VanValkenburg's bill aims to force planned Henrico gaming facility to face public referendum or lose revenue

Work is ongoing to prepare a Henrico shopping center site for the arrival of a controversial gaming boutique – slated to include as many as 175 historical horse racing machines, a wine bar and live entertainment – but Henrico State Senator Schuyler VanValkenburg (D-16th District) is hopeful that an amendment he has introduced in the Virginia Senate will cause the organization’s parent company to reconsider its plans.

VanValkenburg’s Senate Bill 1223 would reduce, by more than half, the amount of money any such facility in the state could retain from wagering pools if that facility had not been specifically authorized by voters as part of a referendum and if the Virginia Racing Commission had not specifically authorized historical horse racing machines within its locality before Jan. 1, 2024. 

The facility (to be known as Roseshire) planned in the Staples Mill shopping center at Glenside Drive and Staples Mill Road by Churchill Downs, Inc., meets neither condition. An opening date has not yet been set, though the county issued a building permit for the site Nov. 7.

The bill advanced through a subcommittee of the Senate’s General Laws and Technology Committee by an 8-0 vote Jan. 20 following a brief hearing and next will advance to be weighed by the full committee. It would limit to 3.5% the total portion of wagering pools that Roseshire, or any other historical horse racing facility in the state that hadn’t met the amendment’s criteria, could keep. (The eight such facilities currently operating in Virginia – all satellite facilities of Churchill Downs-owned Colonial Downs race track in New Kent County – are permitted to retain between 7.3% and 7.9%.) 

It also would earmark 10% of that amount to be split evenly by the locality and the state as a tax payment, further reducing the company’s share.

VanValkenburg and Henrico officials hope that passage of the amendment could cause Churchill Downs to halt its plans and seek the passage of a public referendum instead, rather than surrendering what potentially could amount to as much as $13 million to $17 million or more of annual revenue from Roseshire – a facility that company officials expect to generate well more than $300 million annually in wagers.

During Monday’s subcommittee meeting, Churchill Downs Government Affairs Director Aaron Palmer told senators that passage of the amendment would “put us out of business” at the location.

VanValkenburg and Henrico County Legislative Liaison Mike Schnurman told the subcommittee that the intent of the amendment was not to ban the facility from Henrico but rather to ensure that citizens of the county could have input into where, or whether, it should locate in the county.

“We’re not trying to punish the licensee who wants to come into the community,” VanValkenburg said. “This bill is seeking to incentivize the public approval process. One of the tenets that we have around gaming and casinos [in Virginia] is that we do referendums so that. . . we see if the public supports it.”

But Palmer argued that passage of the measure would unfairly punish only Churchill Downs and would do so despite the fact that the company had not done anything that wasn’t permitted at the time.

“At every step we followed the law, their regulations,” Palmer said of the county.

HHR: a $5 billion business in Virginia

During its short time in existence in Virginia, historical horse racing has become a big business.

Legislation adopted in 2018 by the General Assembly and regulations developed by the Virginia Racing Commission permitted Colonial Downs and its parent company to open and operate as many as 10 off-track gambling facilities statewide offering historical horse racing machines, as a way to help fund live racing purses at the track (which is Virginia’s only horse racing rack).

The eight HHR facilities that Churchill Downs operates in Virginia (each of which carries the Rosie’s name or a variation thereof) were on pace to have generated more than $5 billion in wagers during 2024 – including nearly $347 million in revenue to the company – according to reports reflecting the first 11 months of the year that were published on the VRC’s website.

During those same 11 months, the 1,442 HHR machines at three of the HHR facilities nearest to the Henrico site – those at Colonial Downs, in Richmond and in Dumfries  – generated an average of $5,287.32 per day. At that rate, 175 machines at Roseshire in Henrico would generate $337.72 million in total revenue during a full year and result in an expected payout to Churchill Downs of between $24.6 million and $26.6 million under current law or about $10 million if VanValkenburg’s amendment ultimately passes.

HHR machines look like slot machines but allow people to wager on previously run horse races by selecting a horse (by number) after viewing its past race performances. Horses and their jockeys are not identified by name. The machines show only the last 10 seconds or so of a given race, and thousands of races are included in the system’s database.

Friction began after sale of Colonial Downs, Rosie's

The friction between county officials and Churchill Downs began in 2023, months after the company’s 2022 purchase of Colonial Downs and Rosie’s Gaming Emporium from their previous owner, Peninsula Pacific Entertainment (P2E), for $2.485 billion.

Several years earlier, P2E officials had approached Henrico officials interested in locating a gaming emporium in Henrico, but after meeting with county officials, they agreed that “they didn’t want to go anywhere in the county that they were not welcome,” Schnurman told the subcommittee. Several potential sites didn’t work out, but then the county connected P2E with a developer near Scotts Addition, whose site nearly was nearly a fit but ultimately lacked the necessary surface parking, he said.

In 2023, the new owners approached Henrico and indicated their interest in opening a gaming facility and ultimately the Staples Mill shopping center site. Henrico officials suggested that it would not be a good option, given its proximity to a residential area and because a proposed Sheetz around the corner had generated significant community opposition. But unlike their predecessors, Churchill Downs officials did not intend to stick only to sites that county officials endorsed.

“The response [from Churchill Downs] was ‘I’m sorry, I didn’t make that deal, that was somebody else,’” Schnurman recalled.

Concerned, Henrico officials called an emergency leadership meeting to address the issue.

The theme: “These folks are no longer abiding by the arrangement that we had [with Rosie’s],” Schnurman recalled before the subcommittee.

With that, county officials set out on a months-long process to close a loophole in the county’s code that dated back to the 1992 approval by county voters of a referendum authorizing “pari-mutuel wagering on live horse racing and off-track betting.” HHR machines did not exist at that time, but when the General Assembly passed the legislation in 2018 that allowed them in the state, they were permitted in localities that had approved such referendums.

In Henrico, that meant that a facility with as many as 175 HHR machines could be opened by right on any property zoned B-2 (Business) District and there was nothing county officials could do to stop it unless they changed the code.

But that process required several months, and five days before supervisors voted to finalize the changes, Churchill Downs submitted plans for the gambling facility, thereby grandfathering those plans under the old standards.

Incensed, county officials contacted the company to urge its representatives to withdraw the plans and resubmit them under the new law. 

“The response was crickets,” Schnurman told the Senate subcommittee.

Then, the entire Henrico General Assembly delegation (two Republicans and six Democrats) penned a letter to the company’s CEO urging the same thing.

“The response was crickets,” Schnurman repeated.

To Brookland District Supervisor Dan Schmitt, the company’s timing and subsequent lack of communication with the county burned bridges.

“It’s like they don’t care,” he said. “They must never want to do [future] business in the county. Congrats on your 175 machines, but good luck.”

Weighing possible next steps

Schmitt, a Republican, praised the efforts of VanValkenburg, a Democrat, and echoed remarks made by the latter to the subcommittee: that the fact elected officials so quickly unified in a bipartisan effort on the issue demonstrates how much they all believe that citizens must have a voice in the plans.

“It all boils down to the same desire,” Schmitt told the Citizen. “It is not to not have these establishments, it’s to simply require them to come in front of the public like a gas station does, like a dentist’s office has to, like a builder who wants to build residential homes has to.

“The idea is not to make them different because they donate a lot of money to legislators.”

But Palmer, the Churchill Downs representative, told the subcommittee that his company engaged with Henrico officials in 2023, accepted the county’s suggestion that Short Pump would not be an appropriate place for the gambling facility and recently followed the advice of county officials by rebranding the facility (from Rosie’s Gaming Emporium to Roseshire). Although the company submitted its plans for the site days before the county code was updated, Churchill Downs officials had been working on the concept for months, Palmer said.

“We were well underway with the application prior to their zoning change,” he said. 

Churchill Downs contributes more than $54 million in taxes in Virginia, Palmer said, and the Roseshire project is likely to generate about $4 million more, including about $800,000 to Henrico, according to company projections posted on the facility’s website. 

The state law governing HHR facilities requires that a 6.3% local tax (calculated on net gaming revenue) be split evenly between the locality in which the facility is located, and New Kent County (the home of Colonial Downs).

VanValkenburg already has asked Virginia Attorney General Jason Miyares to weigh in on the legality of grandfathering HHR machines into the 1992 referendum – something the senator believes is not legal, considering that the machines didn’t exist then. 

When asked whether Henrico officials might consider a lawsuit on similar grounds, Schmitt told the Citizen that wasn’t a consideration.

“They have the legal right,” he said. “I don’t think there’s a legal question on this. But there’s a business relationship, there’s community partners, there’s service to the community [that matter too]. There are places for this industry. Clearly there’s demand. But similarly there’s places where they should not be – and 500 yards from a resident’s front yard is probably one of those places.”