OCEAN CITY — A downtown hotel developer’s plea to defer a $165,000 contribution to Ocean City for the cost of constructing a bayside boardwalk along the waterfront was not approved this week, but the request did not fall on deaf ears.
For the last four years, the new Cambria Hotel along the waterfront at 1st Street has steadily risen from the ground on the site of the old Cropper concrete plant and is nearing completion and a certificate of occupancy for the coming season. However, as a condition of a zoning amendment that allowed for the development of a hotel on an old industrially-zone parcel and as a condition of site plan approval for the new hotel, the developer agreed to convey a 10-foot wide public access easement along the bayside of the property and contribute $165,000 toward the development of a bayside boardwalk.
In short, the developer, Ocean Hospitality I, would pay $165,000 toward the bayside boardwalk, long a desire of the town of Ocean City to connect commercial properties along the waterfront in that area. The town of Ocean City has designed the boardwalk and will build and maintain it when finished. However, with the hotel nearing completion and nearly ready for its Certificate of Occupancy (CO) in time for the summer season, whatever that looks like and when it begins, the deed of easement for the public access right-of-way and the $165,000 for the bayside boardwalk has not been conveyed to the town.
During Tuesday’s work session, Planning and Community Development Director Bill Neville explained the situation to the Mayor and Council and laid out a couple of options. The developer has agreed to convey the deed of easement to the town, which is a condition of the original approvals for the project, but has asked to defer the $165,000 contribution for the bayside boardwalk until the fall after the new hotel has at least some semblance of a summer season under its belt.
“The easement agreement is the missing piece and the finishing touches were put on it recently,” he said. “They are hoping to get open and start that economic engine so they can make the $165,000 contribution for the bayside boardwalk in September. Basically, the developer has asked to forego making that payment right now.”
City Solicitor Heather Stansbury and attorney Mark Cropper have reviewed the proposed deed of easement including the developer’s request to defer the $165,000 payment. Cropper was asked for his recommendation during Tuesday’s virtual meeting.
“It’s drafted to require the $165,000 be paid at the time of the signing of the easement,” he said. “I have recommended not to defer the payment for a number of reasons.”
Ocean Hospitality I representative Tauhid Islam then made an impassioned plea to the Mayor and Council to allow the deferral of the $165,000 for the bayside boardwalk until September, pointing out the uncertainty of the times and the challenges in finishing the project during COVID-19. Islam pointed out the 137-room waterfront hotel will contribute $17 million to the town’s property tax base.
“We’ve made a significant contribution to Ocean City and Worcester County with our hotel projects,” he said. “Everything was different then. Life has thrown us a curve ball. Things are very different from where we were just a couple of months ago.”
Islam said the $165,000 was not included as part of the loan from its lender for the hotel project and would have to come from another source.
“The bayside boardwalk was something that was required by the town and it was never to come from the money from the bank,” he said. “Because of all we are doing for the local economy and the people we employ locally, we are asking to defer that payment for the boardwalk until the fall after we are open and have a few months of income. We are in unchartered territory and we are asking the Mayor and Council to consider the shoes we’re in.”
Islam asked the Mayor and Council to consider accepting the deed of easement conveying the waterfront right-of-way to the town now, while allowing them to pay the $165,000 for the bayside boardwalk later. The CO is tied to the transfer of the property to the town as a condition of the original approvals.
“This project has taken four years to develop and we’re right at the finish line,” he said. “I’m asking to give us an opportunity to open. If the city starts the boardwalk in September, we’ll be ready to make that payment. Give us a little time to open the hotel and establish ourselves. We all need each other’s help in these times.”
Islam was asked if the developer had considered securing a bond, essentially a guarantee from a lender to provide the $165,000 payment to the town in September, but he said those efforts have not been fruitful in the current economic climate.
“No bond companies are willing to do that in this current environment,” he said. “None of these companies are issuing bonds because of the situation we’re all in. They are not looking positively at hotels in this environment.”
Councilman Mark Paddack said he supported the developer’s request to defer the payment for the bayside boardwalk and to convey the deed of easement to the town in the meantime.
“I remember when that property was when it was the concrete plant compared to what it is now,” he said. “It’s a beautiful project and it’s going to contribute $17 million to our tax base. I want to place our trust in you and defer the $165,000 contribution and allow the certificate of occupancy to go through.”
However, Council Secretary Mary Knight said while she understood the developer’s situation, she was uncertain about simply taking a leap of faith.
“My concern is there’s no guarantee,” she said. “I trust the developer and I also know the times we’re all in right now. As a representative of the taxpayers, I just want some guarantee.”
Councilman Matt James said there was no guarantee the new Cambria would have a successful first season and the developer would have the funds available in September.
“This summer is not going to be good for Ocean City hotels,” he said. “It would be very tough to come out of this summer with extra money for a bayside boardwalk.”
Islam said the he and his partners would sign any kind of promissory note or other document guaranteeing the payment in September if the town would give them a chance to get open.
“We could draft something that holds us responsible,” he said. “We know it’s not going to be a great summer and we’re not sure when we’ll ever have a great summer again. We will personally sign something and assure you that in September when you’re ready to start the bayside boardwalk, the money will be there. You have to believe in the future. You have to believe Ocean City will come out of this. We certainly do.”
City Manager Doug Miller said he could work with the town’s legal team and the developer on some kind of formal guarantee for the payment. Mayor Rick Meehan said it appeared something could be worked out.
“I support the idea,” he said. “The developer has stated his position and they have made a significant investment with a first-class building. I believe we can work something out and have the city manager work with the developer to come up with something we can all abide by. The bayside boardwalk is something we’ve wanted there for a long time.”
After considerable debate, it was decided to accept the deed of easement in concept form as presented in order to allow the discussion to move forward and have Miller and the town’s legal team work with Islam and the developer on some sort of guarantee the funds will be in place in September.
