The inability of Colonial Downs and Virginia’s horsemen to reach agreement on a racing schedule meeting everyone’s goals has led to the loss of both the 2014 and (most of the) 2015 racing seasons. Colonial Downs has surrendered its racetrack license, and late last week, the company announced it was selling off the properties of the off-track betting facilities it owned. Many people, including Virginia Governor Terry McAuliffe (D), have blamed what they characterize as the intransigence of Colonial’s owner, Jeff Jacobs and his company, Jacobs Entertainment. But in this open letter, Tim Valente, president of the Old Dominion Thoroughbred Horsemen’s Association, an alternative horsemen’s group founded at Jacobs’ suggestion, says that that perspective misses the point.
OPEN LETTER FROM THE ODTHA
from ODTHA president Tim Valente
The sport of kings died in the Old Dominion on November 17 and the people responsible for its safeguarding should be the ones taking the heat for its demise, not the owner of Colonial Downs.
Unequivocally, it is the Virginia Racing Commission’s (VRC) responsibility to promote and grow the sport within the state. Yet their actions over the last two years, and specifically at the commission meeting one month ago, have set the sport back a century. Oh, there are plenty of local horsemen claiming that thoroughbred racing in Virginia has been saved by finally chasing out the bad guy. Be careful what you wish for. Without the Colonial Downs facility and its world class turf course, many of the pleasures of spending a day at the races will be a distant memory… specifically pari-mutuel wagering. What remains can truly be called “native” racing as the commissioners so eloquently called it in the November meeting. The racing venues they will be promoting from now on will be very similar to what our ancestors used: Fields and make-shift tracks. If that’s progress, then job well done. All I can say is, King Charles II must be rolling over in his grave right now.
How did it get to this point? By any proper or rational accounting methods, Jeff Jacobs has lost a substantial amount of money over the 17 years he has owned Colonial Downs. Period. It matters not whether it’s $60 million or $100 million, or how much Mr. Jacobs initially invested in the track, as if that makes the losses he sustained over those years somehow more palatable. Clearly, the business plan in place over those 17 years was not sustainable. The track was losing money. Things needed to change. This should have been a shared concern amongst the major stakeholders, not just a Colonial Downs problem; it was not. The thinking was, “That’s his problem. He can afford it.”
When an industry report was issued by McKinsey & Company in 2011 and followed up by the Jockey Club’s “Building Sustainable Growth” in 2012, Colonial Downs and other racetracks around the country took notice. Finally the industry had a plan on how to grow the business. One of the McKinsey report’s recommendations was to run fewer races with higher purses. Mr. Jacobs and his management team also recognized that advance deposit wagering (ADW) sites and simulcast wagering facilities were now generating a bigger slice of the overall handle. To compete on the national level and remain viable, Colonial Downs knew it must upgrade its product.
Rather than completely convert to a high-end product, Colonial suggested a combination of higher-end races and lower tier or “bread and butter” races for 2014. Jacobs wanted to emulate the Kentucky Downs blueprint for growth – a real-life example where less racing days and higher purses have produced outstanding results. Jacobs was even willing to invest his own money to see this vision become a reality. However, the Virginia Horsemen’s Benevolent and Protective Association (VHBPA) refused to budge from its old ideology of running multiple weeks of lower level racing – a business strategy proven to be unprofitable and unsustainable. Racing was cancelled for 2014 and thus began the two-year impasse between the VHBPA and Colonial Downs.
When it became apparent that things would not be resolved with the VHBPA, Jeff Jacobs asked me if there were enough horsemen out there willing to support Colonial Downs and this new strategy. ODTHA was organized after I personally spent countless hours on the phone and visiting tracks on the East Coast, mainly in the Mid-Atlantic region. I was convinced that trainers and owners not only wanted racing to return to Colonial Downs but also supported our strategy of upgrading the racing product. In the fall of 2014, after negotiations once again failed with the VHBPA, Colonial Downs asked the VRC to recognize ODTHA so that racing could return for 2015.
When the VRC refused to recognize ODTHA, Colonial Downs surrendered its “unlimited” license – a license that had become a liability, not an asset, considering the untenable schism that existed between the parties. Remarkably, when it became apparent the VRC would not win the legal battle to prevent the recognition of ODTHA, they claimed the “unlimited” license rescission by Jeff Jacobs in 2014 was a “character issue” and based on this, denied Colonial Downs a “limited” license for 2016.
Jeff Jacobs has made it clear he will not continue to subsidize Virginia racing. These subsidies have escalated each year because the industry has evolved into the “haves and have-nots”. The “haves” are the racetracks that have other forms of wagering such as slot machines or instant racing machines that augment purses and offset the high costs of conducting live racing. Governor McAuliffe seems intent on blaming Jeff Jacobs for the direction of an industry that must couple its product with other forms of gambling revenue to sustain itself. Virginia’s elected officials have chosen to ignore this reality. Yet it was the politicians who urged Jeff Jacobs to make a substantial investment in Virginia thoroughbred racing 17 years ago. Governor McAuliffe should be thanking Mr. Jacobs for his investment, not publicly attacking him for attempting to adapt and grow his business in a difficult industry.
The Churchill Down‘s Virginia ADW dispute is another example of the dysfunction and lack of control under the leadership of the current VRC. Churchill becomes the second business to publicly voice their displeasure regarding the hostile regulatory environment in Virginia. TwinSpires.com Director of Communications Ed DeRosa told The Blood-Horse, “We question the constitutionality of the Virginia ADW statutory scheme and are prepared to defend our position.” Churchill’s concerns echo those voiced by Colonial – that a group of horsemen persuaded an ill-advised Governor McAuliffe and the Virginia legislature to pass a law this summer to redirect millions of dollars each year away from the racetrack and into a bank account controlled by the horsemen.
In summary, Commissioner D.G. Van Clief Jr. said in his closing statement that the bifurcation of the racing and its horsemen was the wrong course of action to promote future growth of the industry in Virginia. I could not disagree more with that assessment. Bifurcation is the only reasonable solution to adjudicate this impasse. I would urge elected officials to back the VHBPA in their pursuit of “native” racing in Northern Virginia and support Colonial Downs in their efforts to bring about high-end racing with a multi-day Virginia Derby festival each year.
“Adapt or die.” This is precisely why Virginia needs its political leaders to step up now. Governor McAuliffe has done nothing to assist Colonial Downs in its effort to bring nationally recognized racing to Virginia. My hope is that Virginia’s next Governor will spend some time and effort making major league thoroughbred horse racing a priority once again in Virginia. If and when it does return to its former glory, I’m hopeful that Colonial Downs is the place that showcases it, and the sport we have come to know, enjoy and love for more than 17 years is alive and kicking.