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Jury rules Ocean City must pay $7.2 million in land battle

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A jury has ruled that Ocean City must pay $7.2 million for two pieces of property that it acquired through eminent domain in 2021 to preserve as open space along a five-block corridor of public land.

City Council convened in closed session Thursday for about 20 minutes to discuss a long-running legal battle over the price of the property formerly owned by Palmer Center LLC.

After Council returned in open session at the meeting, City Solicitor Dorothy McCrosson reported that a Superior Court jury set the price at $7.2 million following a civil trial that wrapped up last week.

The price includes $3.6 million for property at 16th Street and Haven Avenue and another $3.6 million for related land at 109 16th Street.

McCrosson noted that interest payments by the city could boost the total price above $7.2 million, but she doesn’t believe that they will be significant.

Still remaining is the issue of just how much Palmer Center LLC will be responsible for the environmental cleanup of the land, McCrosson said.

A city contractor removed contaminated soil believed to stem from a former dry-cleaning business on the property. However, Palmer Center took on the financial responsibility of the environmental remediation, McCrosson said.

Palmer Center is headed by developer and former City Councilman John Flood, who ran unsuccessfully for mayor in the 2018 election against Mayor Jay Gillian. The city initially offered to pay Palmer Center $5.6 million for the land, but both sides ended up in court while fighting over the final price.

In an interview after Thursday’s Council meeting, Flood indicated that the legal battle may not be over because he doesn’t “necessarily agree” with the jury’s verdict for the final price.

“It’s not finally over. We’ll see what happens,” he said.

Flood voiced disappointment over what he said was the judge’s ruling that resulted in the jury only considering the city’s estimated value of the land to establish the price.

“They only saw the city’s valuation,” he said. “We were not able to present our valuations.”

He also noted that the issue involving the property’s environmental cleanup remains unresolved.

“The whole remediation issue hasn’t been adjudicated yet,” Flood said.

    City Solicitor Dorothy McCrosson, seated next to Mayor Jay Gillian, reports on the jury's verdict during the City Council meeting.
 
 

City officials have repeatedly said Ocean City will seek repayment of the cleanup costs from Palmer Center after the remediation was completed and a final purchase price for the land was decided.

The former Palmer Center property was among three sites the city acquired through eminent domain to create a full block of land bordered by Haven and Simpson avenues between 16th and 17th streets, next to the Ocean City Community Center.

The land will be added to a corridor of open space protected from dense housing construction. The city plans to dedicate a five-block area from 15th Street to 20th Street to open space and public use.

In 2023, the city finally wrapped up a lengthy legal battle with the private owners of property adjacent to the Community Center by agreeing to pay $20 million for their land. Using its power of eminent domain, the city acquired the land in 2021 from Klause Enterprises to preserve it as open space after brothers Jerry and Harry Klause proposed to develop the site for housing construction.

The city originally sought to buy the Klause land for $9 million. However, the case went to court over the value of the land. In October 2023, a jury decided that the city should pay Klause Enterprises nearly $17.9 million for the property. Interest payments on top of the nearly $17.9 million pushed the total amount to $20 million.

The property was 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.

Next up, the city must decide its long-range plans for the former Palmer Center and Klause Enterprises properties. Last year, the city solicited ideas from the public on ways to transform the land.

Suggestions from the public varied widely but fell roughly into three categories: open space and passive recreation, including features such as trails, gardens, fountains and amphitheaters; active recreation, including attractions such as an outdoor pool, skating rink, pickleball courts or fields; and practical uses such as additional parking or affordable housing.

Mayor Gillian said the city plans to hire an architect at some point to help craft a long-term vision for the land.

In the meantime, the city will beautify the property in time for the summer season by cleaning off the sidewalks, planting sod and creating parking for the Community Center, Gillian said.

    The city will start to beautify the vacant land next to the Community Center, seen in background to the right, by cleaning up the sidewalks, planting sod and creating parking for the summer.


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