OCEAN CITY — Resort officials this week unanimously approved a historic Ocean City Pier’s 35-year franchise agreement after addressing some concerns about some of the elements in the deal.
Earlier this month, Ocean City’s elected officials announced they had reached an agreement with Charles “Buddy” Jenkins and his Synepuxent Pier and Improvement Company to extend the franchise agreement for the historic pier that juts eastward from the Boardwalk at Wicomico Street. On Monday, the Mayor and Council approved the ordinance codifying the extended pier franchise agreement, but not before addressing concerns from a former city councilman.
About 18 months ago, Jenkins approached the city about renewing the franchise agreement for 25 years beyond the 10 years remaining on the existing agreement reached in 1978. Jenkins and his representatives then negotiated the terms of the extension.
As a result, for Jenkins, the 25-year extension means he can confidently continue to make investments and improvements to the pier, including occasionally replacing it after storm damage, which has happened three times in the last five years. It also means he can continue to invest in the Jolly Roger amusement park and other amenities.
For the Town of Ocean City, the extension ensures continuity for what is perhaps the most iconic image of Ocean City. The renewed agreement, which will generate over $9 million in revenue, provides a dedicated funding source for repairing and replacing the iconic wooden Boardwalk as needed over the next three decades-plus.
From a financial standpoint, the franchise agreement reached with Jenkins and his company includes a one-time, up-front payment of $1 million. In addition, when the new agreement starts in 2030, it will include an annual payment of $250,000 to the town in that first year. In each year after, interest will be compounded annually at 3%, meaning the annual payment to the town will grow to over $500,000 by the end of the 25-year deal.
However, before the council could vote on the ordinance formalizing the agreement on Monday, Caine Woods resident Vince Gisriel, a former city councilman, offered some reservations about some elements of the proposed deal. Before he started, however, Gisriel said he appreciated the concept of extending the partnership that has thrived for the last four decades.
“At first blush, it seemed like a good opportunity to put the franchise out to bid and see what other vendors might be interested,” he said. “The more I got into it and studied it, I understand your willingness to negotiate with the current vendor given the fact that obviously the Synepuxent Pier and Improvement Company has a long track record of a quality iconic facility. I’d be hard-pressed to find a company that could come and do this any better than they have for years and years.”
Gisriel then launched into a punch list of concerns with the agreement as proposed, not the least of which was the bottom line. With the agreement essentially worth about $9 million to the town over the next 35 years, he said he wasn’t certain the town was getting full value.
“There is no way that franchise is worth that little bit of money,” he said. “I think you should have a true audit of that property to determine its value. It’s your fiduciary duty to do that.”
Gisriel also raised concern the ordinance as written does not include any indemnification for the town, essentially an insurance policy that holds the town harmless in the event of litigation over a potential incident on the pier.
“The most significant thing is the absence of a hold-harmless clause that indemnifies the city,” he said. “It’s not in this ordinance or in the original agreement going back to 1978. It seems at the very least the town should have some evidence of insurance. The town requires that of everybody, even the guy who wants to have a wedding on the beach.”
Gisriel also raised questions about the $250,000 annual payment to the town over the life of the 25-year extension, which will be dedicated to funding future Boardwalk repairs and replacements. Gisriel questioned if the annual payment, even compounded at 3% annually, will cover the cost of future Boardwalk repairs.
“What’s $250,000 going to be worth 10 years down the road?” he said. “Who knows what it will cost to fix the Boardwalk that far in the future? I’d like to see language in this ordinance that would allow for negotiations based on the cost at that time.”
For his part, Mayor Rick Meehan attempted to systematically address most of Gisriel’s concerns.
“As far as the financial return, there are 10 years remaining on the current contract and that $1 million that is being paid up front over that time span is money the taxpayers would not have received,” he said. “Being able to have that advanced funding when it was not required offsets some of those future revenues you referred to and allows us to immediately invest that money on the taxpayers’ behalf in the form of renovations and reconstruction of our Ocean City Boardwalk without any additional costs.”
Meehan said the agreement taken as a whole covered most of the former councilman’s concerns.
“You have to look at the big picture and the entire agreement,” he said. “You have to look at the cost of operating that pier and the cost of replacing that fishing pier when it had to be done on multiple occasions over the last four or five years.”
Meehan said the agreement was carefully negotiated over 18 months to ensure it was mutually beneficial to both parties.
“The best relations between a landlord and a tenant are those that are mutually beneficial,” he said. “In this case, the tenant has the opportunity to thrive and grow and make a success out of his investment. We wanted that to be a consideration as well.”
Gisriel, however, said everything in it appeared to suggest the town owned the pier and urged the elected officials to add some kind of indemnification clause.
“Given the fact this has been described somewhat as a lease, my gut tells me the town owns the property,” he said. “God forbid there is an injury or some tragedy down on that pier. I think you ought to be protected and held harmless. I hope you will consider amending this for your own benefit and the benefit of the town.”
City Attorney Heather Stansbury expressed confidence the franchisee’s own insurance policies would cover any potential issues.
“This is similar to a lease, but it’s a different animal,” she said. “It’s not a lease. It’s an ordinance and we feel confident this is the right way to go and the town is protected.”
Councilman Dennis Dare pointed out the agreement provides Jenkins and his company with assurances they can safely and confidently continue to invest in the pier and its amenities. He also pointed out without an extension, there might be future changes to the iconic pier.
“We are renewing this with 10 years left,” he said. “Two years ago, the Ferris wheel had to be refurbished and it cost seven figures to do that. There is no doubt that Ferris wheel and those other amusements would need to be refurbished in the next 10 years because that pier is probably the harshest environment in Ocean City. Without this agreement, there is no guarantee the franchisee will invest in those improvements and there is a possibility those amusements go away and we end up with something less desirable up there.”
The council voted unanimously to approve the agreement extending the pier franchise agreement for an additional 25 years beyond the 10 years remaining on the existing agreement.