Measured in terms of Integrated Kinetic Energy at landfall, Sandy was bigger than Katrina...

... and second only in modern records to Hurricane Isabel in 2003. Sandy only had Category 1 winds — while Katrina was Category 3 — but it was very large and thus had more IKE, which relates more strongly to the size of the storm surge.

[T]he storm surge is the increased water level along the coast caused by winds continuously bulldozing the ocean onto the land. It builds long before a storm makes landfall. It simply raises the mean sea level from its normal level by a few to over 25 feet.

Sandy also hit at high tide, making the surge higher. The damage from a surge also has to do with coastal topography and bathymetry.

Hurricane Katrina was “only” a Category 3 storm at landfall, yet ended up being the most costly natural disaster in our nation’s history due its impact on a vulnerable, highly populated low lying city. Sandy had Category 1 winds at landfall yet was able to create very significant storm surge over hundreds of miles of highly populated coastline.

I found that article because I was trying to figure out what "category" Sandy was. I wasn't sure it was even Category 1, and I wondered what would happen if a Category 3 (or 4 or 5) storm hit NYC.  I also found this article in Popular Mechanics, describing a study of the consequences of a Category 4 hurricane hitting NYC. The estimate was $500 billion in damage. A study released last September said a "Category 1 hurricane or winter nor'easter could inundate the city's subway and cause $58 billion in losses"... which sounds like what happened.