By ERIC AVEDISSIAN/Sentinel staff
OCEAN CITY – The city solicitor sparred with the leader of a citizens group that blocked a $9 million purchase of the former Ocean City Chevrolet car dealership, but that had no effect on Ocean City Council Feb. 27 when it approved three bond ordinances to fund the same acquisition – for a lower price – and buy two nearby lots.
All told, council approved spending a total of $11 million. The bond ordinances include $6.5 million to purchase the former car dealership lot between Haven and Simpson avenues and 16th and 17th streets next to the Ocean City Community Center.
The city is negotiating with the former car dealership property’s owners, Harry and Jerry Klause of Klause Enterprises LLC for the property, but the owners have not indicated whether they would accept a lower price.
In 2018, the city wanted to purchase the land for $9 million from Klause Enterprises and spare the land from development.
But Fairness in Taxes (FIT), a local taxpayer group, claimed the $9 million sales price was too high, and started a petition drive to halt the sale and put the property sale to a public vote. The petition drive proved ultimately successful, and after the signatures were verified, the city repealed the property’s sale, ending the deal.
The $9 million appraisals were based on the highest and best use for the property at the time, which were coastal cottages.
Coastal cottage development allowed for two single-family homes to be constructed on a single lot. They were considered an alternative to condos when council approved them in 2013, but revoked them in 2016.
Following the successful FIT referendum, Klause Enterprises pursued new plans for development at the site.
In the spring of 2019, the Planning Board approved a 21-unit housing subdivision on the property.
Seven homes will be built facing Haven Avenue, while 14 homes will be built along Simpson Avenue, according to the plans.
The car dealership offices and showroom were demolished and the debris hauled away.
In August 2019, council approved an ordinance authorizing the city to acquire the property by purchase or condemnation.
The city obtained two new appraisals: one by Integra Realty Resources on Aug. 9 for $6 million and by Northstar Appraisal Company on Sept. 11 for $6.5 million.
In addition to $6.5 million bond ordinance, two other bond ordinances for two other parcels adjacent to the former Ocean City Chevrolet lot were approved: $3 million for 106 16th Street and $2.3 million for 1600 Haven Avenue.
Palmer Center LLC, owns the properties at 106 16th Street and 1600 Haven Avenue.
Solicitor argues with FIT leader
City solicitor Dorothy McCrosson said the city is acquiring the three parcels for open space.
“Council has been subjected to a ritual harangue on numerous occasions from one of our members of the public questioning this price of the contract,” McCrosson said. “I’m happy to defend the process that we went through to get to this bond ordinance now and I’m happy to defend anything that occurred with respect to the first contract.”
FIT President Dave Breedin said his organization also supports acquiring the properties for open space, but believed the original $9 million offer was too much.
“There’s only one reason why coastal cottages was used as an appraisal tool; that was to inflate the price to $9 million. If the Klauses could have built the coastal cottages and made so much money, how come they’re not building coastal cottages?” Breedin asked. “I take offense that I’m haranguing you. We’re doing the job of the city officials here. We said $9 million was too much. We went out on the street and we got those 700 signatures. That should be a red flag to you guys. When we get 700 signatures you should say to yourself, ‘There’s something wrong here if 700 voters of the town think that $9 million is too much, perhaps we should reflect, perhaps we should take a step back.’ You did not.”
Breedin said FIT members who collected the signatures were harassed publicly.
“We saved you $2 million and you criticize us. We harangue you. We bother you,” Breedin said. “I apologize the taxpayers are concerned about their tax dollars.”
Breedin asked why it’s taking the city two years to negotiate with the property owners.
McCrosson said the $6 million appraisal price changed because the zoning changed when council revoked coastal cottage development.
“Coastal cottages are no longer an option,” McCrosson said. “The price changed because of the number of units. I think all of the taxpayers do owe FIT a debt of gratitude because their petition drive did interrupt the prior transaction but that does not mean the prior transaction was suspect in any way.”
McCrosson said there was no evidence to support Breedin’s allegation that the city manipulated the original appraisals.
She said the proposed development on the car lot yielded fewer units than the original proposal.
“FIT’s action by exercising their right to collect signatures on the petitions turns out to be a good thing. FIT’s indictment of city council and the administration because of the prior process is unsupported by the facts,” McCrosson said.
Councilman Keith Hartzell said long negotiations are common with real estate.
“The reason why real estate deals take time is because two people don’t agree. You can’t force somebody to agree,” Hartzell said.