatens to trigger.

The tax, if enacted, would lift the citywide property rate from 12.83% to 13.45%. Ostensibly, this is meant to patch a gaping fiscal hole in the city’s finances. But experts warn the increase is unlikely to end at property owners’ doors. For the millions who rely on Con Edison and National Grid to light, heat, and power their homes, higher property levies risk sneaking onto energy bills through line items few ever read.

Already in New York, utility customers shoulder an outsize share of property taxes. According to the state’s Public Service Commission (PSC), these levies imposed on energy providers are “exorbitantly high”—three to four times above the U.S. average. John Howard, former PSC president and current commission member, put it plainly: “No le están cobrando impuestos a Con Edison. Le están cobrando impuestos a los clientes.” The city’s pockets are being lined not just by homeowners, but by all who keep the lights on.

A spokesman for the regulator confirmed that, indeed, the property taxes paid by utilities become part of the fabric of customer bills. These taxes and concomitant surcharges already account for about 30% of Con Edison’s delivery charges—over $3bn per annum—while for National Grid they constitute roughly a quarter of invoices.

Meanwhile, the state has just approved a plan allowing Con Edison to nudge up electric rates by 10.4% and gas rates by a punchy 15.8% over the next three years. This decision, met with the fatigued resignation that seems de rigueur among New York’s ratepayers, comes on top of forecasts that the average city household will pay an extra $600 annually for utilities by 2028. This is before the impact—if any—of the new property tax hike.

The city’s fiscal math is as complex as the legalese in a utility’s tariff sheet. Budget projections hinge on contested gambits in Albany: Mayor Mamdani’s property-tax ploy is, he says, a fallback if efforts to increase income taxes on millionaires or to raise corporate tax rates should founder. His hopes have not been buoyed by resistance from Governor Kathy Hochul and City Council leaders such as Julie Menin, who have derided broad-based tax hikes as unpalatable in a city already creaking under fiscal weight.

For households, the risk is that attempts at budget triage at City Hall morph into a regressive stealth tax. Landlords and energy companies—both adept at passing on costs—are likely to flow any increase downstream to tenants and customers. The property tax, progressive in theory, can become sharply regressive in effect, squeezing those least able to absorb higher rent and energy bills.

The broader signals bode ill for New York’s vaunted affordability (such as it was). Surging utility costs tend to hit the most vulnerable hardest—those for whom a $50 shock on a Con Ed bill is not an inconvenience but an existential threat. Renters, who comprise two-thirds of Gotham households, stand to be doubly whacked, facing both the landlord’s property tax roll-ups and Con Edison’s bill padding.

Utility bills and fiscal snowball effects

Beyond immediate household claims on the family budget, there is a lagging drag on the city’s economy. Every dollar thrust into energy bills is a dollar less for small businesses, groceries, or the city’s battered cultural offerings. A higher “synthetic tax,” paid via utility bills, lacks the visibility—or legislative constraint—of ordinary budget debates. These stealth transfers can induce long-term economic sclerosis.

Nationally, New York’s predicament is less an outlier and more a harbinger. Cities from San Francisco to Boston face budget shortfalls as post-pandemic office vacancies sap property tax receipts. Washington’s attempts to coax states into upgrading their energy grids often founder on the rocks of local fiscal pressure: a utility forced to foot a higher property tax tab rarely eats the expense. Instead, it passes it forward in the most reliable manner—via the utility bill, that last, unavoidable monthly reckoning.

The city’s unique combination of eye-watering property assessments—three to four times the U.S. metropolitan average according to last autumn’s PSC report—and a growing budget gap pose a uniquely thorny challenge. While property taxes of 8% are the norm elsewhere, Gotham’s are already at the upper end, both for utilities and many homeowners. As ever, the costs are not shared evenly: co-op dwellers and small landlords are often less able to cushion tenants, in contrast to the city’s larger, more leveraged landlords.

To insist that utility giants simply swallow higher taxes is, at best, wishful thinking. As Mr. Howard has wryly observed, “Le están cobrando impuestos a los clientes.” Con Edison, which collected more than $3bn in property-tax-related delivery charges last year, has made no secret of its intention to preserve its profit margins against such municipal encroachment.

Politically, the scene resembles a game of fiscal hot potato. City leaders reckon they can win progressive plaudits by taxing companies or the wealthy, but the practical effect lands on ordinary New Yorkers, whose patience and pocketbooks are wearing thin. State leaders, meanwhile, appear reluctant to underwrite new levies in an election year.

The apparent solution—carving out utility assets from the new tax scheme—has gone unmentioned in budget documents. In the absence of such relief, the default will be to let the hidden hand of the utility bill do the unpleasant work, leaving City Hall insulated from the worst of the political blowback.

Good intentions aside, New York’s latest foray into budget-balancing by property-tax hike spells trouble for affordability, equity, and public trust. Without reforms to the tax structure—or at least more transparency about who ultimately pays—the city’s approach risks compounding the crisis it claims to address. Instead of shoring up its finances, City Hall may simply be stoking the embers of public resentment.

If New York truly aspires to maintain its status as a city open to all, it will need to reckon frankly with the hidden social costs of municipal skirmishes over tax revenue. For now, New Yorkers may just find that their landlord and their lightbulb have quietly joined forces in a new alliance—one as costly as it is inescapable. ■