(June 20, 2014) Accusations of interference from City Hall seem to have stymied city officials’ desire to exercise eminent domain to acquire the property on 64th Street it needs for a new municipal boat ramp.
It also has left Robert Kirchiro, who owns the mostly submerged or unbuildable lots in the wetlands behind Dead Freddie’s, wondering if he’s the victim of a City Hall-inspired plan to prevent him from getting his asking price.
Although the City Council on Monday passed the final reading of an ordinance that would allow it to take Kirchiro’s property via condemnation proceedings, some officials suggested they would rather drop the deal altogether given the complaints.
“I say we just let him keep it and move on,” said Mayor Rick Meehan.
Of the 32 parcels Kirchiro owns, five of them are critical to the boat ramp project. To build a ramp of the size city officials want, parts of the facility would have to encroach on those lots, thereby necessitating either an easement granted to the city, an outright purchase or condemnation.
When the city first approached Kirchiro about the property, he expressed a desire for some type of public-private partnership arrangement that would allow him to retain ownership of boat slips or a bait shop to be built in conjunction with the ramp – something the city is reluctant to get involved in, given the difficulties with environmental permitting.
Meanwhile, Kirchiro’s last proposed sale price to the city was around $180,000 – he paid his grandfather’s estate slightly more than $200,000 in 2007 – but the city has apparently indicated that it would pay no more than $20,000, or roughly twice the land’s assessed value.
But Kirchiro says his price to the city is validated by virtue of negotiations with the adjacent property owner, Steve Carullo, of Dead Freddie’s. That is, at least, until recently, according to Kirchiro.
He said that he and Carullo were near an agreement for a sale in that range, but that local developer and Ocean City Planning Commissioner Peck Miller, Carullo’s Realtor, used inside information and the city’s condemnation threat to drive down the price.
“He knows all the details of my private business,” Kirchiro told the council Monday night. “That’s not right. I was told I was to be negotiating (the city’s deal) with Mr. Ayres [City Solicitor Guy Ayres].”
To back up his assertion, Kirchiro provided this newspaper with a message that he said came from Carullo that said Carullo “got word from a good source that the boat slip will not happen.”
The message also said Carullo was being advised by the city that he could lower his current offer of $100,000, given the pressure of condemnation, but that he was personally still willing to do it because he “is a man of his word.”
“This is more than a fair compromise and against my attorneys, Pecks & the citys advice[.] two of these people make money if the deal closes & still are advising me it’s a terrible deal [sic],” the message said.
Miller acknowledged that he has been attempting to acquire the property on his client’s behalf, but denied that any of his actions were unethical.
“Everything I did, I did as a Realtor. I’m allowed to call and ask questions, same as anyone else,” he said.
Why the property would be worth more to Carullo than its assessed value, or the city’s $20,000 offer, is because the substantial increase in his overall property that the acquisition would produce would be counted in any building density equation: the more land that surrounds a building and its accessory uses, the bigger those things can be.
“Being on the Planning and Zoning Commission, I knew there were development rights that would come with that property, but they would have to be used by the adjacent property owners only,” Miller said.
“I did talk to Guy about what the deal was with the city,” Miller said. “I wanted to know, if Steve bought the property, would the city still want to negotiate with him for the easement for the boat ramp.”
But Miller said he was not involved in any collusion with the city in securing a better deal.
“As far as any insider information, no,” Miller said. “My job is to get as much information as possible for my client. But it was pretty obvious what was going on – most of my information on the deal came from the newspaper.”
Ayres also said that Miller was never being used to acquire the property in a way that was more advantageous to the city.
“A condemnation is against the current owner of the property, regardless,” Ayres said. “If it were sold, it would be sold subject to the agreement negotiated with the previous owner, or it would be condemned under the new owner.”
The purchase of the contested property by Dead Freddie’s, however, could work out more favorably for the city than would a condemnation proceeding against Kirchiro and his partner, Matin Maghsoudzadeh.
If sold to Carullo, the city could negotiate for an easement with an owner who is less interested in the land than he is in the additional development rights it would give him or the higher traffic and potential boost in business a ramp would generate.
Miller said it is that latter that has prompted his client to attempt to buy the property.
“For him, those [development rights] have no value,” Miller said. “For him, it was to get the boat ramp in sooner rather than later and have increased traffic back on 64th Street.”
The disparity between Kirchiro’s asking price and the lots’ assessed value comes down to the worth of the property to any prospective buyer versus a particular buyer. On the open market for a sale in general, the 64th Street stretch of land has extremely limited value, but that would not be the case for an adjacent property owner because of the development rights.
Kirchiro also knows what he paid for the property and how it was assessed when he bought it from his grandfather’s estate.
His grandfather acquired the property in the early 1960s, back when it was almost routine to drain and fill in acres off wetlands to make them into buildable lots. Entire neighborhoods in Ocean City were created that way.
But a decade later, wetlands protection laws prohibited that practice, thus reducing such properties’ value. Even so, after his grandfather’s death, Kirchiro paid $202,240 to the estate for the land, according to land records.
Further, the land was assessed at $100,000, a valuation that Kirchiro and Maghsoudzadeh petitioned to have lowered to the current $10,000, given its limited market appeal.
However, Kirchiro and Maghsoudzadeh contend that the assessed value of the land in its current condition is of no consequence, and is instead worth what it could be used for.
“For a boat ramp, you need underwater property. It’s supply and demand,” Maghsoudzadeh said.
“I just wanted to get out of it for what I got in it, but when Mr. Miller got involved, the price suddenly dropped,” Kirchiro said.
The city has state funding to construct a $4 million public boat launch at the site, which will relieve pressure on the overburdened public boat ramp in the Little Salisbury neighborhood, where traffic backups and parking issues are common.
Dead Freddie’s currently pays Kirchiro $5,000 annually to rent part of their property used as outside dining for the restaurant, but has indicated it is no longer profitable for him to do so if a sale is not made.