In this special proceeding the eight petitioners seek i) relief under CPLR Article 78 to annul the determination of respondent New York City Water Board (the "Board") dated November 14, 2002 denying their applications to remit the surcharges imposed upon them for failing to timely install water meters in their buildings, and ii) a declaration that the subject surcharge regulation "is illegal and unenforceable".

Pursuant to a consent decree in an action commenced by the New York State Department of Environmental Conservation against the City of New York Department of Environmental Protection ("DEP"), the City was to require owners of residential buildings containing six or more units to install water meters. In connection therewith, the Water and Wastewater Rate Schedule issued by the Board for the fiscal year commencing July 1, 2000 contained a provision imposing a surcharge of "100% of either the last annual unmetered water charge or the last annualized meter charge when a customer fails to install a meter or reading device" by July 1, 2000, with the surcharge to "be applied from July 1, 2000 until the date of installation". The cost of metering was to be reimbursed by the City and the surcharge could be avoided simply by sending a postcard to DEP by July 1, 2000 requesting that it install a meter. When petitioners failed to install a meter or request DEP to do so by July 1, 2000, surcharges were imposed upon them equal to 100% of water and sewer charges (the sewer charge being 159% of the water charge) for the period from July 1, 2000 until the meters were installed. Respondents show that several notices of the impending surcharges were sent to all building owners who had not [*2]previously installed meters and that publicity with respect thereto appeared in the media. Petitioners do not deny being aware of the prospective imposition of the surcharges.

Meters were eventually installed by petitioners at various times during the fiscal year commencing July 1, 2000, and the aforesaid surcharge was imposed only for the allocable portion of such year during which a meter had not been installed.

By letters to the Board dated August 8, 2002, each petitioner challenged the surcharge which it had paid, each making substantially the following four arguments:

1) The owner of the building had died and it "took a considerable amount of time until the sons were able to master the complete operation of the business."

2) There was "a shortage of water meters and parts which caused a delay in the installation."

3) "The main valve was not operative and the curb box has to be cleaned professionally ... (which) caused a delay in the installation."

4) "The surcharge violates the 8th Amendment to the United States Constitution because the surcharge is an excessive fine ... (and there) was no loss to DEP ... as the buildings are permitted to stay on frontage in any event."

The last argument relates to the current status of billing whereby, even though a meter had been installed, a landlord is permitted to continue to be billed on a "frontage" basis. Each of the arguments was rejected by the Board by decisions dated November 14, 2002. It is clear, however, that at present time, and so long as a landlord has the option not to be billed on a metering basis, no water conservation ensues merely from the installation of a meter.

This proceeding was commenced by petition and notice of petition dated March

14, 2003, allegedly filed on that day,^[FN1] which papers were thereafter served upon respondents on March 25, 2003.

One of the arguments raised by petitioners is that the surcharges could only be imposed upon the water charge and not upon both the water and sewer charges, pointing out that in the Rate Schedule for the fiscal year commencing July 1, 2002 the surcharge refers specifically to both the water and sewer charges, whereas in prior years the surcharge referred only to the water charge. Respondents assert that the 2002 Rate Schedule merely clarified what was always the practice, and contend that since petitioners acknowledge that this argument was not raised administratively, it may not therefore be considered in this Article 78 review. Petitioners respond by contending that this legal issue raised by respondents is only applicable when there was a [*3]factual hearing held by the administrative agency at which evidence was taken.

The standard of review herein is whether the "determination was made in violation of lawful procedure, was affected by an error of law or was arbitrary and capricious or an abuse of discretion" [CPLR 7803 (3)]. See also, Scherbyn v. Wayne-Finger Lakes Board, 77 NY2d 753, 758 (1991). The "judicial function is exhausted when there is found to be a rational basis for the conclusions approved by the administrative body" [Ostrer v. Schenck, 41 NY2d 782, 786 (1977)]. See also, Pell v. Board of Education, 34 NY2d 222, 231 (1974); Verbalis v. DHCR, ___ AD2d ___, NYLJ, November 10, 2003 (1st Dept.). A "court may not overturn an agency's decision merely because it would have reached a contrary conclusion" (Sullivan

In this proceeding the court's function is to review the determination of the Board. "Judicial review of administrative determinations is confined to the facts and record adduced before the agency." To authorize "a petitioner to raise issues for the first time in an Article 78 proceeding ... would deprive the administrative agency of the opportunity to prepare a record reflective of its expertise and judgment" [Yarbough v. Franco, 95 NY2d 342, 347 (2000)]. There is nothing in the case law indicating that this principle is limited to administrative proceedings where a hearing was held. If raised administratively, the record for review may well have contained a factual basis for the argument asserted that the 2002 change was merely a clarification of prior practice. See also, Fanelli v. New York City Conciliation and Appeals Board, 90 AD2d 756 (1st Dept. 1982), aff'd. for reasons below, 58 NY2d 952 (1983); 72A Realty Associates v. New York City Environmental Control Board, 275 AD2d 284, 286 (1st Dept. 2000); Rozmae Realty v. State Division of Housing and Community Renewal, 160 AD2d 343 (1st Dept. 1990).

Here petitioners had been informed on several occasions that a surcharge would be imposed if they did not act by July 1, 2000. No argument is pursued that the Board acted arbitrarily in rejecting the three excuses offered by petitioners. The purpose of the regulation is to have all buildings in the City immediately capable of being converted to metered billing, as apparently demanded by the State, when a decision to do so is made. Leaving over 100,000 buildings in the City unmetered would prevent such a prompt conversion. In any event, requiring meter installation has been mandated by the aforesaid consent decree and thus the Board was required to see that all building owners were in compliance. Under the circumstances, the court does not find that the sanction imposed by the Rate Schedule of a 100% surcharge on owners who remained out of compliance "shocks the judicial conscience" [Featherstone v. Franco, 95 NY2d 550, 554 (2000)], nor that it is an unconstitutional penalty. See also, Pell v. Board of Education, supra, pp. 233-234; John Paterno, Inc. v. Curiale, 88 NY2d 328, 336 (1996); Egan v. Newman, 92 AD2d 1007 (3rd Dept. 1983).

Accordingly, the petition is dismissed and it is declared that the imposition of the surcharge is not unconstitutional. This decision constitutes the judgment of the court.

Dated: February 11, 2004______________ [*4]

J.S.C.