The Rehoboth Beach Board of Adjustment, by a 4-1 vote, granted a variance for Dogfish Head to build a new brewpub at 320 Rehoboth Ave.

Dogfish founder Sam Calagione said, "We're very relieved this body voted the way that they did."

Chairman Tom Evans said Dogfish would have suffered an exceptional practical difficulty if the variance had not been granted. Board member Clif Hilderley changed his vote from the previous hearing from no to yes, saying he was impressed with Dogfish's presentation. Board member Myrna Kelley said she was very much in favor and that Dogfish met the legal burdens it had to meet.

Board member Doug Popham also changed his vote from the April meeting where Dogfish's request was denied. Kelley was not present at the previous meeting.

Board member Chuck Donahue, the only no vote, said while Dogfish is a wonderful business, the board is constrained by the law. He said Dogfish is not seeking a variance from its current 8,200 square feet, but from the 5,000 square feet mandated by the city code for restaurants serving alcohol.

Donahue said Dogfish Head did not show that improvements could not be made within the 5,000 square foot limitation or in a variance request less than what the company was asking for. He said Dogfish did not show how it would not be able to compete if it was not granted a variance.

Board solicitor Craig Karsnitz said Dogfish was requesting an area variance, made unusual by the fact that Dogfish is seeking to tear down and rebuild and already nonconforming property. Karsnitz cited case law that said exceptional practical difficulty presented by an inability to compete was a consideration the board could make in its decision. He said economic loss could be used as a reason for granting a variance if it can be proved that not granting a variance will have a detrimental effect on neighboring properties.

Karsnitz said the board does not set precedent, as every case is different and has its own sets of facts. He was referring to Dogfish lawyer Mark Dunkle's arguments that Dogfish should be granted a variance because the board previously granted variances to exceed the 5,000 square foot limitation in cases involving The Cultured Pearl, Grotto Pizza, The Greene Turtle and Nicola Pizza.

Dunkle said Dogfish fits in with its zoning in the central commercial district and adds to the character of the immediate vicinity. He said the city's comprehensive development plan envisions and encourages expansion and upgrading of restaurants on Rehoboth Avenue.

"The character of Rehoboth Avenue changes and evolves over time, and that is what we are asking for in our request," Dunkle said.

He said if Dogfish was removed, it would seriously effect the uses of neighboring properties. Dunkle said the residential neighbors around Dogfish did not object to the company's plans. He said the new building is better for the neighbors because it is compliant with the Americans With Disabilities Act, will be more attractive and the design purposely gets rid of the noisy parking lot and puts them into the courtyard, which Dunkle said would deflect sound.

"The new building is a large capital investment on this stretch of Rehoboth Avenue," said Dunkle. "It will not detract from the neighbors, but [it will] actually help. Overall, we think it is going to be a net improvement."

He said there are fewer restaurant seats and bar seats than the current restaurants, which will minimize impact.

Finally, Dunkle said if Dogfish was denied it would create a hardship and exceptional practical difficulty in the company's ability to upgrade and maintain the brewpub. He said Dogfish was looking to expand, not to have a large, Dewey Beach-style dance hall, but to improve the quality of its service. Dunkle said the current brewpub is old and out of date. He said Dogfish's request is conservative for an innovative restaurant trying to evolve.

The city and Dogfish agreed the restaurant's total gross area would be 9,709 square feet, with 9,451 square feet devoted to restaurant purposes. Evans said that is a 12 percent increase, or 1,171 square feet, over what there is now.

Dogfish was able to get back before the board by arguing that the amount of square footage devoted to restaurant was space was incorrect when Dogfish was denied by the board in April.

Calagione said in order to be an innovator in the food and beer industry, it needs more space. He said one reason for the proposed $4 million expansion was to make a better space for its employees and guests. Calagione said the current space gets hot in the summertime, and the sidewalks get crowded with guests waiting to get in, a situation that would be rectified with a courtyard built in the current parking lot.

Calagione discussed Dogfish's impact on tourism in Delaware and how national magazines associate the brewpub with Rehoboth. However, the current building does not reflect Dogfish's national reputation.

"Our building right now is not a national treasure," he said.

Dogfish CEO Nick Benz said of the building's condition: "It's not just an old skin, it has old bones. The bones of the building are in bad shape. We can do better."

Benz said a complete redo was necessary as the building has become beyond repair. One way or another, he said, Dogfish was going to need a variance whether it is renovated or built anew. He said by building a new facility, Dogfish will be able to address issues like stormwater management, noise and trash.

Benz said the kitchen has old exhaust fans, making it very hot for employees in the summer. He said the new restaurant will rectify this with new fans.

Dogfish co-owner Mariah Calagione said if Dogfish was not granted the variance and had to renovate, the brewpub would have to close for 12 months. She said the new brewpub would be constructed in the parking lot while the existing brewpub is in business with a possible short shutdown. She said once the new building is ready to go operational, the existing building would be demolished and the courtyard area completed.

Construction manager Bob MacLeish said the building's inadequate superstructure prevents Dogfish from doing a renovation, as the building is not up to the requirements of the International Building Code. He said a renovation project would have required extensive improvements to the plumbing and mechanical systems that would have been limited by the building itself. MacLeish said a new building was the better choice, as it was a better use of the space and could be tailored to current and future use.

Heidi Lowe, whose gallery has been located next to the restaurant for nine years, said Dogfish is an awesome neighbor whose presence has helped her succeed. She said Dogfish is a very responsible neighbor that has never been the cause of an problems. Lowe said she sees firsthand the problems of the building.

Maria Evans of Lewes said the Cape Region needs more companies like Dogfish who are willing to provide jobs and benefits to employees and provides a ripple effect to the rest of the community.

"What they want to do will make Dogfish Head even more of a destination," she said. "That's what we need here. What you are going to do here is going to affect Sussex County in a positive way."

Mark Grabowski, who formerly owned Finbar next door to Dogfish, said Dogfish cannot keep spending good money after bad rebuilding an aging facility.

Linda Kauffman, 206 Laurel St., compared Dogfish Head's project to the proposed City Hall reconstruction, which is a similar project of tearing down and rebuilding an out-of-date building that is beyond renovation.

Donna Stone, who once operated Kelly's Restaurant at 320 Rehoboth Ave. from 1979-84, testified to the dilapidated condition of the building. She said the new restaurant would provide a better experience for guests and employees.

"This is about a leader in the restaurant industry. A leader in the brewpub industry. It is a destination for people who come from all over the country," Stone said.

Russell Keys, who lives behind Dogfish, said his main concern was about the smoke exhaust stacks behind the restaurant and its health effects on neighbors. He said if the new restaurant goes forward, there will be three exhaust stacks that will blow directly into his house. Keys asked the board to deny the variance.

Calagione said Dogfish still needs to get a permit of compliance from the city commissioners before the new building can move forward.

"We're a long way from shovels in the ground," he said.