OCEAN CITY – As some parcels of the beach equipment franchise approach time for auction this year, operators are asking for the town’s code regarding the percentage one operator can own be returned to its former language.
This week City Clerk Kelly Allmond needed the Mayor and City Council’s approval to proceed with the 2012 Beach Equipment Auction for north-end blocks.
According to City Manager David Recor, the town franchises 70 beach equipment parcels spanning the entire beach. The 70 parcels are divided into three sections, the south end, mid beach and north end. Every year, on a revolving schedule, one of the three sections is auctioned and this year, the north end, or 85th Street to the Maryland/Delaware line, is up for auction.
The highest qualified bidder of each parcel receives a three-year contract to rent umbrellas, chairs and cabanas on the beach. Each contract provides one option to renew at an annual fee of 10 percent greater than the initial term.
Councilwoman Margaret Pillas acknowledged the number of letters the council has received from beach equipment operators concerning the town’s code that allows for 50 percent of the franchise to be owned by one operator and asked for a discussion to take place considering returning the town’s policy back to a third.
In November of 2008, the Mayor and City Council voted to amend the City Code’s Section 39-28, which stated that no sole proprietor of beach stand rental equipment could own more than a third of the total parcels. The new rule states that one beach stand operator can own up to 50 percent of the 70 existing beach parcels that are auctioned off each year.
Mayor Rick Meehan furthered that the amendment has resulted in an increase in revenue received from the beach parcels and just this past year the town collected over $175,000, the highest figure collected from the franchise in history.
“We need to be cautious,” the mayor said. “It is an important decision and I know we haven’t had any issues with it. I know some of the current operators may like having a little less competition and I don’t blame them as a business person in trying to decrease their costs but it could dramatically decrease the revenue we receive for the general fund.”
Councilman Joe Hall welcomed the conversation but added that it needed to take place before a vote was taken to proceed with this year’s auction.
Council Secretary Lloyd Martin said he believes in the motto, “if it’s not broke, than don’t fix it.” Councilwoman Mary Knight agreed saying that since 2008 the town has received $125,000 more in revenue.
‘There has been a steady increase … it seems to be working very well to the benefit of the town,” she said.
The council ended up voting 4-3 to leave the ordinance as written, with Joe Hall, Brent Ashley and Margaret Pillas opposed. Allmond will conduct, a live auction on Wednesday, Dec. 5, 2012 at 9 a.m. in the Council Chambers of City Hall for the north-end parcels.
Franchisee Will Edmunds came before the council following the vote during the citizen comments portion of the meeting asking for the discussion to take place regardless.
“Myself and quite a few of the other operators feel pretty strongly about this one third and I know the council is well aware of it,” he said.
Edmunds brought up Patrick McLaughlin, the owner of 50 percent of the beach equipment parcels who was recently sentenced to 10 months in jail followed by one year of supervised release for failing to file individual income tax returns and failing to report employment tax withholdings in the amount of almost $300,000. McLaughlin also holds the title to both of the town’s beach photo franchises.
“We feel that our business has been very impacted over the last 10 years,’ Edmunds said. “I know myself and a lot of the other operators have lost a lot of concessions and are paying a lot more, and we have really been impacted by this.”