Colonial Downs is pulling the plug on EZ Horseplay, the last tie to off-track betting that finances Virginia horse racing, putting the future of racing in New Kent County, or anywhere in the state, in doubt.
Track owner Jeff Jacobs is officially cutting ties with the Virginia Horsemen's Benevolent and Protective Association by way of the immediate closing of three EZ Horseplay advanced deposit wagering facilities, formerly used for off-track betting, on Wednesday and the closing of 70 EZ Horseplay kiosks across the state by the end of the month.
The move comes 10 days after Gov. Terry McAuliffe proposed an amendment to a 2-month-old General Assembly compromise that would give a nonprofit organization made up of horse owners a chance to take over the betting facilities if Colonial Downs didn't get its license back by Aug. 1.
"There are no agreements that lead us to a license ... so we're going our separate ways," said track President Stan Guidroz of the impasse between Colonial Downs and the Virginia Horsemen's Benevolent and Protective Association.
Off-track betting is the key to horse racing in Virginia because it funds the industry for both the track and the horsemen.
"That's our revenue stream. That's our economic engine," Guidroz said. "Without those, it makes it very hard to make money. That's why they want them."
Bernard Hettel, executive secretary of the Virginia Racing Commission, said the agency understands Jacobs' choice as a business decision made after Jacobs assessed Colonial Downs' profit losses.
"Colonial Downs is on track again to lose $3 million. We're going to reduce those losses by shutting those venues down," Guidroz said.
The decision also brings a fresh round of layoffs for the remaining 32 employees at a company that employed more than 600 people across Virginia in its prime. Employees were informed of the decision on Monday.
McAuliffe's amendment calls for a nonprofit organization, appointed by the racing commission, to reopen the facilities if Colonial Downs doesn't get its license back. That organization must include the Virginia breeders, the VHBPA and a racetrack.
Although it hasn't been officially recognized by the racing commission, the Virginia Equine Alliance — formed in October by the Virginia Thoroughbred, the Virginia Horsemen's Benevolent and Protective, the Virginia Gold Cup and the Virginia Harness Horses associations — is the only group that meets that criteria, said Debbie Easter, executive director of the Virginia Thoroughbred Association.
The purpose of the alliance is to provide Virginia horsemen with purse money for races at Colonial Downs and new tracks that may be established across the state, said William Allison, president of the Virginia Gold Cup Association and chairman of the Virginia Gold Cup Races.
Those in the Virginia Equine Alliance and Brian Coy, a spokesman from McAuliffe's office, maintain that the amendment was created to ensure that the off-track betting facilities could reopen, with or without Colonial Downs.
"Colonial Downs still has the right of refusal," Coy said. "This makes sure those facilities and the jobs they support stay open if Colonial Downs decides not to go ahead ... it's for if things fall off the cliff."
Easter said the horsemen are not planning to seek an off-track betting license — unless Jacobs does not get a racing license.
"That's not our intent, to go in there on June 30 and apply for a license for an off-track betting facility — that's not what we do," Easter said. "We don't run off-track betting facilities, but there was a lot of revenue prior to their shutdown, so we see some value in having them open. Plus, we have a good many people around the state who enjoy going to them."
But Jacobs and Guidroz don't interpret the amendment that way.
Guidroz said the amendment undermines the negotiations that shaped their compromise that was struck at a 7:30 a.m. meeting in the office of Senate Majority Leader Thomas K. "Tommy" Norment Jr., R-James City County, on Feb. 6.
At that time, the parties agreed that because Jacobs invested $80 million in Colonial Downs, which included the off-track betting facilities, he should be the one to reopen them, Guidroz said.
Guidroz said the amendment destroys any incentive the horsemen had to cooperate with the track because they could pursue opening their own off-track betting facilities.
"If they can just open them, then why would they want to cooperate with us," Guidroz asked. "It just circumvents the whole process. It borders on an expansion of gaming in my opinion."
Norment, whose district includes New Kent County, spent time mediating the negotiations and said he is disappointed in Jacobs' decision to cut ties with the VHBPA because of the lost revenue to New Kent County and the state's horse racing industry.
"I'm very disappointed to see the agreement that I thought we had mediated during the session come unraveled. I think everyone is going to find themselves a little short," Norment said. "I think it is a lose-lose proposition. I'm especially disappointed for the citizens of New Kent."
Guidroz said that the horsemen are framing the amendment as a last resort if Jacobs decides not to get a racing license, while refusing to cut a deal and making it impossible for him to reapply for one. Jacobs cannot reapply for a license without a contract with the Virginia Horsemen's Benevolent and Protective Association, which belongs to the Virginia Equine Alliance.
"They're changing the agreement and calling it a backup plan," Guidroz said. "It's just bad faith. It's not a backup plan. It's a way to get what they wanted in the first place."
In the weeks following the General Assembly, Colonial Downs tried to strike a leasing agreement with the alliance for the track, off-track betting facilities and EZ Horseplay, but the horsemen rejected the offers or put stipulations on them that the track couldn't accept, Guidroz said.
One such offer included a single day of racing at Colonial Downs so that the off-track betting facilities could reopen. After a few weeks of negotiating, Guidroz said it became apparent to him that the horsemen weren't interested in making a deal and talks ceased.
"They don't need this amendment to open up the off-track betting facilities. They just won't agree with Colonial to do it. They are doing everything they can to make sure we don't get a license," Guidroz said. "They have refused (a deal) not because they don't want the millions in purse money, but because the off-track betting facilities also help fund Colonial's cost — and in my personal opinion, they are trying to starve Colonial from operating expenses."
Although Jacobs' decision to shut down EZ Horseplay puts a hold on racing at the New Kent County track, Guidroz said Jacobs has no intention of selling the track or off-track betting facilities. The company intends to maintain the infrastructure and reopen when it secures a contract with a different horsemen's group that is interested in bringing high-end thoroughbred racing to New Kent County, Guidroz said.
In the past, Colonial Downs has tried to get approval for a horsemen's group that it helped organize, called the Old Dominion Thoroughbred Horsemen's Association. Last fall, Jacobs said that if the Virginia Racing Commission did not accept the new horsemen's group he would turn in his racing license. Although the group was never officially rejected, Jacobs made good on his promise in October after the commission hinted they would not support the group.
Guidroz said it won't be easy to get a new horsemen's group recognized, but he believes it's the only viable business model that will get racing back to New Kent County.
"Right now, we have no other options," Guidroz said. "A different horsemen's group, we feel, is the only way. We're still here trying to work this out. If there's support from the racing commission to have high-end racing at Colonial Downs, we want to figure out whatever those details are."
Hettel said that the commission will determine a majority horsemen's group based solely on numbers and participation when the new legislation takes effect on July 1.
"Majority rules," Hettel said. "The majority would be determined by the Virginia Racing Commission by sheer numbers, sheer participation. Membership, pledge cards, affirmation of what group you belong to."
The release said that Jacobs believes Virginia horsemen want to move racing out of New Kent County and into Northern Virginia. He said a move would be in line with the horsemen's concerns of not being able to compete in high-end races at Colonial Downs.
Jacobs also said the new legislative framework for the horse racing industry in Virginia, including McAuliffe's amendment, is to pacify the Virginia horsemen at the expense of public policy.
"The 800-pound gorilla in the room is the fact that Virginia's thoroughbred horses cannot compete against most horses from other states," Jacobs said. "Unfortunately, Virginia's regulatory and legislative pari-mutuel framework is about to become oriented to subsidizing these horses. That may quiet the voices of the VHBPA; however, it is poor public policy and does nothing to grow the native industry."
McAuliffe's recommendation came less than two weeks before a critical rescheduled Virginia Racing Commission meeting — and three days before an April 1 deadline Colonial Downs set for striking a deal with the horsemen.
"They came to the alliance the first part of March and said if we couldn't complete a deal to lease everything they had they were going to close the door," said Michael Pearson, executive director of the Virginia Gold Cup Association. "It's like going to the dance with someone who doesn't want to dance. What do you do? Do you keep paying for your date's tux and shiny new shoes, and then he sits in the chair?"
Guidroz said he put the deadline there because he thought 30 days was plenty of time for the parties to agree on leasing terms.
The racing commission meeting was supposed to happen on March 5, but was rescheduled for Wednesday due to snow.
Both parties say they are thinking about the future of Virginia horse racing — but Jacobs said until Colonial Downs can work with a different horsemen's group, that future doesn't lie in New Kent County.
Members of the Board of Supervisors in New Kent County are upset by Jacobs' choice and the effect it will have on county revenues, said board member Ron Stiers. Prior to the track's Nov. 1 closing, the county collected about $400,000 annually in tax revenue.
"We hate to see the revenue that's lost to the county because it affects, either directly or indirectly, everybody in this county," Stiers said.
"We're disappointed — extremely disappointed — about there not being racing in New Kent County," Guidroz added. "We didn't orchestrate the outcome of this. We didn't refuse to race in 2014. We think it's terrible."
Staff writer Dave Ress contributed to this report. Mayfield can be reached by phone 757-298-5828.