OCEAN CITY – Brothers Jerry and Henry Klause have had a long-running dispute with Ocean City over property at 16th Street and Simpson Avenue. Now Jerry Klause reports that a jury has set the value of the lot, which once housed a car dealership, at $17.8 million, almost double the $9 million the city agreed to pay for it in 2018.
Ocean City Mayor Jay Gillian says that the “litigation over the former car dealership lot next to the community center will continue,” an apparent reference to a planned appeal.
The city has long coveted the property, which Gillian says the city will use for open space. The mayor has repeatedly expressed his opposition to use of the property for a residential development.
A 2018 deal to purchase the property for $9 million fell apart when a citizens group, Ocean City Fairness in Taxes, opposed the sale on the grounds that the city was overpaying for the property. The citizens group started a petition drive to place the decision to purchase the property for that price on the ballot for voters to decide. The petition drive was successful and, as a result, the city withdrew its offer in November 2018.
The city subsequently turned to take the property through eminent domain. That process requires that the city compensate the owners based on fair market value. In August 2019 the city council adopted an ordinance that authorized acquisition of the property “by purchase or condemnation.”
That October, the city’s condemnation counsel conveyed an offer to purchase the property for $6.5 million. The offer was derived from the higher of two appraisal reports submitted in September. The Klause brothers did not accept the valuation.
The city formally took the land in May 2020, but a dispute regarding the transfer of funds opened up the potential for a reevaluation of the property. The new attempt to value it, leading to the recent jury verdict, comes after a Covid-induced boom in real estate values drove up prices across the county’s resort communities.
The 2023 equalization tables from the county tax board show the true value of Ocean City property worth over $6 billion more than the cumulative assessed value.
In addition to the Klause property, the city also used eminent domain to take an adjacent parcel known as the Palmer Center LLC lot. That condemnation case has not yet been resolved by the courts.
Ocean City will not comment on the matter, citing ongoing litigation.
Contact the author, Vince Conti, at vconti@cmcherald.com.
