Keeneland’s, Churchill Downs’ new track plans get cool reception from racing commission

Keeneland, the Lexington racetrack and Thoroughbred auction company, and Churchill Downs, the home of the Kentucky Derby in Louisville, announced a plan Friday to open two new racetracks and gambling parlors.

One track would open in Corbin, just off Interstate 75 north of Tennessee, and another in Oak Grove, on Interstate 24 near Fort Campbell.

No details were immediately released about how the partnerships would work or whether they will share revenue equally.

However, a statement late Friday by the Kentucky Horse Racing Commission from chairman Frank Kling and vice chairman John Roach said they have no plans to consider the requests any time soon.

“Over the last several months, we have informed Kentucky’s race tracks that we would not consider any applications for new race track facilities in Kentucky. Despite that communication, Churchill and Keeneland have chosen to submit an application for new race track facilities,” the statement said. “At this time, neither of us have any plans to take any action related to this application or any other application for a new race track facility. It is our hope that in the future we will be able to develop a process and criteria to determine whether any new race track facilities are needed in the Commonwealth.”

Historical horse racing machines are allowed only at active racetracks. The track in Corbin would offer Quarterhorse racing, as Keeneland previously has planned, according to Vince Gabbert, vice president and chief operating officer. The Oak Grove track would offer harness racing, Gabbert said Friday.

John Asher, vice president of racing communications for Churchill Downs, said many details are being worked out, including how many race dates the tracks will apply for.

“We’re probably looking at boutique-type meets: smaller, but hopefully of great benefit for the areas that host the tracks,” Asher said. The two venues hope to develop as tourism attractions that will draw in visitors as well as create jobs, he said.

Gabbert didn’t release the projected cost of building the two tracks and gambling parlors or the potential revenue. Both would be operated jointly. The application for Corbin will include a request for 250 gambling machines, and the application for Oak Grove will include a request for 500 machines, he said.

The applications for the licenses were expected to be filed Friday with the Kentucky Horse Racing Commission. Kentucky has nine racetrack licenses, including one that isn’t in use. Another for a harness track at Prestonsburg called Thunder Ridge has been under scrutiny by the commission as costing more to regulate than it generates in betting.

It would be up to the commission to decide who gets licenses, Gabbert said. The timetable for building the tracks would depend on when, and if, the licenses are awarded. Kentucky sets the racing calendar for the next year in October.

“We wouldn’t apply if we weren’t optimistic about what it means for the industry,” he said.

To share the news about the new tracks, the two companies released a video featuring Churchill CEO Bill Carstanjen, Keeneland president and CEO Bill Thomason, Kentucky Thoroughbred Association executive director Chauncey Morris, and Kentucky Horsemen’s Benevolent and Protective Association executive director Marty Maline praising the plans.

“Horse racing is a $4 billion industry in the commonwealth that creates thousands of jobs, strengthens our statewide economy and attracts millions of visitors from around the globe,” Carstanjen said in the video. “Churchill Downs and Keeneland share a deep commitment to making Kentucky’s horse racing industry the very best version of itself, and the new racing facilities in Corbin and Oak Grove will help us achieve this by generating much-needed funds to increase purses and breeders’ incentives.”

In June, Churchill Downs announced plans to open its first historical wagering parlor after years of saying that the machines, based on previously run horse races, couldn’t compete with traditional slots. Churchill’s $60 million Trackside gambling parlor will be at the track’s former Sports Spectrum in Lousiville.

Historical horse racing, which proponents say is parimutuel, has been challenged in the courts. Opponents of expanded gambling claim that it’s illegal. The case is in Franklin Circuit Court; a trial date has been set for January.

It’s unclear exactly how much the new projects could generate for purses, for the tracks or for the state. The three historical horse-racing parlors operating so far have widely varying levels of revenue.

Both new parlors, Gabbert said, would likely use the gambling platform that Churchill is developing rather than the one that Keeneland uses at Red Mile.

Since 2015, Keeneland has jointly operated a gambling parlor at Red Mile. The parlor now has more than 900 machines; in August, more than $23 million was bet there, generating more than $1.35 million for the tracks and almost $350,000 for the state in taxes. However, it lags far behind the Kentucky Downs parlor, which opened four years earlier, in handle and revenue.

In August, Kentucky Downs’ 695 terminals saw almost $54 million in handle, generating more than $3.4 million for the track and purses and more than $800,000 in taxes.

The average daily handle per machine at The Red Mile was $826 in August; at Kentucky Downs, it’s $2,491.

In August, there were about 1,700 terminals operating at three Kentucky tracks, with handle of almost $83 million. Year to date, almost $170 million has been wagered on the machines, generating more than $10.6 million for the tracks and purses and another $2.5 million in Kentucky excise taxes so far this fiscal year.

The state general fund receives a sliver of the excise tax; in the fiscal year to date through August, the machines generated more than $535,000 for the general fund. The rest of the excise tax goes to programs dedicated to horse racing, including purses, research and education. Most of the money that is bet goes back to the players in winnings.

Gabbert said he has heard no discussion of any plans to increase the amount of revenue that would go into the general fund from historical horse racing. The tracks probably would oppose that move.

“We have a product that is a slow-growth, but long-term is a very sustainable product,” Gabbert said. For long-term viability, historical horse racing “must remain consistent to provide purses.”

Churchill Downs and Keeneland are working with the Tourism, Arts and Heritage Cabinet and other state and local officials on incentives and necessary infrastructure improvements for both sites, according to the companies.

Bruce Carpenter, economic development director for Corbin, told the Herald-Leader that local leaders think the track there would provide a significant boost to the economy. The projection is for the track to provide 125 or more permanent jobs, plus additional seasonal jobs, and tospur other development including restaurants and retail outlets, Carpenter said.

The land in Corbin is owned by an industrial-development authority made up of Knox, Whitley and Laurel counties, and the tracks have an option to purchase for an undisclosed price.

The population of Corbin is 7,800. The three counties have a combined population of about 135,000.

In 2013, Keeneland announced plans to buy the license used by harness track Thunder Ridge in Prestonsburg and moving it Corbin. At that time, the Lexington track said it was teaming up with Nevada-based Full House Resorts, which would have run the historical racing slots parlor there with a quarterhorse track.

But that plan never came to fruition because Keeneland couldn’t secure the license. However, in July, a deal was reached to pay off an outstanding $2.2 million bond on the Floyd County track, which would clear the way to move the track.

The tracks also have an option on property in Christian County, which is near Fort Campbell, home to about 31,000 soldiers, Gabbert said. More than 50,000 of their family members live on or near the base, according to the public affairs office.

This story was originally published September 15, 2017 at 8:37 AM with the headline "Keeneland’s, Churchill Downs’ new track plans get cool reception from racing commission."