Council approves $12.5 M., but litigation could drag on for two years
By DAVID NAHAN/Sentinel staff
OCEAN CITY – Although litigation could continue for two years over the properties where the former Chevy dealership had been, the city could take ownership of the properties soon.
How much the city will end up paying is the open question. That may not be known for along as two years if the city or the owners balk at a price determined by a three-commissioner panel.
The city is taking the land by condemnation after years of wrangling. City Council had approved buying the land for $9 million, but citizens group Fairness In Taxes initiated a successful voter referendum to overturn the decision, arguing the city was paying too much. In turn, the Klause family, owners of that land, threatened to build a housing development there instead, a prospect the city and neighbors do not want, hoping to use the land for something other than adding housing density to the island.
Inevitably the city turned to proceedings to take the land and two adjacent properties, getting new, lower appraisals that put the price of the dealership lot at $6.45 million. The city set prices based on those appraisals, but did new appraisals this summer because the value of the land has increased.
At Thursday evening’s Ocean City Council meeting, council voted unanimously on three ordinances that provide more money for the parcels based on the newer appraisals.
The first ordinance appropriates an additional $355,000 for properties owned by the Klause family where the dealership was located between Haven and Simpson avenues and between 16th and 17th streets – adjacent to the Ocean City Community Center. Thecity previously had appropriated $6,545,000 for that land back in February.
That brings the price of that lot up to $6.9 million.
The other two ordinances approved additional money for adjacent Palmer properties at 1600 Haven Ave. and 109 16th St. owned by the Flood family that were not included in the original plans for the former dealership lot.
One adds $100,000 to the $3 million purchase price. The other adds $160,000 to the original purchase price of $2,340,000.
All told, the city is hoping to acquire the former dealership and nearby lands for a total of $12.5 million. The original plan for $9 million (now reduced to $6.9 million ) was only for the Klause lots that comprised the dealership – 1601-43 Haven Ave., 1620 Haven, 1628-38 Haven, 1640 Haven and 1644-46 Haven Ave.
City solicitor Dorothy McCrosson explained prices have changed since the city first bonded to take the properties so the new ordinances reflect the additional cost when condemnation proceedings were filed.
The Klause property was newly appraised in May and the Palmer properties in June.
The new prices are what the city believes the properties are worth as of the filing. That is the city’s position, but litigation could determine the final value.
On questions from Councilman Keith Hartzell, McCrosson said cases like this tend to settle rather than go to jury trial. First three commissioners will make a ruling on the value of the property. If it is disputed, it could go to a trial. Because of current COVID-19 restrictions, that could put a trial up to two years way.
“My guess is we are two years from knowing the final number if it goes to a jury trial because courts not holding live hearings,” McCrosson said. However, she said there can be a settlement at any point in the process.
When Hartzell wondered if the city would be stuck waiting for two years before doing anything with the land, McCrosson said that isn’t the case.
“Although the litigation may take two years, we expect to own the properties before that because once we figure out what we believe the cost of remediation is, we will pay the money into court, which we could do sometime late in December,” McCrosson said. “And then the property owner can file a motion to remove the money from court.”
The city said it would require the property owners to pay for any remediation or cleanup of the site because it housed a car dealership and could have some contamination. The potential cleanup costs would be set aside, but the property owners could withdraw the rest of the money so they would not have to wait for the bulk of their funds.
“When we pay the money into court, and file the declaration of taking with the county clerk, the city will own the properties well in advance of the conclusion of the litigation,” McCrosson said.
Once that happens, she added, “The city would be the outright owner and could do whatever it wants with the land.”
As for what the city ends up paying, that will await the commissioners or a trial.
“We’re at a point of no return,” Hartzell said. “I guess at this point … we’re at the mercy of the commissioners or the trial judge or jury. … No matter what happens, we’re either going to pay the number we have or the number that is set by the commissioners or by trial.”
“Correct,” McCrosson said. “The city is committed to paying fair market value for the property.”
There has been no final decision on how the property will be used by the city.