June 21, 2024

Ocean City to Pay Final Cost of $20 Million in Property Saga

Environment cleanup is underway on the site because of contamination suspected to be from a former dry-cleaning business once located on the property.


Ocean City took the last steps Thursday night to finally wrap up a protracted legal battle over a large piece of property that it originally sought to buy for $9 million, but will end up paying $20 million.

City Council approved a $9.9 million bond ordinance that represents the last part of the funding for the tract of land that runs along Haven and Simpson avenues between 16th and 17th streets.

In a related vote, Council also approved a resolution authorizing a settlement with brothers Jerry and Harry Klause in the long-running legal saga over the value of the property.

City Solicitor Dorothy McCrosson said in an interview after the Council meeting that the settlement will finally bring the litigation to an end. She noted that the settlement will be finalized “soon” because Mayor Jay Gillian has also given his consent.

Using its power of eminent domain, the city acquired the land in 2021 from Klause Enterprises to preserve it as open space after the Klause brothers proposed to develop the site for housing construction.

However, the case went to court over the value of the land. In October, a jury decided that the city should pay Klause Enterprises nearly $17.9 million for the property.

McCrosson told Council that the total cost to the city for the property will be $20 million. Interest payments on top of the nearly $17.9 million pushed the total amount to $20 million, she noted.

“This is a very long, complicated history,” McCrosson said of the city’s attempts to acquire the land.

City Solicitor Dorothy McCrosson, seated next to Mayor Jay Gillian, briefs City Council on the details of the land deal.

Council voted 6-0 to approve the $9.9 million bond ordinance and the resolution authorizing the settlement with Klause Enterprises. Councilman Jody Levchuk did not attend the meeting Thursday.

Councilman Tom Rotondi said it would likely be detrimental for the city if it went back to court to continue the legal battle with the Klause brothers.

“Let’s stop the bleeding and move on,” Rotondi said.

The city initially tried to acquire the Klause land in 2019 for $9 million. The deal fell through when the community group Fairness In Taxes circulated a petition drive for a voter referendum to block the purchase.

During the petition drive, FIT said it supported the idea of the city buying the land for open space, but argued that the proposed $9 million purchase price at that time was too high. FIT had valued the land at $6.5 million.

It forced the city to restart the process to acquire the property, which eventually significantly increased in price.

A dispute with the Klause brothers over how much the city should pay for the land triggered what became a lengthy court fight to determine the value – culminating with the jury’s decision that the land was worth nearly $17.9 million.

Ocean City resident Sheila Hartranft questions city officials about the financial implications of the land deal on local taxpayers.

One local resident, Sheila Hartranft, expressed concerns about the city ending up paying more than double than the original amount that was first proposed for the land.

“What is the liability for the taxpayers?” Hartranft asked city officials during the public comment portion of the Council meeting.

McCrosson noted there is a possibility that Ocean City will seek grants to help pay for the land.

The property is best known as the former site of the Perry-Egan auto dealership. The city’s main objective in acquiring the land was to stop the site from being densely developed. At one point, the Klause brothers proposed building 22 single-family homes on the land.

The property is currently undergoing environmental cleanup because of contamination suspected to be from a former dry-cleaning business that was once on the site.

Since the property has been under the city’s ownership, Mayor Gillian has proposed keeping the site as open space, while leaving a portion for parking for residents and those who use the adjacent Ocean City Community Center.

The Community Center is a hub of activity year-round. It attracts hundreds of thousands of visitors each year. The complex includes the Free Public Library, the Arts Center, the Aquatic & Fitness Center, the Historical Museum and the Seniors Center.

City officials have talked about incorporating the former Klause Enterprises property into a five-block corridor of public land that connects the city’s Emil Palmer Park, the Community Center and other public facilities in the area.

The property runs along Haven and Simpson avenues between 16th and 17th streets, next to the Ocean City Community Center.

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