Klause Property Update

At the last city council meeting, City Solicitor Dottie McCrosson provided council an update on the condemnation of the Klause and Palmer properties. Whenever she voluntarily furnishes information on the condemnation of these properties, a legal alarm clock goes off in my head to check the case files to determine if there is any recent activity and exactly what Mrs. McCrosson is attempting to get ahead of by providing this information.

A review of the case file for Palmer Development shows no recent activity, but there is recent activity in the Klause file.

While I have not had an opportunity to read over all the recent filings with the Klause matter, it appears that Klause is petitioning the court to change the valuation date of the condemnation from May 28, 2020 to March 22, 2021. Obviously, the later valuation date will yield a higher land value based on current market trends. The reason behind this request is that Klause is claiming that the city delayed the condemnation process which in turn warrants the change in the valuation date. Based on my understanding of state condemnation law, it appears the city is on solid ground with the valuation date of May 28, 2020, which valued the Klause property at $6,900,000. This value was based on the assumption that needed approvals would have been received for the 21 unit sub division along with recognizing single family homes as the highest and best use of the land.

However, buried in a certification provided by Louise “Jerry” Klause, there was some information that I found interesting and provided some insight into exactly what was happening (or not happening) behind the scenes between the city and the Klause. Since it has been almost 3 years since the successful petition drive, will provide some historical background along with the information contained in the legal certification that I found of interest.

1. Late October, 2018, FIT was successful with securing needed signatures to force a referendum.

2. The city elected not to go the referendum route and on November 27, 2018, repealed the $9,000,000 bond ordinance for the Klause property purchase.

3. Now, according to the certification, soon after FIT was successful with petition drive, Mayor Gillian approach Jerry Klause and asked them to reduce the sales price to $8 million. The offer was rejected.

4. Contrary to representations made by the city that negotiations were ongoing after the FIT successful petition drive, Klause states that there were no further negotiations. A direct quote in the certification states “once Ocean City let the agreement of sale for $9,000,000 expire on October 31, 2018, there was absolutely no further contact between anyone representing Ocean City and my brother, myself or anyone representing us, in regards to a negotiated sale of our property.”

5. If accurate, that begs the question what was Ocean City doing between November 2018 and May 2020, when condemnation proceedings commenced? Also, again if true, why was Ocean City publicly representing that negotiations were ongoing when in fact they were not?

On or about August 8, 2021 there will be a hearing over the Klause request to change the valuation date. I plan on attending and will advise all of the outcome. In addition, as I continue to review the written record in this particular matter, will alert all if I discover anything of interest.

Finally, I have attached a copy of the relevant pages from the Jerry Klause certification regarding the lack of negotiations.

Thanks – Dave
David Breeden, President Ocean City Fairness in Taxes



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