Red ink puts future of Colonial in jeopardy Blame spread around for Va. track's plight

July 04, 1998|By Kent Baker | Kent Baker,SUN STAFF

NEW KENT COUNTY, Va. -- The show will go on at Colonial Downs this fall, come hell or high debt.

"We're going to open, but it may have to be under the protection of Chapter 11 [bankruptcy]," said chief executive officer Jeffrey Jacobs. "We will keep working to make it work."

Virginia's first parimutuel track is winding down its first harness meeting -- the meet ends tomorrow -- amid disappointing attendance, controversy that encompasses two arbitration procedures, requests for concessions from the state's horsemen's groups, growing deficits and charges of mismanagement.

Colonial Downs' second thoroughbred session is scheduled to start Aug. 26, with the public company's cash reserves dwindled and a projection for a $3 million to $4 million loss by the end of

the year.

Barring a financial turnaround, future meetings appear in serious doubt.

L How did this happen? The answer depends on who is giving it.

Jacobs recently criticized the Virginia Racing Commission for "pressure it exerted" that forced him to pay off $4 million -- draining his cash reserves -- to subcontractors who helped build the track. Jacobs holds that Norglass, Inc., the primary contractor during construction, is responsible for paying the subcontractors. The matter is in arbitration.

Colonial Downs' first thoroughbred meet, which ran 30 days and ended last Oct. 12, performed far below expectations. Track management had projected an average attendance of 4,000 and live handle of $400,000, but the track's final averages were 3,600 and $183,000. The total handle of $5.5 million was $6.5 million below projections.

The harness meet drew 6,153 opening night, but attendance fell off quickly. Minus that big opening crowd, attendance averaged 1,300 through late May, with betting at $58 per person. In the first 15 days, there were five crowds of 900 or fewer. The Richmond (Va.) Times-Dispatch reported that Colonial Downs was reluctant to supply attendance and handle figures with the results it was sending to newspapers.

Most of the betting action takes place at satellite facilities on some nights. The stands at the state-of-the-art track are often eerily empty. There have been few lines at the betting windows or concession stands, and the impression is that the races are being run primarily for telecast purposes.

"We've got to get more bodies in there," said Charlie Dunnavant, president of the Virginia Harness Horsemen's Association. "These people just don't know about wagering down here. They think it's like playing the lottery. They've got to be educated that it's more a game of skill than luck."

"I'm fearful that they're underspending on promotion," stock analyst Mike Beall of Davenport & Co. told the Roanoke (Va.) Times & World News earlier this year. "As a shareholder who follows the company, I've learned to live with the fact they're not going to make money for the first few years. I think it's important that they build momentum for the sport in the state."

Expertise in such matters is supposed to come from the Maryland Jockey Club, which receives a 2 percent take from all betting (exclusive of live harness) for managing the thoroughbred meet.

Joe De Francis, the Maryland Jockey Club's president, said: "What we're most disappointed in is that they haven't relied on us more. They should take advantage of our management and allow it to become more involved. A lot of the problem can be solved fundamentally.

"There's an awful lot of needless overlap, with people doing things we could do cheaper and better."

Seeking relief, Colonial would like to cut the fee to the Maryland Jockey Club and to save money by reducing the number of races.

De Francis agreed to the arbitration of the fee, which amounts to nearly $3 million. The matter is being heard by John Shenefield, the first chairman of the Virginia Racing Commission.

De Francis seems willing to bend somewhat to make Virginia racing more viable, although Colonial Downs still has not reimbursed the jockey club some $750,000 for last year's services.

"I think it was a mistake for them to run their harness meeting head-to-head with Rosecroft," he said. "But there is no reason with four OTB parlors and competent management that the thoroughbreds can't go.

"With the turf course in place this year, their thoroughbred meeting should be very successful."

However, Virginia's horsemen are disenchanted with track management, and they're taking a hard stance against a track proposal to cut daily cards from 10 races to seven. Horsemen favor, instead, a reduction in the number of days run.

"We are most definitely opposed to fewer races," said Woodberry Payne, president of the Horsemen's Benevolent and Protective Association. "To maintain the present purse schedule average], there should be a minimum of nine races a day.

"We're sympathetic with the company, but the reduction of racing days is the best area to work with."

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