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Virginia Racing Commission
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Historical Horse Racing [under development] [11 VAC 10 ‑ 47]
Action To Promulgate Regulations Pertaining to Historical Horse Racing
Stage NOIRA
Comment Period Ends 3/20/2019
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3/20/19  3:12 pm
Commenter: John Hannum, Virginia Equine Alliance

Virginia Equine Alliance Comments on Historical Horse Racing Permanent Regulations
 

Introduction

                The Virginia Equine Alliance (VEA) is the "nonprofit industry stakeholder organization" statutorily recognized by the Virginia Racing Commission ("the Commission"). Va.Code 59.1-392.1 (1). It is comprised of the the Virginia Horsemen’s Benevolent & Protective Association (owners and trainers), the Virginia Thoroughbred Association (breeders), the Virginia Harness Horse Association (owners, trainers, and breeders), and the Virginia Gold Cup Association (steeplechasers).  VEA's mission is to sustain, promote, and expand the state's horse industry, including breeding and horse racing.

                According to the American Horse Council's recent study the horse industry directly contributes over $1.34 billion to Virginia's economy, along with 29,232 jobs. Adding the indirect and induced economic ripple effects results in an estimated total contribution of $2 billion to Virginia's economy. See, Economic Impact of the Horse Industry in Virginia, American Horse Council, p. 3 (2018).

               VEA was formed in 2014 because the horse racing and breeding sector of the industry became moribund with the closing of Colonial Downs, Virginia's only track for thoroughbred and standard bred racing with pari-mutuel wagering. Drawing on limited financial resources generated by revenue from on-line wagering on out of state races, VEA and its member organizations were able to: (1) revive harness racing in Virginia, with the cooperation of the Shenandoah County Fair, by spending more than a million dollars to rebuild the fairgrounds track in Woodstock, Virginia to facilitate Fall race meets; (2) stimulate breeding in Virginia by setting up a bonus program for owners of Virginia bred and Virginia certified horses winning races in six neighboring states, which to date has paid out over $1.5 million in bonus money and brought about 1500 new horses to the state; and, (3) build and operate four satellite wagering facilities in Richmond, Chesapeake, and Collinsville (Henry County).

                However, until last year VEA was stymied in its attempt to revive thoroughbred racing, the heart of the industry, because there was no suitable racing venue other than the shuttered Colonial Downs. Fortunately, the Colonial Downs Group of investors (“Colonial”) came along, and in April 2018 bought Colonial Downs.  That purchase was preceded by months of discussions between VEA, its member organizations, and Colonial, which included a consensus on hosting as soon as possible fifteen to thirty days of quality thoroughbred racing at Colonial Downs.

                All parties, as well as the Commission, understood that goal was not attainable without a new revenue source called “historical horse racing.” Specifically, the Commission formally adopted the December 2017 report of its Strategic Planning Committee that concluded:

In today’s economic environment, live racing is not self-sustaining. Thus, developing HHR . . . is vitally important to securing the long-term future of flat-track racing in Virginia. HHR revenue . . . is needed to substantially supplement a flat track’s considerable operational costs and ensure purse levels that are competitive with neighboring states. . . . if HHR is not developed in Virginia it is doubtful that Virginia’s horse racing industry will ever be competitive with Maryland, Pennsylvania, or Delaware; on the contrary, Virginia’s horse-racing industry, without HHR, will remain an also ran.

See, Virginia Horse Racing Industry Strategic Plan, December 2017, pp. 12-13,        www.vrc.virginia.gov.

              Indeed, experience at the old Colonial Downs showed revenue based on live racing and traditional simulcast wagering at satellite facilities was not sufficient to finance quality racing in Virginia that was competitive in the Mid-Atlantic region. For that reason, VEA strongly supported passage of HB 1609, which created the potential for life saving revenue by authorizing use of historical horse racing terminals.

Upon signing HB 1609, Governor Northam in his Executive Directive to the Commission accompanying HB 1609 noted:

“ . . . Virginians have been breeding and racing thoroughbreds for hundreds of years, and it is an important part of our economy. . . . Without a major thoroughbred track in the state where Virginia-bred horses can race, and without a source of revenue to support the industry, it will be difficult for Virginia to once again be a place where the horse industry can thrive.

See, Governor’s Executive Directive I (2018), Directing the Virginia Racing Commission Regarding Regulations Related to Historic Horse Racing Pursuant to House Bill 1609.

                After enactment of HB 1609 redevelopment of Colonial Downs began in earnest. To date the new owners have spent $150 million in rebuilding and refurbishing the race track and  related facilities, as well as developing new satellite wagering sites in Richmond, Vinton, Hampton, and Chesapeake. When complete the total cost of renovation and renewal will be $300 million.

                Under its horsemen's contract with the Virginia HBPA, and with the Commission's approval, Colonial will host a 15 day thoroughbred race meet this year from August 8th through September 7th, with purses totaling $7.5 million. Next year the meet expands to 30 race days with purses projected to be in excess of $15 million. That will make Virginia racing very competitive with the racing product offered in Maryland, Delaware, Pennsylvania, West Virginia, and New Jersey. But all the foregoing is premised on successful implementation of historical horse racing.

Comments on the Proposed Historical Horse Racing Regulations

                VEA commends the Commission for its work in bringing horse racing back to Virginia.  Without its assistance VEA's efforts would have come naught. We now respectfully request the Commission's continued help in launching and sustaining thoroughbred racing in 2019 and beyond.

                The Commission's "Final Draft of Historical Horse Racing Regulations ("the Draft")," dated September 19, 2018, is a step in the right direction. The Draft implements HB 1609 by establishing rules for the use of historical horse racing ("hhr") terminals at the track and at satellite wagering facilities. However, VEA proposes modifying the regulations in one respect. The Draft places a hard cap on the number of hhr terminals that may be placed at the race track and its satellite wagering facilities. See, 11VAC10-47-180 (7) ("In no circumstance shall the combined statewide total number of historical horse racing terminals located at satellite facilities and significant infrastructure facilities exceed 3,000."). We submit the Commission must have discretion to increase that number, if necessary, to generate additional revenue to promote, sustain, and expand the state's horse industry.

                Specifically, 11VAC10-47-180 (7) should be modified by adding a final clause  to the one sentence paragraph (7) so it reads:  (7) "In no circumstance shall the combined statewide total number of historical horse racing terminals located at satellite facilities and significant infrastructure facilities exceed 3,000 unless the Commission determines that an increase is necessary to generate revenue to promote, sustain, and expand the Commonwealth's horse industry.

                Based on its financial projections VEA believes a 3000 terminal cap may not produce sufficient revenue to sustain 30 days of thoroughbred racing beyond 2020. And it most likely will not yield enough revenue to support 30 race days and fund the expanded breeding and certification programs that have begun with such promise by bringing hundreds of new horses to Virginia. Nor will it support the need to expand harness racing beyond 10 days of racing in the Fall at Shenandoah Downs. And finally, Virginia's steeplechase race venues, highlighted by the Virginia Gold Cup, will require additional funds to support purses and offset operational expenses.

                In short, the Commission must be accorded reasonable discretion to fulfill its statutory mandate to assist in the "promotion, sustenance, and growth of a native industry" when circumstances change. Va.Code 59.1-364 (A).

                                                                                                                           

Respectfully submitted,

John B. Hannum III

Executive Director

Virginia Equine Alliance

March 20, 2019