Commissioners say Klause properties alone worth $13 million, up from $9.98 million approved by City Council
OCEAN CITY — Buying open space at the center of town could now cost the city in excess of $20 million.
Debate was intense in March after Ocean City Council approved resolutions to cover the rising cost of the Klause and Palmer Center lots the city took by eminent domain.
Last month the cost was estimated at more than $17.1 million for both. Now it looks like the price could be climbing much higher.
In the eminent domain process, commissioners were tasked with coming up with a price for the properties.
On Thursday, the commissioners determined the Klause family is owed just more than $13 million for the property that was home to the Ocean City Chevrolet dealership between 16th and 17th streets and Haven and Simpson avenues. That does not include the amount for the adjacent properties owned by Palmer Center (Flood family).
To put that in perspective, in March, council approved setting aside additional money for the land, making its projected purchase price $9.98 million.
Back in 2018, when the city first offered to buy the land, the purchase price agreed upon by the city and the Klause family was $9 million. That process was stopped when citizens group Fairness In Taxes (FIT), arguing the lots were overvalued, initiated a successful petition drive that ended up killing the deal.
A later valuation of the land put the cost at $6.9 million, which FIT pointed to as evidence the city’s initial offer was too high. But the Klause family did not agree to it, offered to have an arbitrator set the price, and made plans to build homes on the site. The family argued it could make more money than the $9 million by putting a housing development there, a move some saw as a means to pressure the city, which wants to keep those lots open. FIT declined the arbitration offer.
The city later moved to acquire the Klause and Palmer Center land via eminent domain, a process in which the sides try to arrive at a fair market price for the lots. The city has acquired the lots, but as part of the process, the court appoints impartial commissioners to arrive at the price.
Since the initial purchase attempt in 2018, and especially since the COVID-19 pandemic began in 2020, real estate prices have soared nationally, and especially on this barrier island.
On Thursday, commissioners Alan I. Gould and Daniel Kurkowski, both attorneys, filed in Superior Court in Cape May County their decision on the value of the Klause property. In the notice they posted, they said they heard presentations about the value from the city’s representatives and from representatives of Klause Enterprises.
They decided the compensation to be paid by Ocean City to the Klause family for their land should be $13.02 million.
This, of course, does not end the story. The city or the Klause family both have the opportunity to reject the findings. It is expected this will go now to a jury trial, which means it’s possible the amount could go even higher.
$13 million doesn’t include Palmer properties
In March, when Ocean City Council approved additional money for the Palmer Center properties, which are adjacent to the Klause parcels and help create a stretch of open space from the Ocean City Free Public Library to the Emil Palmer Field on the north side of 16th Street, the total purchase price rose to $7.2 million.
An earlier assessment put the value of the property at $5.6 million, but a later assessment increased that to $7.2 million. That price also is subject to a ruling by the commissioners, which could then be rejected in favor of a jury trial.
Even if the $7.2 million price tag remained, that could put the total acquisition cost of both families’ properties at more than $20 million.
Potential litigation over both of the lots was the subject of an executive session during the City Council meeting April 7.
– By DAVID NAHAN/Sentinel staff