Cost nearly triple amount originally bonded in 2020
OCEAN CITY — City Council approved bonding for another $9.9 million for the purchase of the former Chevrolet dealership lot to 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 funding is in addition to more than $10 million council previously bonded for the purchase of the property, which is bordered by 16th and 17th streets and Haven and Simpson avenues.
The total amount bonded, $19,007,400, includes the new $9.9 million plus $6,217,750 authorized by the original bond ordinance and $337,250 authorized by a supplemental bond ordinance in 2020, as well as $2,961,900 authorized by a supplemental bond ordinance in 2022.
Madden said the total purchase price was still in negotiations as of Dec. 26.
“That is everything we need to complete the purchase,” City Council President Pete Madden said following the meeting. “We are trying to be proactive in our approach and be ready and prepared to do anything we need do to.”
The city acquired the land through condemnation in May 2020. At the time, it was owned by brothers Harry Klause, 75, and Jerry Klause, 72.
Through a series of missteps and official rulings, the purchase price inflated by about 300 percent. Following years of wrangling, a jury ruled unanimously Oct. 17 to grant Klause Enterprises $17,860,000 for the property.
City Council met in executive session for nearly an hour Monday, Dec. 10, to discuss a potential settlement in the ongoing battle over the cost. The city had filed a motion seeking a new trial Dec. 1 but later delayed that until Dec. 15, at which time the city would owe the jury-set price plus interest dating to May 2020 when the city took possession of the property.
According to the resolution, “recent discussions with representatives of Klause Enterprises have raised the possibility of resolving the litigation, provided agreement can be reached prior to Dec. 15, 2023.”
The settlement may be the end of a years-long saga over the sale price of the property.
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, 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 ultimately the move ended up costing taxpayers more than $10 million above that amount.
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 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 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.
In April 2022, 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 its land should be $13.02 million.
That was not the end of the story, as the findings were rejected and went to trial.
By CRAIG D. SCHENCK/Sentinel staff