Mayor, Developer Battle Over Ocean City’s $9 Million Land Deal

Mayor, Developer Battle Over Ocean City’s $9 Million Land Deal

Mayor Jay Gillian, left, and developer John Flood are disputing each other's account of a key legal point about the city's proposed purchase of a large tract of land.

By Donald Wittkowski

Fallout from Ocean City’s proposed $9 million purchase of property that would be protected from high-density housing construction has embroiled Mayor Jay Gillian and a commercial real estate developer in a testy exchange of words.

Developer John Flood, a former city councilman who lost to Gillian in last May’s mayoral election, is accusing the city of exaggerating the possibility that the land may be used as a site for “coastal cottages,” a type of housing that would be tightly packed together in one location.

Flood disputed Gillian’s contention that there is a court order allowing developers to build 29 coastal cottages on the land, which includes a defunct auto dealership at 16th Street and Simpson Avenue.

In a statement sent to Gillian and City Council, Flood insisted that there is no such court order. He said Ocean City residents are being told things “that are not even remotely true.”

“(There) is NO imminent threat of the dealership property getting developed into coastal cottages,” Flood said in the statement.

Gillian fired back Tuesday afternoon with his own statement, saying that the court order does exist and that Flood has gotten the issue wrong.

There is an “imminent threat of the dealership property getting developed into coastal cottages,” Gillian said.

A now-closed auto dealership at 16th Street and Simpson Avenue is the centerpiece of a nearly block of land the city is looking to buy for public use.

The city has proposed buying a large tract of land, nearly a full block, bordered by Simpson and Haven avenues between 16th and 17th streets. The site is where the former Ocean City Chevrolet dealership once stood before going out of business in January.

The city’s proposed $9 million purchase from the current land owners, brothers Jerry and Harry Klause, has been approved by Council. However, the local government watchdog group Fairness In Taxes has started a petition drive for a public referendum that would give voters the final say whether to buy the land.

FIT argues that the price is simply too high and is disputing the results of two city property appraisals. One appraisal valued the land at $8.3 million, while the other concluded the property is worth $9 million. Gillian has defended the appraisals, saying they accurately reflect the value of the property.

The Klauses, meanwhile, have asked $9 million for the land and are sticking to their price in talks with the city. Jerry Klause appeared before City Council last Thursday to publicly state that his family wants to sell the property to the city and see it preserved for public use. He added, though, that the family knows it could get a higher price from housing developers and would consider their offers.

Gillian, who opposes FIT’s petition drive, believes it will delay or kill the property deal. He has repeatedly warned that any delay risks putting the city in a bidding war with developers over the land and would ultimately raise the price over $9 million.

“It remains my belief that if voters believe in preserving this city block for public use, they should not sign the petition seeking a public vote,” the mayor said in his statement Tuesday. “Our tentative sales agreement expires Oct. 31. After that date, the property can and likely will be developed.”

Landowner Jerry Klause tells City Council at its Sept. 27 meeting that his family wants to sell to the city, but is willing to consider offers from housing developers.

Although the city does not yet have specific plans for the land, Gillian has said it would either be preserved as open space or serve as the site of a new public safety building for the police department and municipal court.

More than anything, Gillian has stressed that he does not want to see high-density coastal cottages built on the land. The mayor and members of Council say the city is already struggling with overdevelopment and does not need that type of housing.

The coastal cottage concept was originally approved by Council in 2013 as a way to create smaller, affordable homes that would attract more year-round residents, particularly younger families, to Ocean City.

The lone coastal cottage project that was built, 18 homes along Haven Avenue between 12th and 13th streets, has been shadowed by complaints that it has exacerbated flooding, parking and overcrowding problems in surrounding neighborhoods.

After neighbors grumbled that the houses were too big, too expensive, too densely packed together and were out of character with the rest of the area, Council responded in 2016 by revoking coastal cottages from the city’s zoning laws.

Litigation ensued between a development group and the city over whether coastal cottages could be built. Flood was part of the development group, but later withdrew. Originally, 44 coastal cottages were proposed, but the number was pared down to 29 later on.

In his statement, Flood said the courts ordered the development application for 44 coastal cottages sent back to the city’s Planning Board in 2017 for its consideration. Disputing the mayor, Flood said there was no court ruling that approved 29 coastal cottages on the land the city is now trying to buy.

“(It) is difficult for me to sit and listen to the people being told things that are not even remotely true,” Flood said. “I offer you the following verifiable facts: There is no court order allowing 29 coastal cottages to be built.”

Gillian responded in his statement that the courts have given approval for the coastal cottages, even though Flood withdrew from the project and that the number of proposed homes was reduced from 44 to 29.

“The fact that the property owned by Flood’s company is no longer part of the application does not change the requirement for the city to abide by the court’s ruling,” Gillian said.

Empty land behind the former auto dealership building at 16th Street and Simpson Avenue is also being eyed by the city.

Flood, in an interview Tuesday with, said he believes the city’s elected officials are “misleading the public.”

City spokesman Doug Bergen declined to comment beyond the mayor’s statement, saying that “it speaks for itself.”

In the meantime, the city hopes to acquire land owned by Flood at the corner of 16th Street and Haven Avenue to pair it with the adjacent property owned by the Klauses. Flood and the Klauses are cousins.

Council voted last Thursday to acquire Flood’s land either by negotiating a deal or seizing it through eminent domain. Eminent domain allows government to seize private land for a public use after the courts decide on a fair price.

Flood said the city has offered him considerably less than the prorated value of the Klause transaction. He did not disclose the city’s offer.

“At the same time, the city is going out of their way to justify the Klause’s ‘take it or leave it price.’ They are essentially telling me take our considerably less offer or we’ll condemn (eminent domain) your property,” Flood’s statement said. “How is this fair? If the city thinks they can get a better value for my property via eminent domain, why wouldn’t they get the same better value for the rest of the property?”

Copies of the Flood and Gillian statements and court order follow: