Terry Lowenberg could have state law on his side, lawyers told the Gearhart City Council on Wednesday, April 5, giving him the ability to put four video poker machines in his new brew pub.
But city councilors voted against a permit for the machines anyway.
Maintaining neighborhood character, the proximity of lottery machines at nearby locations along U.S. Highway 101 and no proven need for the machines all factored into the decision to uphold a January Planning Commission denial.
“For me, the idea of having a poker establishment in Gearhart is not in line with the residential commercial zone, that’s more in line with the business zone down the highway,” City Councilor Kerry Smith said.
He said the new pub — called Gearhart Crossing — “would not help the character of Gearhart.”
Smith was joined by Mayor Matt Brown and City Councilor Sue Lorain in voting to uphold denial of the permit.
“To me, the question is, is video poker part of an eating and drinking establishment? And I believe the state of Oregon says it is,” City Councilor Dan Jesse said as the lone vote in the permit’s favor.
Citing losses, Lowenberg went before the Planning Commission in March 2016 seeking approvals for a brew pub and deli on the site of the 4,100-square-foot Gearhart Grocery. Lowenberg said the business was unable to compete with larger grocery stores. Commissioners approved the plan.
But when Lowenberg presented building plans to the city, drawings designated an area of four video poker machines isolated from the main seating area by an 8-foot wall display.
While Building Official Mark Brien had “no objections to the use of lottery machines in this building,” Lowenberg was told by city staff his revised plans would require additional review.
An amended conditional use application showing the lottery machines was submitted by Lowenberg and subsequently denied by a 5-2 Planning Commission vote in January.
Commissioners determined the request was inconsistent with the city’s comprehensive plan and neighborhood commercial zoning.
“Further, there is no evidence of demand for the machines in the city’s central core,” commissioners wrote.
Lowenberg challenged the decision, disputing City Planner’s Carole Connell’s contention that lottery machines are not a use “devoted to the use of food while customers are seated at tables.”
State versus local rules
Lowenberg closed the Gearhart Grocery in December and reopened doors as Gearhart Crossing in mid-March.
Lowenberg’s appeal challenged the Planning Commission’s denial of video lottery, contesting what he called “biased statements” and arguments against the machines by linking “gambling and drinking.”
“The denial does not appear to be based on any relevant fact, but rather on a prejudice against gaming and the people that participate in gaming,” he wrote in his appeal.
In addition, Lowenberg told councilors the requirement for a conditional use made by the city “appears to be contrary to Oregon law.”
After receiving a conditional use permit last year as a “neighborhood cafe,” Lowenberg applied for and was granted a limited license from the Oregon Liquor Control Commission to sell beer and wine.
“The applicant’s position is that video lottery machines are controlled by the state and that local regulations are preempted by state law,” City Attorney Peter Watts said at the April meeting.
“This is where things start getting nuanced,” Watts told councilors. “The OLCC says in order to get a video lottery machine, ‘All we need is this permit.’ You’re precluded from prohibiting a use they’re entitled under state law. We’re at a very, very unique area of the law: the intersection of city code and city preemption.”
Even if the council upheld the Planning Commission decision, “it does not mean he cannot have video lottery machines in his restaurant or neighborhood cafe,” Watts said.
Armed with the limited license, the cafe could put the video lottery machines anywhere in the building, Watts said.
Faced with competing state and local statutes, councilors were split.
Jesse warned that if the council denied the machines, the city could find the machines placed in a more prominent location within the establishment.
“I voted for a neighborhood-friendly cafe and because our code doesn’t identify a use for this, then I feel on the merits of what we have in front of us, I couldn’t vote for it,” Lorain said.
Brown said the downtown commercial zone was designed for nearby residents.
“If you don’t even need our ‘yes’ or ‘no’ to have video poker, it doesn’t matter how we vote,” Brown said. “But strictly from the zoning standpoint, it’s going to be hard for me to vote with the applicant based on that.”
In casting his ‘no’ vote, Brown added: “It’s hard for me to see a public need was proven.”
For now, Lowenberg’s decision whether to pursue video poker remains unclear, as he issued a blanket “no comment” to questions after the meeting.
“We believe that the conditional use is not required to install the lottery machines at this time,” Jeremy Rust, Lowenberg’s attorney, said at the meeting. “Based on our research, based on the state law, I don’t think we need the city’s approval to have the lottery machines.”
If Lowenberg installs the machines, he may face city enforcement action.
“I think after this decision, I may be forced to,” City Administrator Chad Sweet. “If he puts the video lottery machines in the middle of the room, he would potentially be in violation of a neighborhood cafe. If he were to put (the machines) in the back, I would cite local zone code and his conditional use permit.”