Rehoboth nods approval to Dogfish Head rebuild

For about two hours, the future of Dogfish Head in Rehoboth Beach was brought into question.

The country’s 13th largest craft brewing company, which opened its first brewpub in the town two decades ago, was at the final stage of approval to make its first renovation to the building since it originally opened.

But how the plan characterized the business’ distillery almost derailed the project altogether.

“I certainly want them to stay in town,” said commissioner Stan Mills. “But the people who know me know I look at (city code) in black and white.”

By the end of Friday’s board of commissioners hearing on the project, the multimillion dollar rebuild received the board’s unanimous approval. But it came after a heated discussion of the application’s compliance with the city’s zoning code, which tugged at the brewing giant’s impact on the town and those who support it.

Dogfish Head CEO Nicholas Benz and a team of attorneys showed how the new building will feature an outdoor courtyard and a large stage area for live concerts. The overall plan would expand the building’s footprint by about 1,500 feet.

Benz’s plea to the commissioners was that his Rehoboth business was “an old building with some old bones” that isn’t in line with its other facilities in Lewes or Milton.

“It doesn’t reflect us. It does not represent us,” he added.

Because the town has a 5,000-square-foot size cap on restaurants, the company’s attorneys argued the distillery should not be included when making the size determination.

Their argument was that because that part of the facility ships its product off-site, it does not come under the scope of a proper restaurant and should not be included when permitting the variance to allow the project to move forward. The decision to separate the two sides came after another heated meeting with the city’s board of adjustments in April about the project, where one member suggested that Dogfish Head move “out of town.”

It was that distinction that drew the ire of some of the commissioners. Because, if the distillery is not part of the restaurant, then what is it?

The contentions started with commissioner Mills, who said he understood “a distillery is not a permitted use in this zone” if it was to be considered not part of the restaurant.

Mayor Sam Cooper further elaborated that the city has a “permissive zoning code,” and that “distilleries” are not included in that code as permitted by the city.

Dogfish and its team countered that the business already has a distillery within the building and that it should not require another use variance because the city has not asked it to apply for one since it opened in 1995.

“We did not receive any determination from the city that it was not permitted,” attorney Mark Dunkle said on behalf of the brewing company, adding it’s an “accessory to the primary business” like a restaurant inside a hotel.

But Cooper countered that because so much of the distillery’s product will be shipped or consumed off-site and is not considered to fall the umbrella of a restaurant, the facility may have to apply for a different use.

“How do you consider it not a manufacturing facility?” he asked.

The two sides went back and forth on the issue for nearly an hour. Some on the board saw it as an unnecessary hangup, like outgoing commissioner Bill Sargent.

“I would not deny ... that there is a bit of a problem here,” Sargent said. “But is it enough to stop this? A brewpub itself includes the idea of brewing.”

By the time the discussion reached public comment, many inside commissioner chambers came out in support of the project, including fellow business owners.

“I wonder whether anybody has scrutinized Candy Kitchen or Kilwins” or other similar businesses, resident Frank Cooper said. His point was that, if the town was going to argue the distillery is a manufacturer, it must examine other businesses whose products are largely shipped and sold outside the town.

“Hypothetically, what if you all say no?” Steven Fallon, a New Castle Street resident, asked. “And then they do decide to leave. What are we going to do? As a businessman, a lot of my income is driven by their business.”

It was Sargent, in his last meeting as a commissioner after losing the Aug. 8 election, that made the push to other commissioners to look past the issue and approve the project.

“Don’t let our lack of ordinance tonight stop us from going ahead and approving this,” he said.

And it would pass, with unanimous support from the commissioners, with the added stipulation that any further expansion of the distillery would have to go through another hearing process. In addition, the board agreed the “brewpub” and “distillery” issue needs to be addressed in city code, so another meeting like Friday’s couldn’t happen again.

Contact reporter Phil Davis at 410-877-4221 or pdavis3@dmg.gannett.com