Downtown Beach Stand Bids Soar 23%

Downtown Beach Stand Bids Soar 23%
beach stands

OCEAN CITY — The recent rebidding of the beach stand parcels in the south end revealed the overall revenue for the city will increase by an average of 23 percent in 2017, although tweaks to the system are needed after a few glitches were revealed in the process.

On Tuesday, City Clerk Diana Chavis presented to the Mayor and Council the results of the bidding for beach stand parcels from the Inlet to 27th Street. The parcels are essentially franchised to private-sector companies and individuals who rent to the vacationing public chairs, umbrellas and boogie boards, for example.

The auction was held in December and the numbers represented a significant increase in revenue for the town. For example, the same 34 parcels from the Inlet to 27th Street resulted in around $506,000 in revenue for the town of Ocean City, while the figure jumped to over $624,000 for 2017, representing an increase of 23 percent.

Some parcels saw the bids increase more than others. For example, the successful bidder for 1st Street paid $29,900 for 2017, compared to $15,510 last year, representing an increase of 93 percent. Similarly, the successful bidder for 7th Street paid $27,000 for 2017, compared to $14,520 last year, representing an increase of 86 percent.

The bids often fluctuate from year to year because of changes in the number of potential visitors to a particular beach. For example, the opening of a new hotel on one of the parcels could increase the overall value for the operators and those changes are reflected in the bids. Most typically stay true to form and there is usually some consistency from year to year.

Despite the good news, there were a few anomalies in the process for which Chavis sought guidance from the Mayor and Council on Tuesday. For example, under the current town ordinance, the successful bidders are required to pay a $500 deposit on the day of the auction and front-pay 20 percent of the entire bid about a week later, in this case by Dec. 12 for 2017. Historically, a handful of veteran operators who know the ins and outs of the system bid on large blocks of parcels make the appropriate payments in full and on time. However, each year a handful of new operators making their first forays into the beach stand business fail to make good on their bids for a variety of reasons and that was the case again this year.

For example, the successful bidder for the Inlet parcels bid $49,000 for 2017, representing a 43-percent increase over the 2016 contract. The successful bidder made the $500 deposit and paid the 20 percent down by Dec. 12, but has since moved back to Ireland and his return Beachto the U.S. is uncertain. Because the bidder had no established credit in the U.S., the Inlet parcels were offered again in a closed bidding process and a veteran operator swooped in and got the lucrative Inlet parcels for $46,000, or about $3,000 less than the initial bidder.

In another example, the successful bidder for 19th Street did make the $500 deposit on auction day, but defaulted when he failed to put down the 20 percent by Dec. 12. As a result, another veteran operator won the parcel with a sealed bid. Chavis said the anomalies complicated the process and suggested adjusting the payment schedule to avoid similar problems in the future.

“The current policy is a $500 minimum bid and a $500 deposit due on the day of the auction,” she said. “We’re suggesting raising both of those figures to $1,000, which would help the bidders be sure they can successfully operate the business on the beach.”

Councilman Wayne Hartman suggested in the case of a successful bidder defaulting for a variety of reasons, the parcels in question would be automatically awarded to the second highest bidder. He suggested implementing a record of the bidding process to determine who the second highest bidder was for a particular parcel.

“In the event a winning bidder fails to perform, the parcel should automatically go to the second highest bidder,” he said. “The auction should be recorded or videotaped in such a way as to ensure who the second highest bidder is.”

However, Councilman John Gehrig said the second highest bidder might not want a failed bid on a parcel to automatically default to them.

“The second highest bidder shouldn’t be bound to take on a parcel if the top bidder defaults,” he said. “They should have the first option, but sometimes financial situations change and they might not want to be automatically awarded the parcel.”

Councilman Dennis Dare said the occasional defaults in the bidding process are few and far between.

“In reality, we basically have the same core of bidders year after year and they know the process,” he said. “They have been through the qualification process, but we run into problems when we have these rogue bidders.”

Mayor Rick Meehan also cautioned against automatically awarding the parcels to the second-highest bidder.

“Sometimes, two bidders both start at say $5,000, but the bidding jumps up to $25,000,” he said. “We wouldn’t necessarily want to bids to drop all the way back to $5,000 in that example.”

About The Author: Shawn Soper

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Shawn Soper has been with The Dispatch since 2000. He began as a staff writer covering various local government beats and general stories. His current positions include managing editor and sports editor. Growing up in Baltimore before moving to Ocean City full time three decades ago, Soper graduated from Loch Raven High School in 1981 and from Towson University in 1985 with degrees in mass communications with a journalism concentration and history.