Re-Opening Colonial Downs in 2019

harness racing at Colonial Downs was unaffected by the 2014 license dispute, but after the 2014 races it too became just a memory
harness racing at Colonial Downs was unaffected by the 2014 license dispute, but after the 2014 races it too became just a memory

The Colonial Downs race track in New Kent County closed in 2014. Owners of the track were unable to convince the horse owners and the state to reduce the number of days of racing and expand opportunities to earn revenue from gambling not associated with live racing at the track. Closure of Colonial Downs impacted owners of Thoroughbred racehorses in Virginia, and reduced jobs and tax revenues in New Kent County in particular. Even before the track closed, there were numerous proposals to replace and/or re-open Colonial Downs.

Colonial Downs was the only track that offered pari-mutuel betting in Virginia year-round at OTB parlors, but Virginia law already authorized the Virginia Racing Commission to issue a limited license to a non-profit organization for up to 14 days of gambling at other tracks. Legal betting on horse races had occurred at Oak Ridge Estates and Morven Park before Colonial Downs opened, and those venues became the obvious alternatives once Colonial Downs closed in 2014.

After the negotiations between the Colonial Downs track and the VHBPA collapsed in 2015, the governor and the General Assembly agreed to new legislation that authorized 10 off-track gambling parlors that would not be controlled by Colonial Downs. Opening the OTB parlors would re-start the flow of gambling revenue to the horse industry, and help subsidize races at sites other than Colonial Downs.1

in 2015, with the track at Colonial Downs closed, there was only a 15 percent dip in revenues from Advance Deposit Wagering (betting via internet/phone)
in 2015, with the track at Colonial Downs closed, there was only a 15% dip in revenues from Advance Deposit Wagering (betting via internet/phone)
Source: Virginia Racing Commission, 2018 Annual Report

In October 2015, after closure of Colonial Downs, the Virginia Equine Alliance arranged for four days of harness races with pari-mutuel betting at Oak Ridge Estates. The Virginia Racing Commission has issued a limited license for three weekends of harness races there in 2001. That site suffered from the same handicaps as Morven Park, which had offered Virginia's first licensed pari-mutuel betting in 1991-92. Oak Ridge Estates was too far away, and the customer base was too small. Not enough Standardbred horse owners were willing to travel to a short meet in Nelson County.

Oak Ridge Estates attracted more interest in 2005, when it announced plans to apply for an unlimited pari-mutuel license. The plan was to offer steeplechase races prior to the start of the Colonial Downs Thoroughbred races in June, but the proposal was dropped. Another decade passed before harness racing, with legal betting, returned to Nelson County in 2015.2

While Colonial Downs was still operating, one county fair continued to offer harness racing. Racing has been a tradition at the Shenandoah County Fair since 1917; the $1,000 purses attract horses from as far away as New York and South Carolina. A Wine and Trotter festival started in 2013 to offer an opportunity for racing in the Spring. Until 2016, the races during the Shenandoah County Fair and the Wine and Trotter festival did not offer legal pari-mutuel betting.3

Though Colonial Downs had an exclusive license to offer year-round racing with legalized betting, it was still threatened by potential competition. A developer in Stafford County had drafted another proposal in 2002 to build a second racetrack and get a second license to offer year-round racing with legalized betting, but that proposal never resulted in a formal request for approval by the Virginia Racing Commission.

No track in Virginia was ever been awarded a second unlimited license. Colonial Downs retained its monopoly on OTB facilities between 1996-2014, because the state feared competition would undercut the economic viability of the track in New Kent County.4

In 2013, the Virginia Racing Commission authorized short-term betting at the long-running Virginia Gold Cup steeplechase. That event has been held in Fauquier County since 1922. After two years of racing initially at the Oakwood estate, the Gold Cup was moved to Broadview Farm. It was run there until suburban sprawl encroached.

Starting in 1985, the race has been held at Great Meadow. That site is in northern Fauquier County near I-66, on a parcel that was once planned to be developed for housing.5

the Gold Cup steeplechase race in Fauquier County dates back to 1922, and got a limited license to offer pari-mutuel betting starting in 2013
the Gold Cup steeplechase race in Fauquier County dates back to 1922, and got a limited license to offer pari-mutuel betting starting in 2013
Source: Library of Congress, Looking at the gold cup. Horse races at Warrenton, Virginia (1941)

The May, 2013 Gold Cup's wagering was processed in tents with betting machines, using staff brought in from Lexington, Kentucky. The trained clerks were available because the Kentucky Derby was held on the same day in Louisville, Kentucky. A race in nearby Lexington could not compete with that event, but the clerks could find work at the Gold Cup in Fauquier County.

To minimize the time waiting in line for the October, 2013 meet, the Gold Cup used online betting via smart phones. To make that possible, $80,000 was invested to expand the Wi-Fi capabilities at the track.6

the Great Meadow steeplechase racetrack (home of the Gold Cup) is near I-66 and convenient for the Northern Virginia population, while the Colonial Downs thoroughbred/harness racetrack was located on I-64 to attract customers from Richmond/Hampton Roads
the Great Meadow steeplechase racetrack (home of the Gold Cup) is near I-66 and convenient for the Northern Virginia population, while the Colonial Downs thoroughbred/harness racetrack was located on I-64 to attract customers from Richmond/Hampton Roads
Source: ESRI, ArcGIS Online

After Colonial Downs closed in 2014, owners of Virginia Thoroughbreds raced their horses in Maryland and other states. In 2015, the Virginia Racing Commission authorized Laurel Race Track in Maryland to host officially three "graded" Thoroughbred races that had previously been held at Colonial Downs - the Virginia Derby, Colonial Turf Cup, and Virginia Oaks.

The Virginia Equine Alliance endorsed the change, and the Virginia Horsemen's Benevolent and Protective Association committed $800,000 in total purse money. However, Colonial Downs objected to the transfer of races to Maryland. The track claimed it had invested in promoting those races, and had intellectual property rights for their names.

Two Grade II races, the Virginia Derby and the Colonial Turf Cup, were renamed the Commonwealth Derby and the Commonwealth Turf Cup. The Grade III Virginia Oaks race was renamed the Commonwealth Oaks. (Top-graded races, with the best Thoroughbreds racing for the best money, are classified as Grade I.)

Horse races have reputations, like horses, trainers, owners, and race tracks. The American Graded Stakes Committee of the Thoroughbred Owners and Breeders Association grades races, assigns grades based on the amount money awarded to the winners (purse value) and other criteria. Races of a similar grade attract horses of similar talent, creating a competitive setting that spurs betting and generates income for the industry.

Races must be run for at least two years under similar conditions to earn a grade. Failure to host a race for two years results in the grade being withdrawn. The Virginia Racing Commission, with funding from the Virginia Horsemen's Benevolent and Protective Association, preserved the status of three Thoroughbred races by holding them in Maryland.

The Virginia-themed Commonwealth Derby, Commonwealth Turf Cup, and Commonwealth Oaks races have been held at Laurel Park since their inaugural runs in 2015. The Commonwealth Turf Cup was renamed the Baltimore/Washington International Turf Cup in 2017, when all three races were run on "Commonwealth Day" - in Maryland. After the closure of Colonial Downs, Maryland racing expanded. The primary role of the horse industry in Virginia shifted to breeding and training, rather than racing within the state.

The state racing agency and the Virginia horsemen chose to abandon the All Along Stakes and found no site for it in 2015. That Grade III race had been run since 1998 until Colonial Downs closed. To regain a grade in the future would require two years of offering that race without a grade, making it harder to attract horses, before asking the Thoroughbred Owners and Breeders Association to classify the All Along Stakes again.

Instead, Laurel renamed the Lady Baltimore States as the All Along Stakes race starting in 2017. It was not run on Commonwealth Day. The race once run at Colonial Downs was listed on Laurel's card for Maryland Million Day, "Maryland's Day at the Races," three weeks later.7

in 2015, three of Virginia's Thoroughbred races moved to Laurel Race Track in Maryland in order to maintain their graded status, before shifting to Morven Park in 2016
in 2015, three of Virginia's Thoroughbred races moved to Laurel Race Track in Maryland in order to maintain their graded status, before shifting to Morven Park in 2016
Source: ESRI, ArcGIS Online

After Colonial Downs finally closed, the track owner still sought to establish the Old Dominion Thoroughbred Horsemen's Association as an alternative to the Virginia Equine Alliance. The track requested authorization from the Virginia Racing Commission to hold one day of Thoroughbred racing after Thanksgiving in 2015, and 20 days in 2016. It offered a $2,000 incentive for horse owners to join the Old Dominion Thoroughbred Horsemen's Association sponsored by Colonial Downs, in hopes of undercutting the Virginia Equine Alliance.

The application for one day of racing after Thanksgiving in 2015 also blocked the Virginia Racing Commission from granting authorization to the Virginia Equine Alliance to open its own off-track betting facilities.

That maneuver by Colonial Downs put financial pressure on the horsemen's association in 2015. Under the regulations of the state commission, the alliance would be allowed to keep 4% of bets made online to finance purses for races and to cover operational costs. That funding had gone to Colonial Downs, until the track stopped offering Thoroughbred races.8

Colonial Downs then filed suit in Federal court claiming that the Virginia Racing Commission's recognition of the Virginia Equine Alliance as the "majority horsemen's group" violated the Interstate Horseracing Act of 1978.

Once the suit was filed, the track abandoned its proposal to offer one day of racing after Thanksgiving, 2015. Instead, it applied to the Virginia Racing Commission for a license to run four days of Thoroughbred races in the summer of 2016, while postponing plans to offer 20 days of racing until 2017.

The application for 2016 races included working through the track's Old Dominion Thoroughbred Horsemen's Association, not the state-recognized Virginia Equine Alliance, to hold the Virginia Derby and the Colonial Turf Cup. The Virginia Racing Commission quickly rejected that proposal. The state agency insisted that Virginia racing requires relying upon just one horsemen's association, and that the group sponsored by Colonial Downs did not represent the Thoroughbred community in Virginia.

The dispute between Colonial Downs, horse owners, and state officials involved strong personality disagreements and also substantial financial assets. Colonial Downs claims it has invested $60 million to build the track in New Kent County, plus another $8 million to build the OTB parlors. Without a horseracing license, those facilities were closed and generated almost no revenue for the private corporation. The six buildings that housed the former OTB parlors were put up for sale by Colonial Downs in January, 2016, a clear acknowledgement that the racetrack would not be re-opened.

After rejection of the application to hold races in 2016, a representative of Colonial Downs indicated the site of the racetrack in New Kent County held "significant promise as a golf course development." The governor's response was not to cater to Colonial Downs, but to endorse moving the authorized racetrack to the northern part of the state:9

Virginia should be a home of horse racing... Maybe we should look at it in Middleburg and other areas of the state where it is very prominent.

Legal pari-mutuel betting at horse races in Virginia did not stop with the closure of Colonial Downs. In 2015, the Virginia Harness Horse Association and the Virginia Racing Commission arranged for a harness race meet with pari-mutuel betting at Oak Ridge Estates in Nelson County.

The Virginia Equine Alliance and the Virginia Racing Commission also arranged for Thoroughbred races in 2015 at Great Meadow, after considering the State Fair site in Caroline County. Great Meadow was established as a steeplechase track, but it had a grass surface for flat turf races up to one and a half miles in length.10

the Great Meadow racetrack near I-66 in northern Fauquier County hosts the Gold Cup steeplechase races
the Great Meadow racetrack near I-66 in northern Fauquier County hosts the Gold Cup steeplechase races
Source: US Geological Survey, Marshall 7.5x7.5 topographic map

For 2016, the Virginia Equine Alliance arranged for Thoroughbreds to race again in two events at Great Meadow in The Plains. The Virginia Racing Commission continued to license pari-mutuel betting at the Virginia Gold Cup and the International Gold Cup, and Virginia Thoroughbreds had dedicated race days in Maryland.

"Mid Atlantic Day" at the Pimlico Race Course in Baltimore featured Virginia-bred horses racing in the morning and Maryland-bred horses in the afternoon. Laurel Park held a separate "Virginia-Bred Day" race, which it had initiated in 2014.

Laurel Race Course advertises racing days based on horses bred in Virginia, so Maryland received most gambling revenues from Virginia Thoroughbreds
Laurel Race Course advertises racing days based on horses bred in Virginia, so Maryland received most gambling revenues from Virginia Thoroughbreds
Source: Virginia Thoroughbred Association

The governor's comments to "look at it in Middleburg" were based on plans to build a Thoroughbred racing track at Morven Park near Leesburg, a 1,000-acre site with the historic home of former governor Westmoreland Davis. The Virginia Equine Alliance made a five-year commitment. Morven Park agreed to convert its turf steepletrack course, unused for steepletrack racing since 2010, into a flat, one-mile turf course for Thoroughbreds. The plan was to offer "country racing - racing on grass" without a large grandstand.

Colonial Downs had used a dirt track for its major Thoroughbred races. The upgrade to a grass track was expected to help Morven Park compete for the right to host the World Equestrian Games in 2022 or 2026.

The plans for a Northern Virginia racetrack with pari-mutuel betting were abandoned in 2017, in a mutual agreement between the Virginia Equine Association and Morven Park. Costs would have been too high to flatten the steeplechase course and make it suitable for Thoroughbred racing, there were concerns about adequate water supply and runoff pollution in the karst topography, and there were constraints on construction due to potential sinkholes in the limestone bedrock.

In addition, Thoroughbred races at Morven Park could have detracted from other programming at the Morven Park Equestrian Center including horse shows, activities of Loudoun Therapeutic Riding, polo, and training for the Olympics. Instead of converting the steeplechase track into a flat Thoroughbred racetrack, Morven Park chose to support a restart of the steeplechase races in 2018.11

The racetrack at Colonial Downs had capacity for 35,000 visitors. A report on the decision in The Racing Biz included comments from the chair of the Virginia Equine Association that highlighted the difficulty in financing an alternative track to Colonial Downs:12

"...we don't generate the kind of revenue you need to build a Colonial Downs-type place... Those are $40 and $50 million facilities, and we just don't have that type of money."

But if a Colonial-type facility is out of the question, and Morven Park is out of the question, then what?

Unfortunately, in Virginia, we just don't have a someplace else right now..."

the Virginia Equine Alliance chose Morven Park in 2015 to replace Colonial Downs as the site for a two-week Thoroughbred racing meet, but dropped that plan two years later
the Virginia Equine Alliance chose Morven Park in 2015 to replace Colonial Downs as the site for a two-week Thoroughbred racing meet, but dropped that plan two years later
Source: ESRI, ArcGIS Online

After dropping plans for Morven Park, Powhatan Farm in King George County was considered for the site of a new Thoroughbred racetrack. The 1,000-acre farm has been developed for breeding and training horses since 1952. The Virginia Equine Alliance also searched for a buyer willing to purchase and re-open Colonial Downs in New Kent County.13

a racetrack at Powhatan Farm, east of Fredericksburg, would be within a 30-minute drive from I-95
a racetrack at Powhatan Farm, east of Fredericksburg, would be within a 30-minute drive from I-95
Source: Google Maps

The Virginia Racing Commission re-started off-track betting in 2016, when it authorized the Virginia Equine Alliance to open a Satellite Wagering Facility parlor in the Richmond area. The license was granted for a sports bar in Henrico County on Broad Street (Route 250), six miles west of the previous OTB parlor operated by Colonial Downs. Voters in both Richmond and Henrico previously had approved betting on horse races, and the former Colonial Downs facility was located just inside the Richmond boundary line.14

the OTB parlor operated by Colonial Downs at 4700 West Broad Street in Richmond was next to the city-county boundary, but voters in both Henrico County and the City of Richmond had approved pari-mutuel betting
the OTB parlor operated by Colonial Downs at 4700 West Broad Street in Richmond was next to the city-county boundary, but voters in both Henrico County and the City of Richmond had approved pari-mutuel betting
Source: ESRI, ArcGIS Online

Pari-mutuel wagering on harness races in Virginia moved in 2016 to Shenandoah County Fairgrounds. The Virginia Equine Alliance and the Virginia Harness Horseman's Association signed a 20-year contract to hold the Shenandoah Downs meet, to be held each Fall on weekends after the fair concludes.

The Virginia Equine Alliance invested $800,000 to upgrade the half-mile track for harness racing. The first races demonstrated the modified track offered more visibility for customers to see the horses run, in comparison to Colonial Downs where "spectators watched the races through binoculars or a video screen." The larger purses, based on revenue from pari-mutuel bets, were intended to attract higher-quality Standardbred horses to the Shenandoah Downs meet after the fair.15

The Virginia Equine Alliance chose the Shenandoah County site in part because the fairgrounds had fewer scheduling conflicts than Oak Ridge Estates. The fairgrounds is physically closer to the population centers in Northern Virginia and the District of Columbia, so it also had greater potential to attract bettors in person.

In 2017, the second season of pari-mutuel harness racing at the track, was the 100th anniversary of horse racing at Woodstock. It was also the first year bettors could go to an Off-Track Betting parlor in Virginia to lay a wager on the harness races at the Shenandoah County Fairgrounds.16

the Shenandoah Valley Fairgrounds site is next to I-81's Exit 283, providing easy access for those living in the DC-area who want to gamble on harness races
the Shenandoah Valley Fairgrounds site is next to I-81's Exit 283, providing easy access for those living in the DC-area who want to gamble on harness races
Source: ESRI, ArcGIS Online

After rejected the proposal of Colonial Downs to establish a separate horsemen's association and return to racing, the Virginia Racing Commission granted the Virginia Equine Alliance authority to open Off-Track Betting parlors. The first two were located in Richmond at Ponies & Pints in Shockoe Slip (downtown Richmond), and at the Breakers Sports Grille in the West End.

Initial plans were to add the next parlor in Hampton, but two other locations were approved first.

In 2017, an Off-Track Betting parlor opened at Buckets Bar and Grill in Great Bridge. Residents in Virginia Beach, Norfolk, Chesapeake, and Suffolk could drive there easily (except at rush hour), while vacationers needing a break on their trip to or back home from the Outer Banks could choose to stop there as well.17

Buckets Bar and Grill in Great Bridge could attract customers from South Hampton Roads, plus travelers going to and from the Outer Banks
Buckets Bar and Grill in Great Bridge could attract customers from South Hampton Roads, plus travelers going to and from the Outer Banks
Source: Google Maps

Also in 2017, Virginia Racing Commission and Henry County officials authorized Off-Track Betting at a hotel in Collinsville, seven miles north of the site of the parlor that opened in 2005 and closed in 2014.

the Virginia Equine Alliance highlighted the opening of an Off-Track Betting facilty in Collinsville
the Virginia Equine Alliance highlighted the opening of an Off-Track Betting facilty in Collinsville
Source: Virginia Equine Alliance, Virginia Horse Racing

Perhaps more importantly, the site was less than a 30-minute drive from the North Carolina border on the main road between Greensboro and Roanoke (US 220). Since North Carolina does not permit Off-Track Betting, a parlor near the border could draw customers across the state line.18

the second Off-Track Betting parlor in Henry County, at the Dutch Inn, was only 12 minutes further away from the North Carolina border compared to the parlor that closed in 2014
the second Off-Track Betting parlor in Henry County, at the Dutch Inn, was only 12 minutes further away from the North Carolina border compared to the parlor that closed in 2014
Source: Google Maps

In 2018, Revolutionary Racing purchased the Colonial Downs racetrack from Jacobs Entertainment for over $20 million. To sweeten the benefits of the potential deal, Gov. Terry McAuliffe proposed in his last budget to authorize slots-like gaming machines at the track by redefining "simulcast horse racing."

The "historical horse race terminals" would enable gamblers to bet on horse races completed in the past. Some terminals incorporate digitized videos of 60,000 previous races, but gamblers do not know the exact race on which they are betting. They get enough information about the horses to choose the top three finishers. Only after making the bet does a gambler get to see who is racing, then watch a clip or all of the race.

Because the payout based on pari-mutuel odds, the General Assembly does not consider it to be casino gambling. As described in the Richmond Times-Dispatch:19

The terminals hide the names of the horses and the location and date of the race until the user locks in a wager by predicting how the horses will finish. The machines can display the horses' odds at the time the race was run, injecting an element of skill that makes the game slightly different from the pure luck of slots.

The head of the Equine Alliance supported the proposal, saying:

Race tracks can't make it on live racing anymore... We've got this wonderful world-class facility down there at Colonial Downs that's basically sitting there rotting.

The General Assembly ended up debating the bill separately from the budget. That process made even more clear that a large majority of the legislators approved adding slots-like betting machines to the Colonial Downs site in 2018, facilitating the sale to Revolutionary Racing. The vote in the House of Delegates on HB 1609 was 71-29. The key vote in the State Senate was 23-17, blocking a one-year delay, before final approval by a 31-9 vote.

Advocates for the horse-raising industry in Virginia, together with lobbyists for Revolutionary Racing, made the case successfully that:

- commercial horse farming in Virginia (beyond wealthy homeowners raising a few horses for recreational use) required creating a commercial opportunity for horse racing
- a viable horse racing business required loosing the restrictions on gambling

Opponents to what they called a "massive gambling expansion" lost the argument. The General Assembly has committed to subsidizing horse farming in Virginia through gambling, including legalizing historical horse racing terminals, satellite wagering facilities (Off-Track Betting parlors), advanced deposit wagering (betting from home over the internet), and live races at Colonial Downs.

Legislators concurred that expanding gambling options was essential to get Colonial Downs restarted. Otherwise, Virginia's horse-raising businesses would relocate near the horse-racing tracks in Pennsylvania, Kentucky and Maryland. After Colonial Downs closed in 2014, Maryland added 30 days to its racing calendar. That filled the summertime space when horse operations in Maryland used to migrate to New Kent County.

the logo for New Kent County includes a horse head, in recognition of the Colonial Down track
the logo for New Kent County includes a horse head, in recognition of the Colonial Down track
Source: New Kent County

Revolutionary Racing anticipated it would invest $50 million to restart live horse racing at Colonial Downs and open a Rosie's "gaming emporium" there. Total revenue from gambling would, after five years, was projected to exceed $200 million. Only $7 million would come from 25 Thoroughbred race days at Colonial Downs, plus an additional $1-2 million from three days of steeplechase racing.

the General Assembly approved historical horse race terminals in 2018, so that revenue would incentivize Revolutionary Racing to re-open Colonial Downs
the General Assembly approved historical horse race terminals in 2018, so that revenue would incentivize Revolutionary Racing to re-open Colonial Downs
Source: Revolutionary Racing, The Economic Impact of Colonial Downs in Virginia (p.5)

Off-Track Betting terminals would generate $30 million and advanced deposit wagering would generate $5 million. Historical horse race terminals, in a facility operating 24 hours/day and 7 days/week at Colonial Downs and in Off-Track Betting parlors, could generate $160 million in total revenue. That included $26 million in annual tax revenue, plus $18 million for the horse industry. The $18 million would be distributed according to a formula in state law among the Virginia Breeders Fund, Virginia-Maryland Regional College of Veterinary Medicine, Virginia Horse Center Foundation, Virginia Horse Industry Board, and Virginia Thoroughbred Association " to sustain and promote the growth of a native industry."

Gamblers were expected to bet $12,000/day on each machine, with 96% of the bets returned as winnings. Revolutionary Racing will keep 2.75%.

The 1.25% state share was projected to generate $150 daily per machine. The state will keep 0.75% of its 1.25% tax.

The other 0.5% of the state's share goes to New Kent County for machines at Colonial Downs. For machines at Off-Track Betting facilities, the local share will be divided. New Kent County will get 0.25%, and the other 0.25% will go to the jurisdiction in which the Off-Track Betting facility is located. As many as 1,400 jobs could be associated with the re-opened horse track.

The state will split its 0.75% share with the Virginia Equine Alliance. For the first $60 million in revenue, the state will transfer 6% to the group. Above $60 million, the Virginia Equine Alliance will get 7% of the state's share.

When Revolutionary Racing entered the market, eight localities had already authorized Off Track Betting parlors: the cities of Richmond, Hampton and Chesapeake; the counties of Henrico, Henry, Brunswick and Scott; and the town of Vinton in Roanoke County. The Virginia Equine Alliance was operating just four parlors. All were in sports bars: Breakers Sports Grille in Henrico County east of Short Pump, Ponies & Pints in Richmond's Shockoe Bottom, Buckets Bar and Grill in Chesapeake, and The Windmill at the Dutch Inn motel in Henry County (Collinsville).

in 2018, eight localities had authorized Off Track Betting parlors but only four (blue) had one in operation
in 2018, eight localities had authorized Off Track Betting parlors but only four (blue) had one in operation
Source: Wikipedia, Map of Virginia's counties and cities

Revolutionary Racing agreed to purchase those facilities from the Virginia Equine Alliance for $10 million. The new racetrack owner projected that it would generate 80% of its anticipated $200 million in annual revenue by 2022 from historical horse racing terminals. That could affect the atmosphere in the neighborhoods that had hosted the Off Track Betting parlors. As one observer noted:20

They're going to be surprised when they wake up one day and there's 300 slot machines around the corner.

The Virginia Racing Commission regulations determined how many historical horse racing terminals could be installed at each Rosie's Gaming Emporium. It authorized up to 3,000 total machines, far more than the 1,755 historical horse racing machines that Kentucky had permitted..

A total of 600 machines are allowed at the track in New Kent County and 700 machines at OTB parlors in jurisdictions with at least 120,000 people. If Revolutionary Racing offered less than 15 days of live racing, with at least six races each day, then the cap would be 100 machines per day of racing. The Virginia Racing Commission built a clear incentive into its proposed regulations to offer at least 15 days of live racing; if there were only 14 days, then the number of authorized terminals would drop from 3,000 to 1,400. Revolutionary Racing may not make much profit from hosting extra days of live racing at Colonial Downs, but the Virginia horse industry will benefit.

Like Colonial Downs, the OTB parlors in Richmond, Henrico County, and Chesapeake were allowed to install 700 terminals. Communities with 60,000 to 120,000 people could have 300 machines. Those with less than 60,000 people were limited to 150 machines, except New Kent County could have more because it was the home of the Colonial Downs track.

Only 150 machines are authorized in Henry County/Martinsville and at Vinton, because they have less than 60,000 people. Revolutionary Racing complained that the number was too low because a Rosie's Gaming Emporium there would serve a regional customer base rather than just local residents. The website for Colonial Downs headlined its story on the approval of regulations "Virginia Horse Racing Officials Adopt Rules That Limit Expansion Of Slots-Like Gambling Machines."

Rosies Gaming Emporium in Vinton
Rosies Gaming Emporium in Vinton

The historical horse race terminals blurred the boundary between skills-based selection of a winning horse and simply pulling the arm/pressing the button of a slot machine. Skills-based machines not associated with horse race are available in nearly every jurisdiction now, located in places with licenses to sell alcohol. Though they closely resemble slot machines, they offer an opportunity for the user to make a decision before pressing the button again. That creates the legal loophole which defines the machines not as gambling instruments, but as skills-based instruments because some results are not based 100% on chance.

The distinction is not obvious to a first-time user. When showing off the first historical horse racing machines delivered to Colonial Downs in 2019, the chief operating officer of the Colonial Downs Group commented:21

If you don't understand horse racing or you don't consider yourself a handicapper, just by hitting the spin button you can automatically pick the top three horses ... without having to do any work at all

Rosie's Gaming Emporium includes a restaurant, bar, and video-based gambling terminals
Rosie's Gaming Emporium includes a restaurant, bar, and video-based gambling terminals
Source: Colonial Downs

Revolutionary Racing is allowed to open a total of 10 OTB parlors. The constraint had been obtaining voter approval, and small localities such as Scott County and the Town of Vinton had approved betting. The Virginia Racing Commission incentivized locating more parlors in larger jurisdictions, by authorizing more machines in places with a larger population. Revolutionary Racing could make more profits by installing more machines in just a few locations, but expansion into larger cities or suburban counties would require more voter approval campaigns.

After the initial regulations were adopted by the Virginia Racing Commission, Revolutionary Racing planned to open Rosie's betting parlors with historical horse racing machines at the track in New Kent, Richmond, Hampton, Vinton, and Chesapeake. The Hampton facility was projected to have 1,000,000 people come through the door in the first year to bet on horses. Many would be repeat customers, and 80% were expected to come from outside of Hampton's city limits. The projection suggested than Hampton would see a net increase in economic activity, not just a shifting of local spending from purchasing different services to gambling.22

The new Rosie's Gaming Emporium in Vinton hired over 100 people. Half were responsible for gaming operations, including technicians to maintain the historical horse racing machines, security staff, and tellers. The other 50% were typical hires for a restaurant. Colonial Downs, fundamentally a gambling operation, highlighted in its hiring advertisements that it offered wholesome entertainment:23

We are family, friends and neighbors taking care of and serving family, friends and neighbors.

In South Richmond, the new Rosie's Gaming Emporium with 700 historical horse racing terminals, a restaurant, and a bar replaced a closed K-Mart. Revolutionary Racing eased local concerns by committing to contribute $500,000 to the nearest elementary school, Miles Jones Elementary School.24

Rosie's Gaming Emporium facilities opened first in New Kent and Vinton
Rosie's Gaming Emporium facilities opened first in New Kent and Vinton
Source: Colonial Downs, Locations + Hours (as of May 31, 2019)

Martinsville was not on the initial list. An earlier editorial in the Daily Press, urging restraint in the expansion of gambling, had noted how the local economic potential drove smaller communities to ask for more machines beyond the limit of 150:25

The money generated from historical horse racing alone is enough to make any struggling locality see the color of cash.

Revolutionary Racing sponsored voter referenda in 2019 to get local approval to open a Rosie's Gaming Emporium in Danville and Dumfries. Dumfries had 5,000 residents, well below the 60,000 person threshold for hosting more than 150 terminals. Getting the issue on the ballot in Dumfries required only 137 signatures, 5% of the town's 2,724 registered voters.26

Danville has only 40,000 residents, so it too could host only 150 machines. To get a referendum on pari-mutuel wagering in 2019, Revolutionary Racing easily collected the 5% of signatures needed from the city's 28,054 registered voters. The company hired 25 signature collectors who went to events around Danville, including the minor league baseball park and breweries. In 1987, when Virginia voters approved a referendum authorizing pari-mutuel betting on horse racing, people in Danville had voted against it by 52% to 48%.27

In the 2019 general election, 60% of voters in Dumfries approved opening a local Rosie's Gaming Emporium. In Danville, the ratio flipped compared to 1987 and 52% of the voters were in favor of gambling. Colonial Downs planned for the two new facilities to offer pari-mutuel betting on historical horse races and satellite betting on live races at tracks across the United States.28

Revolutionary Racing could have chosen a location in Pittsylvania County and placed 300 machines in Pittsylvania County. The potential for getting voter approval was lower in that county, and there was a risk that the population of Pittsylvania County would drop below 60,000. In 2018, the Weldon Cooper Center estimated there were 61,640 people in the county, a decline of 2.9% since 2010. If the Pittsylvania County population continued to drop, the Virginia Racing Commission might impose a 150 machine limit in a Rosie's Gaming Emporium.29

To support a 2019 re-opening, the Virginia Racing Commission chose not to run two graded stakes races in Maryland in 2018. Funding for the purses of the Commonwealth Derby for three-year-olds and the Commonwealth Oaks for three-year-old fillies was retained, and could be used to increase the stakes for 2019 races.

The final license required 15 racing days for Thoroughbreds in 2019, and 30 racing days in 2020.30

The Equine Alliance supported expanding gambling options, anticipating that the new historical horse race terminal revenue would be directed to the horse industry to stimulate breeding, training, and other operations on Virginia farms. The president of the Equine Alliance noted bluntly:31

Race tracks can't make it on live racing anymore.

At the same time the General Assembly authorized historical horse racing terminals, the Virginia Department of Alcoholic Beverage Control approved the use of new video gaming machines in establishments with a liquor license.

The state agency has determined that so long as a game is based predominantly on skill and not chance, it is legal. Machines that require a customer to use hand-eye coordination or memory in order to win a prize are not gambling machines. A bar with a liquor license can provide skills-based games for customer entertainment, without risking a loss of the liquor license.

a game that requires skill is, by definition, not a game of chance
a game that requires skill is, by definition, not a game of chance
Source: Queen of Virginia Skill and Entertainment, Compliance and Legal

The manufacturer of "Queen of Virginia" advertised that it was Virginia's only legal skill game, citing the ruling from the Virginia Department of Alcoholic Beverage Control.32

bars can include Queen of Virginia games without the risk of losing their liquor license
bars can include Queen of Virginia games without the risk of losing their liquor license
Source: Queen of Virginia Skill and Entertainment, Compliance and Legal

The potential economic benefits for New Kent County and the state altered expectations that Virginia would never authorize casino gambling.

Federal recognition of the Pamunkey tribe in 2015, through the administrative process of the Bureau of Indian Affairs, created the potential for the tribe to develop gaming operations. The Indian Gaming Regulatory Act defines the procedures required for creating a compact with the state, which would be required to offer games of chance (such as slot machines) in addition to games of skill (such as betting on a historical horse race).

"Skills-based" machines in bars may divert a few gamblers away from a trip to Colonial Downs, but could also spur gamblers to start betting on horse raises. In contrast, the Pamunkey tribe could emerge as a major competitor to the horse racing business.

In April, 2018, the Pamunkey revealed that an Illinois-based video gaming company had purchased 610 acres on I-64, ten miles west of Colonial Downs at the Route 205 interchange. It could be developed into a $700 million casino and resort, employing as many as 4,000 people. At the end of 2018, after receiving a cool reception from New Kent County officials, the tribe announced it was considering a site in Norfolk next to Harbor Park and the Amtrak station.33

two gambling centers were proposed on I-64 east of Richmond, one by the Pamunkey tribe and one at the former Colonial Downs racetrack - and then Norfolk became an option in 2018
two gambling centers were proposed on I-64 east of Richmond, one by the Pamunkey tribe and one at the former Colonial Downs racetrack - and then Norfolk became an option in 2018
Source: ESRI, ArcGIS Online

On April 23, 2019, the first Rosie's Emporium opened at the Colonial Downs racetrack in New Kent County. The horses would not return to the track until August, but for the first time in Virginia customers could gamble legally on the historical horse racing machines at the track. The Rosie's Emporium in Vinton was next to open, on May 9. Richmond, Hampton, and Chesapeake were scheduled to open later.

Each historical horseracing machine at the racetrack was expected to generate $150-$160 in revenue daily. New Kent County anticipated receiving $17 million in new tax revenue, and using it to build a new elementary school and fire station.34

The plans to open in Chesapeake hit a snag in 2020. Colonial Downs planned to open a Rosie's in the closed Sears store at Greenbrier Mall. It was part of a redevelopment project, The Zone at Greenbrier Mall, including a new hotel, bowling alley, and restaurants. Local officials calculated that the developer's proffer of $15 million to offset traffic impacts would not be sufficient, and questioned if the project would attract new visitors from outside the City of Chesapeake. The applicant withdrew the proposal before city council voted on it, and Colonial Downs announced it would look for an alternative location in town.35

Actual horse racing at Colonial Downs restarted on August 8, 2019, a rare revitalization of a horse track in the United States. In the track's first 15-day session, 85% of the bets came from outside Virginia. Betters wagered $17.5 million, and the track was able to offer $7.4 million in purses for horses that ended up in the win/place/show categories.36

gambling re-started at the Colonial Downs racetrack on April 23, 2019
gambling re-started at the Colonial Downs racetrack on April 23, 2019
Source: Colonial Downs

The opening of the track at Colonial Downs and the Rosie's Gaming Emporium facilities had a negative impact on some businesses. Bingo had been the only legal gambling in Virginia, and non-profits such as volunteer fire departments regularly hosted bingo nights, but the number of bingo licenses issued by the Charitable Gaming Board dropped from 382 in 2011 to 240 in 2019.

Attendance dropped due to three factors. The new horseracing options drew customers away from bingo games. Thousands of unregulated slot-like "skill games" were installed in retail stores, restaurants, and bars across the state. Law enforcement officials debated their legality, but the Virginia Alcoholic Beverage Control Authority ruled that places would not lose their liquor license if they installed them. In addition, the Virginia Lottery increased its advertising and betting options 9including games on smartphones) in order to compete.

Topless clubs catering to men in Richmond reported their business had dropped by 50% after Colonial Downs reopened. A business owner commented:37

I would argue that in South Richmond, people don't have a lot of disposable income... You get $200 a week in play money, people are deciding, do they want to play the slot machines or go to the strip club? There's only so much to go around.

The re-opened track drew 36,000 visitors in 2019, when there were 15 days of racing. There were 18 days of racing scheduled in 2020 on Mondays, Tuesdays, and Wednesdays, but then the COVID-19 pandemic threatened to close Colonial Downs again. The Rosie's Gaming Emporiums were closed from March 15-July 1, reducing the revenue available for daily purses.

revenue for daily purses was cut after Rosie's Gaming Emporiums were closed from March 15-July 1, 2020 due to the COVID-19 pandemic
revenue for daily purses was cut after Rosie's Gaming Emporiums were closed from March 15-July 1, 2020 due to the COVID-19 pandemic
Source: Colonial Downs

The track held races, but there were no fans in the stands. A maximum of just 200 people were allowed in the on-site Rosie's and the Jockey Club area. Purses were reduced from a planned $500,000/day to $340,000/day. Jockeys could not ride at another track during the meet, since a 14-day quarantine would be required to return to Colonial Downs.

The track attracted twice the number of horses as in 2020, but racing had to be cancelled halfway through the planned six-week season. A jockey tested positive for COVID-19, and subsequent testing revealed multiple other cases.38

Horse Racing and Gambling in Virginia

Native American Gaming and Casino Gambling in Virginia

Opening - and Closing - Colonial Downs

Slot Machines (and Casino Gambling?) on the Maryland-Virginia Waterfront

only half the planned 2020 races were offered at the track before positive COVID-19 tests forced closure
only half the planned 2020 races were offered at the track before positive COVID-19 tests forced closure
Source: Colonial Downs

Links

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32. "New games let bar patrons cash in, but aren't considered gambling machines," The Virginian-Pilot, July 2, 2018, https://pilotonline.com/business/article_c0852932-749b-11e8-bdc6-c7c126d4ae95.html; Queen of Virginia Skill & Entertainment Game Terminals, https://www.vaskillgames.com/ (last checked December 20, 2018)
33. "Pamunkey Indian Tribe associates buy New Kent land for possible resort, casino site," Daily Press, April 22, 2018, http://www.dailypress.com/news/politics/dp-nws-pamunkey-and-20180421-story.html; "Pamunkey tribe working to buy land for casino near Harbor Park in Norfolk," The Virginian-Pilot, December 19, 2018, https://pilotonline.com/news/government/local/article_0e93ab18-03a7-11e9-89fc-2b17dbcb7b30.html (last checked December 20, 2018)
34. "They're off! Colonial Downs reopens with a different kind of gambling," Richmond Times-Dispatch, April 24, 2019, https://www.richmond.com/news/virginia/government-politics/they-re-off-colonial-downs-reopens-with-a-different-kind/article_fff3ebe3-8035-51ff-9c3a-71ad3923b24c.html; "Rosies's New Kent officially opens at Colonial Downs Racetrack," WWBT, April 13, 2019, http://www.nbc12.com/2019/04/23/rosiess-new-kent-officially-opens-colonial-downs-racetrack/; "Nearly $71 million wagered last month at Colonial Downs' new casinos," Virginia Mercury, June 18, 2019, https://www.virginiamercury.com/2019/06/18/nearly-71-million-wagered-last-month-at-colonial-downs-new-casinos/ (last checked June 22, 2019)
35. "A Rosie’s slots parlor, a hotel and more are no longer headed to Chesapeake’s Greenbrier Mall," The Virginian-Pilot, September 15, 2020, https://www.pilotonline.com/government/local/vp-nw-rosies-gaming-chesapeake-council-20200915-5iyhzzyakjhafdp5w2zysqd5di-story.html (last checked September 16, 2020)
36. "Live horse racing returns to New Kent's Colonial Downs," The Virginia Gazette, August 8, 2019, https://www.vagazette.com/news/va-vg-colonial-downs-opens-virginia-0809-story.html; "Colonial Downs says 2019 races outperformed track's final year under previous owner," Richmond Times-Dispatch, September 11, 2019, https://www.richmond.com/news/virginia/government-politics/colonial-downs-says-races-outperformed-track-s-final-year-under/article_703a9deb-3ffe-5bc9-bda8-080af282f195.html (last checked September 11, 2019)
37. "As Virginia gears up for gambling debate, thousands of slot-like games have already slipped in the back door," The Virginia Mercury, December 20, 2018, https://www.virginiamercury.com/2018/12/20/as-virginia-gears-up-for-gambling-debate-thousands-of-slot-like-games-have-already-slipped-in-the-back-door/; "Amid a surge of slots, bingo's last gasps in Virginia," Virginia Mercury, September 20, 2019, https://www.virginiamercury.com/2019/09/20/amid-a-surge-of-slots-bingos-last-gasps-in-virginia/; "Another potential loser to expanded gambling in Virginia: Strip clubs?," The Virginia Mercury, September 24, 2019, https://www.virginiamercury.com/blog-va/another-potential-loser-to-expanded-gambling-in-virginia-strip-clubs/ (last checked September 25, 2019)
38. "Horse racing returns to Colonial Downs, but purses are down due to pandemic closure of Rosie's," Richmond Times-Dispatch, July 30, 2020, https://richmond.com/sports/local/horse-racing-returns-to-colonial-downs-but-purses-are-down-due-to-pandemic-closure-of/article_25dec278-dcbd-5f56-b809-00941891a7a6.html; "Colonial Downs Adjusts To 'Spectator-Free' Racing," Colonial Downs, https://www.colonialdowns.com/colonial-downs-adjusts-to-spectator-free-racing/; "COVID-19 Update," Colonial Downs, https://www.colonialdowns.com/covid-19-update/; "Colonial Downs cancels remainder of 2020 races due to positive COVID-19 tests," Richmond Times-Dispatch, August 15, 2020, https://richmond.com/sports/local/colonial-downs-cancels-remainder-of-2020-races-due-to-positive-covid-19-tests/article_47643273-2488-5afa-b15e-b12215b4116a.html (last checked August 15, 2020)


Horses in Virginia
Virginia Places