City approves land swap, property purchase

City approves land swap, property purchase

(April 25, 2014) Despite public skepticism over whether or not the city was getting a fair shake in the deal, city council passed the final reading of two ordinances this week that will facilitate the land exchange for the new Ocean City Beach Patrol building.

The town will swap the current OCBP property with the Ocean City Development Corporation in return for land one block north to build a new beach patrol headquarters.

Additionally, the city will be backing OCDC’s use of inlet parking fee proceeds to pay off the $816,000 purchase of additional land, adjacent to the current OCBP building, from the Hall family.

Former Councilman and political advocate Vince Gisriel lobbied council Monday night to “do their homework” before sealing the deal, pointing out that the city was not getting an even swap from OCDC and was using outdated and potentially inflated values on the property it was purchasing.

“On first blush, the city is giving up almost twice the amount of land that OCDC is swapping for,” Gisriel said.

But the resounding response from the town was that the deal involved much more than could be shown on the assessments and appraisals Gisriel referenced.

“I don’t want anyone to believe that the Mayor and Council are making this decision blindly,” said City Manager David Recor. “They understood that this was not necessarily an even swap of acreage and assessed value…there were bigger factors than just having land for the beach patrol.”

The city is nearly finished with the design of a new OCBP headquarters, to be built on three tax parcels currently owned by OCDC and located on the southeast corner of Talbot Street and Philadelphia Avenue.

Once the new facility is completed, OCDC will take possession of the current OCBP building, located on eight parcels spanning the east side of Philadelphia Avenue between Dorchester and Somerset Streets. This property abuts the two parcels being purchased from the Hall family, consisting of the old Pioneer Hotel and an adjacent residence on the northwest corner of Somerset Street and Baltimore Avenue.

With the exception of two small lots on the northeast corner, this will create a publicly owned “model block” between Dorchester and Somerset Streets and Baltimore and Philadelphia Avenues, where OCDC hopes to design a mixed-use project that will enable downtown renewal. The project will then be marketed to an outside developer for construction.

Funding for the purchase of the Hall properties will come from inlet parking lot revenues, of which 50 cents of every fee – $2.50 per hour Monday-Thursday and $3.00 Friday-Sunday – is allocated to OCDC.

Since the non-profit group does not have taxation powers itself, the city’s allowance to OCDC is the group’s only guaranteed source of income, and thus the purchase must be backed with the full faith and credit of the town. The city will allocate $216,000 for a down payment, and will mortgage the remaining $600,000 over six years at two percent interest, for a total expenditure of $858,000.

Gisriel’s concerns were two-fold. First, he noted, the assessed value of the land the city was giving up was far greater than what it was getting from OCDC.

While the parcels being surrendered have a total area of .598 acre and a taxable value of $2,596,400 per the state assessor, the land for the new OCBP facility is only .344 acres valued at $875,700.

“Clearly the value that the assessment office has put on the eight parcels of the Mayor and City Council far outweighs the three parcels from OCDC,” Gisriel said.

Secondly, Gisriel noted, the appraisal of the two parcels being purchased from the Hall family is two years old, and determines the properties’ values using comparable sales that are four or five years old.

“The appraisal you’re relying on…does not reflect current conditions. It takes you out of the realm of the current market,” Gisriel said.

But Recor countered that the seemingly far-flung comparables – which include properties outside of the city limits as well as sales which did not close – should be taken as a reflection of the city’s diligence in trying to find references for a property that was uniquely situated in an otherwise slow-moving market.

“A way of looking at the appraisal is the lack of obvious comparables for this particular property, which is why great length was gone to find these,” Recor said.

The city and OCDC have been trying to secure the block for years, Recor noted, which puts them in a unique position.

“As I’m sure you’ve heard, a property is worth what someone is willing to pay for it,” Recor said. “After an offer, a counter-offer, and another counter-offer were made, the council did not vote at the last stage to go back and have the property re-assessed.”

In reality, the party likely getting the worst deal is not the city or the Hall family, but OCDC. Despite the relatively high value of the land the group will get, they are not receiving it carte blanche.

“The titles will transfer [to OCDC],” said Heather Stansbury from the office of City Solicitor Guy Ayres. “But the Memorandum of Understanding with the town will not allow OCDC to do anything with the property unless the town approves it.”

Further, when the “model block” properties are sold, the proceeds will go to the town. The MOU prohibits any sale otherwise, and the deeds will transfer to the town if OCDC dissolves, Recor noted.

“I’m completely confident that it will be in the contract that everything reverts to the town,” said Councilwoman Margaret Pillas. “It’s time to give the beach patrol what they need.”

Negotiations for the deal were apparently more strained between the town and OCDC, as was alluded to this week, rather than between the public entities and the Hall family.

“It was not a slam-dunk,” said OCDC President Bob Givarz.

“OCDC came in with a ceiling [to pay the Halls] and we didn’t agree with that ceiling,” said Council Secretary Mary Knight.

The purchase was only secured late last year when OCDC offered to sweeten the deal by footing 30 percent of the annual debt payments for the $2 million the town borrowed for the new OCBP building.

OCDC had lobbied heavily to keep the beach patrol downtown, arguing that its employees provided a needed summertime population and economic stimulus to the area. The town had previously expressed interest in moving the beach patrol to a more centralized location in the resort, against the wishes of the OCBP and OCDC.

Leave a Comment