What? Lex talionis is punitive. Returning that which was wrongfully taken (i.e. stolen) is restorative and corrective.

However, in this case, returning the money with interest would be somewhat punitive, and that would indeed be appropriate, as it would discourage future carelessness in enforcement and abuse of the citizens of NY.

If you fail to pay all the taxes you owe, you are required to pay penalties. If the government fails to correctly enforce the law and wrongfully fines innocent citizens, why should it not be required to pay penalties?

This is the most basic way to hold government accountable for such carelessness. When a department fails to meet its budget because it did not correctly train its officers in the law, did not properly oversee enforcement, and now has to repay what it wrongfully took, those responsible for the oversight will be replaced with others more competent. As a result, the citizens have a more competent, ethical, accountable, and efficient government.

Wherever did you get the idea that, "Well, as long as you promise not to do it again..." is a sensible solution?

This is more than an eye for an eye: it is the PD that had its procedures wrong, and you are asking the victims to pay the cost (in terms of the time, money and risk involved in court procedings) of making it right.

In an argument where the authorities are using the cost of repayment as an "argument" -- that's pretty silly.