OCEAN CITY — City Council has approved two bond orders worth more than $3 million each, intended to cover additional expenses as part of the city’s long-running effort to acquire land that once housed a car dealership on 16th Street and Haven Avenue.
The city sought to acquire the land for years, first by negotiated purchase and then by filing for eminent domain.
During this period, property values soared, along with other values in the city and throughout the Jersey Shore, in part due to a pandemic boom in second home sales.
“It was good news for property values and for homeowners, but not so good news for property buyers, which we were at the time,” said city attorney Dottie. McCrosson, during the Thursday evening meeting.
McCrosson told council members that the city now owns the land, but the fair market value of the property is still being worked out. This question could eventually be decided by a court. The city sought condemnation of the properties after purchase negotiations failed.
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Properties include more than a block adjacent to the town’s community center.
The land had been a car dealership for decades, but the property’s most recent tenant closed in early 2018. The building having been demolished, it is now one large paved area.
Most of the land is owned by Palmer Center LLC, a family business run by John Flood, and some is owned by brothers Harry and Jerry Klause, who are Flood’s cousins.
Mayor Jay Gillian sought to prevent development of the property. He said he wanted the earth to remain an open space. In 2018, the city reached a deal to buy the Klause property for $9 million, but that deal fell apart after the group Fairness In Taxes challenged the original bond ordinance in a petition. .
“You’ll recall they thought the price was too high,” McCrosson told the board in a recap of events at Thursday’s meeting. She said the petition signified a delay in the deal, and that the sale agreement for the Klause portion of the property expired on October 31 of that year, and the Klauses refused to renew it.
According to McCrosson’s presentation, Palmer Center LLC had approvals for single-family homes on the property, while Klause Enterprises received Planning Board approval for 21 single-family units.
Current city appraisals value the Klause lot at $9.98 million. There are two separate parcels owned by Palmer Center, including one on the north side of 16th Street which is generally described as the truck lot.
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Each of the Palmer properties is valued at $3.6 million, for a total value of $7.2 million. The city also plans to set aside more than $1 million for cleanup costs.
A city investigation found no contamination in the parking lot, McCrosson told council, and the Klauses undertook their own remediation. Part of the Palmer property is cause for concern. Flood had actually sought to manage that repair, McCrosson said, but the city disagreed on the plans, which meant about nine more months of negotiations.
“It’s basically a difference in methodology in terms of the remediation, the extent of the remediation, and the cost of the remediation,” she said.
The city’s environmental consultants did not believe the remediation proposal would be enough to bring the land up to residential standards, she said.
At one point, McCrosson said, there was either a dry cleaner or another company using volatile organic compounds on that property.
Dave Breeden, president of Fairness in Taxes, spoke at the bond orders public hearing. He alleged that the city failed to file the appraised value of the condemned properties with the courts along with the motion for condemnation, allowing owners to request updated appraisals that increased the values.
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Although cities can legally take private land for public purposes, they must pay for it. The money is paid to the courts until the fair market value can be established.
City legal officials say the city did not pay the courts the appraised legal value of the properties when the initial petitions were filed, but instead waited until the courts established the city’s right to take the land. This was established in the summer of 2020. After additional court filings and the lengthy approval process for two bond orders, which require two votes by council and a public hearing, the funds were available in December 2020.
The court set the date for the updated assessments as December 23 of this year.
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