2005 Minutes

Virginia Racing Commission

MINUTES OF THE SPECIAL COMMISSION MEETING
SEPTEMBER 28, 2005
STATE CORPORATION COMMISSION
TYLER BUILDING COURTROOM B
1300 EAST MAIN STREET
RICHMOND, VIRGINIA

In Attendance Commission Members:
Anne D. W. Poulson, Chairman
Peter C. Burnett, Vice Chairman
Mark T. Brown
David C. Reynolds
Dr. George W. Rimler

Commission Staff:
Stanley K. Bowker, Executive Secretary
Kimberly M. Carter, Office Administrator
David S. Lermond, Jr., Director of Pari-Mutuels
Marvin A. Sniegon, Director of Financial Management and Planning

Attorney General’s Office:
Teresa Griggs

__________________________

At 9:40 a.m., Chairman Poulson called the meeting to order.

Chairman Poulson stated that this is a special meeting to continue the discussion that began on September 7, 2005 on the Stock Purchase Agreement of Management and Consulting Agreement between Colonial Downs and the Maryland-Virginia Racing Circuit. She stated that the format for the meeting would start with representatives from Colonial Downs giving opening comments for the record followed by a presentation from the Maryland Jockey Club.

James Weinberg, counsel for Colonial Downs, introduced all parties who were available to answer questions and thanked the Commission for the opportunity to provide opening remarks.

Mr. Weinberg said he first would like to addresses responses made by Colonial Downs to the letter of September 22, 2005 from the Commission’s staff requesting additional information.

He said among the benefits of the management agreement purchase for horsemen would be additional purse money from account wagering and $100,000 per year for backstretch improvements. From a management perspective the structure would be clear and unambiguous and not divided between two organizations and Colonial could refocus on the management of the satellite wagering facilities to further grow business at those facilities. Finally he said the concerns over the window in which no overlapping of thoroughbred days was guaranteed had been expanded and backed up to an opening date of June 1 at the determination of Colonial Downs.

Joseph De Francis, President of Maryland Jockey Club, was introduced and he provided an historical perspective of how racing in the Mid-Atlantic region has evolved since Colonial Downs had first been licensed by the Commission in 1994. He stated at that time full-card simulcasting was just beginning, there was no account wagering and there was very little discussion about alternate forms of gaming including slots. He added then it was important to maximize live racing days.

Now, Mr. De Francis continued, racing is dealing with a dramatic different world. Now account wagering has become an important part of the growth of the industry, we have new competition from simulcasting in which every track in the country is competing with every other track in the country and putting on a quality show is absolutely critical to the viability of the industry.

After having served Maryland well in the 70’s and 80’s, he said the old business model is a dinosaur. With slots all around, the only way to improve against the competition is to provide higher purses and by finding a unique niche. Maryland and Virginia have a niche with more turf racing than is available at other tracks.

Mr. De Francis added two business models that now seem to be the most successful involve VLTs and limited live racing supported by simulcasting and off track betting facilities. Those options provide opportunities to maximize purses that produce high quality racing that in turn makes the sale of the signal on the live races attractive to locations throughout the country and eventually internationally as well.

For Maryland to become competitive with purses, it has to reduce live race days. He said MJC has proposed a plan reducing live days from 200 to 112 in 2006. Those days would involve 60 days at Laurel from January 1 through mid-April. Racing would move to Pimlico for 18 days concluding with Preakness Day in mid-May. The final 34 days would be run at Laurel beginning the first week of November.

In addition to the change in live racing days, MJC plans to close the Bowie training facility permanently after receiving legislative approval. And training would cease at Laurel and Pimlico as well during the summer months.

When asked about a timetable for Maryland Racing Commission approval of MJC’s proposed schedule, Mr. De Francis said he did not have a strong indication of when the Maryland Commission will decide. He said the complexity of the issues and the opposition by Maryland horsemen will be receiving a lot of further debate and discussion.

Chairman Poulson said there still is concern about the potential overlap of live thoroughbred race days and she asked if the window could be opened up a little more and she asked about MJC’s current position on overlapping days.

Mr. De Francis responded that the circuit concept is more important now than ever before and there could not be overlapping days with Virginia and Maryland competing for the same horses if either is to be successful. He said he believed it was in the best interest of both Virginia and Maryland to have a clearly defined window of when there would be no overlapping days.

Commissioner Reynolds asked how the June 1-July 31 dates would square with Virginia’s plan for 50 days in 2007.

Commissioner Burnett asked if it was possible to state in the agreement that Virginia can run anytime Maryland is not running.

Mr. De Francis said he would accept the modification to the agreement of moving the window back to after the Preakness and added Virginia is free to run in August because MJC clearly has no desire to run in August and is not willing to go back and revisit that issue in Maryland.

A clause in the agreement between the two horse groups and Colonial Downs involving negotiations on the division of new money to be available because Colonial no longer will be paying MJC a 2% fee was discussed and Commissioner Burnett said he would be more comfortable if those negotiations took place before the Commission approved the agreement. He further stated he was also interested in when those negotiations would be completed.

Mr. Weinberg of behalf of Colonial Downs said they would be completed by December 1 when Colonial Downs had to apply for 2006 race days.

Commissioner Rimler said he has concerns about the terms in the agreement involving MJC receiving a percentage of pari-mutuel handle if a northern Virginia satellite wagering facility is approved.

Mr. De Francis said northern Virginia is an important area for both Colonial Downs and MJC. He added the purchase agreement could have been structured a little differently with a higher purchase price thereby eliminating MJC’s interest in Virginia but to pass a referendum in that area will take a cooperative effort of both organizations.

Colonial Downs President Ian Stewart added that it will be difficult enough to pass the required referendum without the assistance of MJC and would be impossible with MJC’s opposition. He said a facility in that area will be much larger than any other facility built to date and would be expected to generate considerable more handle.

Commissioner Brown said he was concerned that the management plan has not been fully developed or clearly defined. He said experienced management is being lost and he would like a further explanation of how it will be replaced.

Mr. Stewart said the General Manager’s responsibilities are being split with Jeanna Bouzak to be in charge of the satellite wagering facilities and Iain Woolnough to oversee live racing. Some of their specific responsibilities have not been defined in a box yet but will be soon.

As to marketing, Mr. Stewart said the plan is to have a Marketing Director on board by the end of this year. Craig Andow is expected to continue as harness Race Secretary and a search is being conducted for a thoroughbred Racing Secretary.

Commissioner Burnett stated that when MJC went to the Maryland Racing Commission two weeks ago, it presented what was called a “Plan for Maryland Racing 2006 and Beyond.” He said with as big a change as will result from the purchase of the management agreement from MJC that Colonial Downs needs a similar clear cut plan on where it is going. He said he still is unclear where the management change is going to lead Virginia racing.

Chairman Poulson said she has similar questions and would like to see a similar plan when Colonial Downs applies for 2006 race days on December 1. Mr. Stewart committed to providing such a plan with the race days request.

During public comments, thoroughbred trainer-owner-breeder Michael Pearson said that results of the last year of racing in Virginia have been very positive and said the industry should not lose focus on the fact that most of the money for racing is coming from the satellite facilities. He added more facilities are needed and the industry must do a better job of educating the bettors in Virginia.

It was moved, seconded and unanimously voted that the Stock Purchase Agreement of Management and Consulting Agreement between Colonial Downs and Maryland-Virginia Racing Circuit be approved with the amendments as agreed to by Mr. De Francis.

In reviewing the Case Decision involving Colonial Downs’ original license, it was determined that the only deviation that was required was in paragraph 34 that stated in part: “Maryland Jockey Club has committed to manage the Colonial Downs thoroughbred meet.” That subsequently was amended to include the standardbred meet and the satellite wagering facilities. It was moved, seconded and unanimously voted to approve the deviation. As a result, the Maryland-Virginia Racing Circuit’s operator’s license was to be terminated as soon as the purchase agreement was closed.

There being no further business before the Commission, the meeting adjourned at 12:30 p.m.