Dewey, DBE extend agreement for five years

Dewey Beach will receive a $300,000 cash payment and $1.4 million in possible future penalties in exchange for amending an agreement with Dewey Beach Enterprises, developers of the Lighthouse Cove project, to give the company more time to complete the half-finished project.

Town council’s 4-1 vote came during its Sept. 9 meeting, just six months before the original 6-year mutual agreement and release between the two entities was set to expire.

Mayor Diane Hanson said she wishes the project had been completed, but it’s not. If no action were taken, she said, the company’s building permit would expire.

Hanson said Dewey Beach Enterprises and the Hyatt are a part of the town, and nobody wants the project to remain half finished.

Extension negotiations began in January, said Hanson. Numerous executive sessions were held, but the council meeting was the first time the extension was discussed during a public meeting.

The original six-year agreement was signed by the town and DBE in February 2011. Construction on the project began at a breakneck pace but has slowed considerably since. In September 2013, the 108-room Hyatt Place with 16 condominiums opened. In the fall of 2014, a section facing Dickinson Avenue opened with 22 more hotel rooms, 10 more condos and the first portion of a parking garage.

Another amendment to the MAR was signed in January 2015. DBE agreed to pay the town a lump sum of $500,000 and an additional annual payment of $37,500 in perpetuity in exchange for a 3,000-square-foot space the town was expected to occupy when the project was completed. In return, the number of condos DBE was allowed to rent out as a property manager increased from 20 to 40. The money from the sale of the town’s space in Lighthouse Cove paved the way for the town to purchase a Route 1 property in February 2015 for $875,000.

As part of the amendment agreed to Sept. 9, the town receives a $300,000 cash payment and professional review and legal fees are paid for. In addition, a gazebo will be completed in the next phase; a $600,000 line of credit will secure construction of 85 public parking spaces; and escalating fees were established for any future building permit extensions.

DBE now has the right to take five more years to finish the project, but the escalating penalties create an incentive to finish. The upcoming year’s extension cost $50, but it would cost $50,000 next year, $150,000 the following year, $400,000 the year after that and then $800,000 in the final year.

DBE plans two more phases of the project. The next phase includes the construction of 27 condos, additional parking, a pool and the gazebo, which will be open to the public. The final phase includes up to 41 additional condos, a new convention center, retail space, additional parking and a bay walk.

The cash payment and the escalating fees are in addition to the normal costs of getting a building permit, which in Dewey, is 3 percent of total construction costs. Town Manager Marc Appelbaum said the next phase of the project has been estimated by DBE to cost $7 million. Three percent of that is $210,000; Appelbaum said there was a check on his desk for that amount.

Commissioner Dale Cooke said he appreciated the detail in the current agreement, which was absent in the original.

“This is much better than the original MAR,” Cooke said as he gave his favorable vote. “It’s much more strict on the developer than the original ever was.”

Commissioner Courtney Riordan said the new amendment was great for the town, but he had two questions regarding the pricing of the 85 public parking spots and the size of the gazebo.

In the original MAR, the developer was given the right to set prices for the public parking to be built. Riordan said he was concerned that gave DBE the power to set the pricing so high the spots would essentially be used only by hotel and condo guests. He said he wanted DBE to agree its public parking would be the same price as the town’s.

The amendment to the agreement calls for the gazebo with an area up to 500 square feet, but no less than 250 square feet. Riordan said he wanted the gazebo to be 500 square feet.

William Lower, DBE representative, attended the meeting. After sending a couple of quick text messages to his bosses, he said he agreed in principle to the wording.

Commissioner Gary Mauler was the lone no vote. He said he was concerned the public wasn’t given enough time to participate in the process, noting he had called the owners of restaurants Nalu, Dewey Beach Club and Two Seas, and, he said, they were all disappointed a meeting of this magnitude was happening on a Friday night.