City councilors decided not to roll the dice in a state appeals board and granted Terry Lowenberg a conditional use permit to install lottery machines at the Gearhart Crossing Pub and Deli.

The move overrides a year and a half of testimony, along with Planning Commission and City Council denials, and allows video gambling machines to be placed in a walled area behind the main dining room. Up to six machines are permitted.

Councilors decided not to test state law preemptions over city zoning code.

“The City Council made a difficult decision, but the decision was correct based on the facts of the law,” Gregory Hathaway, Lowenberg’s attorney, said after the meeting. “The city stopped the appeal process because they wanted to bring it back for discussion. Based on that discussion, they decided to reverse themselves and approve it.”

Citing losses, Lowenberg, the owner of the former Gearhart Grocery, won a conditional use permit to open a neighborhood brewpub and deli at the grocery’s location at 599 Pacific Way in March 2016, saying the grocery was unable to compete with larger stores. After commissioners approved the plan, Lowenberg submitted an amended permit request seeking video lottery machines.

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 council’s decision to uphold a January Planning Commission denial.

In April, the City Council held an appeal hearing, and affirmed the Planning Commission’s decision to deny the revision. After Lowenberg’s appeal to the state’s Land Use Board of Appeals, the city withdrew the case for reconsideration in late May.

A new staff report recommended that the City Council affirm the Planning Commission’s denial of Lowenberg’s request. “They have to comply with conditional use criteria,” Planner Carole Connell said. “If that use is not listed or permitted, it is considered prohibited.”

But a submission to the city from Hathaway and additional comments from City Attorney Peter Watts led to a change in direction by councilors.

In 1984, voters passed Measure 4 amending the Oregon Constitution to establish a state lottery.

A fundamental provision of the law is that jurisdictions are preempted from enacting any regulation in conflict with its provisions. Land use regulations, whether adopted before or after 1984, would be preempted, Hathaway said.

A key provision of the law regulates how a video lottery game may be placed and does not require an applicant to demonstrate that the placement of lottery machines is permitted by local land use regulations, Hathaway said.

“The preemption use is covered specifically,” Hathaway said. “Other uses as mentioned can be absolutely regulated by the city, but when it comes to the placement of those machines, that’s subject to the preemption statute. It appears to be very unambiguous about the Legislature’s intent: making sure local government regulations don’t prohibit the ability to place authorized lottery machines in authorized places.”

While declining to issue a recommendation to approve or deny the appeal, Watts said state law had “never been tested.”

“This is a difficult decision, because you’re not only looking at city code, you’re looking at state statutes,” Watts said. “This language is pretty strong.”

The state could preempt local codes, including the city’s comprehensive plan, Watts said, which limits uses in the city’s downtown area.

Ultimately, city councilors decided not to pit Gearhart’s zoning code against state law.

“I must say I am dead set against video lottery machines in the downtown corridor,” Councilor Kerry Smith said before the vote. “I’m going to kick myself. Right now I have to vote for the video lottery machines because of that damn law.”

Councilor Sue Lorain seconded that sentiment. “I feel really badly because I have to vote for it,” she said.

“Our citizens will vote for it with their wallets,” Councilor Dan Jesse said. “They will choose to either support the business or not support the business. Either it will succeed or fail based on what Terry decides to do with it. To me it’s not for us to be getting into. It’s for the citizens to decide. I think the law is pretty clear.”

Jesse, Lorain, Smith and Paulina Cockrum voted on behalf of allowing the machines, with conditions. Mayor Matt Brown abstained.

The city’s staff report, to be presented at the council’s August meeting, will be rewritten to indicate tentative findings and conditions, including limited exterior signage, number of tables in the walled area and food and beverage service in the lottery location.