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The Oregon Land Use Board of Appeals has sided with the Lake Oswego City Council in an appeal challenging city approval of a controversial downtown mixed-use development.

A LUBA released on Wednesday rejected arguments made in the joint petition filed by Wizer block opposition group Save Our Village and the Evergreen Neighborhood Association questioning City Council approval last year of PHK Development Inc.’s $92-million project.

Project plans call for razing an existing building, at 140 A Ave., and constructing 201 residential units atop 36,500 square feet of commercial space in three four-story buildings.

The city’s development commission in August denied a project approval request, leading the developers to appeal to the City Council. After several hours of testimony from both sides, the council later reversed the commission’s decision.

Opponents of the project argued in their appeal to LUBA that the high-density multifamily portion of the development doesn’t comply with the section of city code that requires new construction uphold a 鈥渧illage character 鈥� of small-scale structures that appears and operates like a traditional small town.鈥� The appeal challenged the City Council’s approval of an exception to the city code allowing the development to have live-work units on the ground floor where residential use would otherwise be prohibited. Appellants also argued that additional traffic created by the development would exceed city standards.

The LUBA decision sides with the City Council’s interpretation of the 鈥渧illage character鈥� section of the city code that it serves as a guideline and not a mandate against development taller than three stories. The opinion also backs city approval of an exception for ground-floor live-work units because they will have commercial character and traffic studies showing that intersections near the development are not at risk of backing up.

Portland-based PHK Development intends to move forward with the development, the company’s president, Patrick Kessi, said in statement following the LUBA decision.