TIMES DISPATCH: RECESSION AND COMPETITION HURTING HORSE RACING IN VIRGINIA

By Emily Dooley/Richmond Times Dispatch

Virginia’s legacy of horse racing is in jeopardy.

The recession and an industry in decline nationally are partly to blame. So are the surrounding states with slots and table-game gambling that offer bigger purses, luring quality horses away with lucrative prize money.

And anti-gambling sentiments at the General Assembly have so far hampered efforts to expand betting options in the Old Dominion.

“The industry is in, I would call it, the most severe downturn that it has ever been in in Virginia,” said Glenn Petty, executive director of the Virginia Thoroughbred Association.

In two years, annual attendance at Colonial Downs’ track in New Kent County and off-track betting sites has dropped by 21 percent and wagering is down nearly 14 percent.

Frank Petramalo Jr., executive director of the Virginia Horsemen’s Benevolent Protective Association, which negotiates prize money and offers other services to horsemen, said increased costs to maintain race horses and higher purses elsewhere are hurting the Virginia tradition.

“It ain’t what it used to be,” he said.

A storied history
It’s a tough reality to face in Virginia, home to a long, proud history of horse racing.

Quarter horse racing originated here and the commonwealth had a number of tracks prior to the Civil War, before the horses were conscripted for military purposes.

In the 1960s, Virginia was the fourth-largest producer of Thoroughbreds in the country, averaging 1,400 foals a year — a number that has since dwindled to about 350 a year.

Secretariat, the legendary Triple Crown winner in 1973, was born in Caroline County in 1970.Meets like the Strawberry Hill Races date to the 19th century and still draw thousands each year.

While Saturday’s Virginia Derby — Colonial Downs’ premiere event — will shell out $600,000 in purse money and is expected to attract upward of 9,000 people, the horse-racing industry, from barn to track to betting parlor, is in decline.

An economic impact study of the state’s equine industry is currently under way, but old numbers, prior to the recession, shed some light.

In 2001, Thoroughbreds in Virginia had a collective value of nearly $778 million, but by 2006 that number had fallen to $529 million, according to a 2006 Virginia Equine Survey Report. During that same time, the number of Thoroughbred horses declined from 36,300 to 30,900.

Industry observers anticipate the new report may show further erosion, in part because of the recession.

Pari-mutuel as a savior
Pari-mutuel wagering — where gamblers collectively place bets against one another — came about not as a means to raise money for the state but as a way to preserve Virginia’s Thoroughbred breeding industry and to develop the population of standardbred horses, which are used for harness racing.

After six decades of attempts, voters finally approved pari-mutuel wagering in a 1988 referendum, making it legal to bet on horses in Virginia for the first time since 1904. A percentage of the take is devoted to supporting the industry, including local breeders.

Proponents, citing economic studies, later sought approval of off-track betting, saying additional outlets were key to economic success at the track. The General Assembly approved OTBs in 1992, but only if a locality’s residents voted in favor, as off-track betting was not part of the initial campaign to legalize wagering. The first off-track betting parlor opened in 1996 in Chesapeake.

The first betting track
After a lawsuit, delays and changes in management, Virginia’s first pari-mutuel racetrack, Colonial Downs, opened in 1997.

The track was plagued by money issues in its early years. It sought concessions to reduce the number of race days and floated the possibility of bankruptcy. The public company eventually went private and today is owned by Colorado firm Jacobs Entertainment Inc.

Colonial Downs boasts the second-longest dirt track in the nation, behind only Belmont Park, host of the third leg of the Triple Crown.

The 607-acre complex with a capacity of 10,000 people features dirt and turf tracks, 95 wagering stations and several floors to watch races, from the grandstand to luxury boxes.

“This racetrack is probably about the best I’ve been to to watch a race,” said King William County resident Jimmy Jones, who also goes to West Virginia, where racetracks are paired with casinos.”I don’t know why Virginia is so against gambling,” he said. “We wouldn’t pay any taxes if we had gambling here.”

Colonial Downs has a license to operate 10 off-track betting sites and currently has nine across the state, but none north of Richmond; off-track betting referendums in Northern Virginia have always ended in defeat. The most-recent satellite facility is in a small back room of Finn McCool’s restaurant in Innsbrook — a new approach for Colonial Downs.

“A lot of the major building blocks of success are in place,” said Chris Baker, manager at Spring Hill Farm near Casanova in Fauquier County.

But Baker, whose farm produces 60 Thoroughbred foals a year and is among the largest breeders in the state, fears that if changes are not made, the industry could stagnate or diminish further.

Competition taking a toll
Virginia horse racing faces formidable competition from neighboring states with many more gambling options.

West Virginia, Pennsylvania and Delaware have combined race tracks with casinos. Maryland will open a similar facility this year. And New Jersey draws upon its 11 Atlantic City casinos to fund purses at its tracks.

The slots and games help fatten the purses and prize money.

“If you would ask me what the biggest challenge is, it’s the encroachment of alternative gaming,” said Virginia Racing Commission Executive Secretary Victor Harrison.

Tucked in at the end of his 2009 annual report is an ominous note.

“Some form of slot machine/alternative gaming or instant racing should be approved eventually in the commonwealth,” Harrison wrote. “Without it, a crisis in Virginia horse racing may arise.”Owners go where the money is, Petramalo said, and that isn’t always at Colonial Downs.

On average, Colonial Downs offers a total daily purse of about $170,000; Monmouth Park in New Jersey can offer up to $1 million per race day, Petramalo said.

And Colonial Downs has a boutique season, racing 76 days per year — 40 for Thoroughbred and 36 for harness racing — which means the opportunities to make money are fewer. By comparison, Hollywood Casino at Charles Town Races in West Virginia is running races 235 days this year.

Political roadblocks
As evidenced by the lengthy battles to get pari-mutuel wagering, gambling initiatives in Virginia face a perilous political path.

It means, “you can’t compete, you can’t even maximize the things that are [allowed] in the state,” Baker said.

For the past three years, state Sen. Thomas K. Norment Jr., R-James City, has filed bills to allow instant racing, or historical racing, at Colonial Downs and its off-track betting facilities.

Instant racing allows people to view old races — using real handicapping statistics but with the horse’s names changed — and bet on the outcome. Rather than waiting 30 minutes between races, this racing happens as fast or as slow as a bettor’s desire.

Since it is technically pari-mutuel wagering, which is legal in Virginia, Colonial Downs could install the machines, but track President Ian Stewart said he preferred to have legislative support.”It’s important for the General Assembly to buy into it,” Stewart said. “We’re not looking to impose on anybody.”

Norment, who is not a gambler or a horse man but represents New Kent, said he sees the bill as a way to help horse racing and fund Virginia’s transportation infrastructure needs without raising taxes. His bill called for the Commonwealth Transportation Fund to receive 50 percent of the money left over after the winning wagers had been paid out.

“I thought it was appropriate for Virginia to capture a resource of revenue within the context of what was already happening in Virginia,” Norment said. “Some of the faith-based groups have opposed the legislation because they think it’s immoral and a plague on society.”

An impact statement estimated that 1,500 instant racing terminals in Virginia could generate $78 million annually, half to the transportation fund and half to be spread among localities where Colonial Downs or wagering facilities are located, the Virginia Tourism Corp., the race track owners and a purse fund.

“In this day and time you have to pursue all avenues of revenue,” said Reggie Barnes of Mechanicsville on a recent day as he watched the races in New Kent.

Colonial Downs — which put the track up for sale in 2008, but later took it off the market — did not push the latest bill, but it is something it supports.

“I think we’re just talking about where the gambling is going to take place,” Stewart said. “The proceeds can build roads in Pennsylvania, Delaware and West Virginia or the proceeds from gaming in Virginia can build roads in Virginia.”

In each case, Norment’s bills have never made it out of committee in the House of Delegates.
Speaker William J. Howell, R-Stafford, who appoints committee members, is cited by horsemen as the reason why. He shrugs that claim off when asked about it and says he’s not that important — but Howell does not support any type of gambling.

“It’s not the pot of gold everybody tells you it is,” he said.

Howell noted that when the legislature approved pari-mutuel wagering, that was supposed to be the only request. Then it was off-track betting facilities. Now it’s instant racing, which could beget slot machines, he said.

“It’s never the last thing,” he said. “The sport of Thoroughbred horse racing isn’t the draw that it used to be.”

Slots not necessary?
Petty, of the Virginia Thoroughbred Association, said casinos and slots and instant racing wouldn’t be needed if Colonial Downs were able to expand its satellite facilities, especially into Northern Virginia’s lucrative market.

“Virginia can be very successful if we just take the product we have and deliver it to the population.”He thinks some gambling fairness needs to take place. The Virginia Lottery, which currently has about 4,900 outlets, doesn’t require a local referendum, but off-track betting does.

Through a spokeswoman, Gov. Bob McDonnell said he would review proposals relating to horse racing as they come up, but declined to comment further.

Colonial Downs officials acknowledge the industry is challenged and said the company is focused on growing attendance and wagering, not all of which has to happen at the track.

There are a handful of ways to bet in Virginia: at the track, at an off-track betting parlor, online and by telephone.

The satellite off-track betting sites — three in the Richmond area — offer opportunities for growth, last year generating nearly $116 million in wagers.

The recently opened off-track betting room at Finn McCool’s is a new concept. By using an existing location and installing wagering gear, Colonial Downs need only pay rent and staff the facility. Food, upkeep and other worries are left to someone else.

“That kind of model is going to be where we will probably expand,” Colonial Downs’ Director of Marketing Darrell Wood said. “We don’t need a standalone anymore.”Online and telephone wagering also have potential.

Five entities are licensed to offer online/telephone horse race wagering in Virginia and the practice is growing. In 2004, nearly $1.3 million was bet online and over the phone. Last year, it brought in wagers of nearly $50 million.

Colonial Downs, through its company EZ Horseplay, offers this type of wagering, known as advanced deposit wagering. They have in excess of 1,000 customer accounts.

The company also has developed computer terminals that allow people to do online wagering in private clubs, but Stewart would not say how many machines they have or their locations.Still, Virginia horse racing remains in search of innovations to sustain itself.

“It needs to reinvent the product somewhat,” Petramalo said.

(Editor’s Note: Though some may disagree, I think RTD’s Emily Dooley did an excellent job on this story. She did quite a bit of research and quite accurately depicts the situation facing our industry. The only change I would have made would be to insert “Political Hurdles” into the headline. I applaud her efforts to contact the Governor and the Speaker of the House and I find Speaker Howell’s assertion that he’s not blocking the expansion of pari-mutuel gambling to be both comical and ridiculous. He must not be aware that various members of the House of Delegates have conversations with representatives of the horse industry to the contrary. It is unfortunate, that he has no concern for the economic viablity of thousands of Virginians who earn a living in the breeding and racing industries. – Glenn Petty)