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The Sacramento City Council approved a conditional-use permit for a proposed casino in downtown’s historic Elks Tower, a project that supporters say would provide jobs and a 24-hour entertainment venue.

The council on Tuesday denied an appeal by other card-room owners in the city seeking to block the project.

“It’s competition is what it is,” Mayor Darrell Steinberg said. “But competition is a good thing.”

The Planning and Design Commission in February approved a conditional-use permit sought by Steve Ayers to operate the Elks Casino in the 14-story building on J St., along with a lounge, bar, restaurant and other amenities, including a “spirits library” where guests could order rare vintage beverages.

But John Park, owner of the Parkwest Casino Lotus on Stockton Boulevard, and Clarke Rosa, owner of Capitol Casino on North 16th Street, appealed the decision. They filed a lawsuit against the city in August, seeking to prevent Ayers from taking over the card-room license held by Casino Royale, which operated inside the Red Lion Inn Woodlake Hotel in North Sacramento. The owners of that license included William Blanas – son of former Sacramento County Sheriff Lou Blanas – and Sacramento Attorney James Kouretas.

Casino Royale was shut down in 2014 by the California Bureau of Gambling Control after it was accused of failing to pay off winnings it owed customers. Blanas agreed in February 2016 to pay a $228,980 fine and $146,020 in court and investigation costs to the state, according to a settlement agreement.

The city of Sacramento allows up to four card rooms to operate within the city limits. In addition to Parkwest Casino Lotus and Capitol Casino, the Limelight Cardroom operates on Alhambra Boulevard. The fourth card room, Casino Royale, has not operated since November 2014.

Park and Rosa maintain that Casino Royale’s license must be automatically revoked because the card room has not operated in more than two years. They argue that the license must be awarded through a lottery, not passed on to a hand-picked successor.

Dale Campbell, an attorney representing Park and Rosa, urged the council to grant the appeal, citing his clients’ lawsuit against the city over what they argue is the “invalid resurrection” of Casino Royale’s license to allow sale of the license to Ayers.

City staff members in a written response to the appeal, said the conditional-use permit, which the Planning and Design Commission approved, is based on land-use issues, and the card-room license is a separate matter. Establishing a card room requires a two-step process, and the conditional-use permit is just the first step.

Although the number of card-room licenses is limited, there is no limit to the number of conditional use permits that may be issued. “From a practical standpoint, if there is no card-room license available to complete the second step of the process, the conditional use permit cannot be activated and therefore will expire within three years of approval,” the staff report says.

Park and Rosa accuse the city of trying to circumvent provisions of the city code to allow transfer of Casino Royale’s card-room license to Ayers and the proposed casino.

The Elks Casino proposal has received support from the area neighborhood and business groups.

“This project will activate a key area of our downtown and provide ongoing, 24-hour activation that Downtown Partnership is striving to see in our central city,” Michael Ault, Downtown Sacramento Partnership’s executive director, said in a February letter to the Planning and Design Commission. “The Elks Tower Card Room is a strong addition to our already booming downtown and we look forward to the 200 new jobs it will add to the downtown core.”

Sean Wright, president of the Alkali & Mansion Flats Historic Neighborhood Association, wrote, “We support approval of the conditional use permit and look forward to the project’s completion. This will add a fantastic new entertainment venue to the downtown scene.”

In addition to the competing casino operators, owners of a neighboring building sent a letter opposing the project, citing problems with current Elks Tower tenants related to a shared alley and expressing concern that a card room operating around the clock would add to the problems.

Several people spoke in support of the project during Tuesday’s council hearing. They argued that the project was in keeping with the city’s efforts to revitalize the downtown core while providing an estimated 150 to 200 jobs.

Councilman Steve Hansen noted that the project is in his district and his neighborhood. He praised Ayers for his efforts to adapt the building for new uses.

Hansen said he understood why competing card-room owners would seek to block the project. “It’s capitalism at its finest,” he said, but argued that there is room for another card room in the city.