Floyd County officials are worried that the county could be on the hook for more than $2 million over a failed deal between Keeneland and the owners of Thunder Ridge harness racing track in Prestonsburg.
For several years, Keeneland was in talks with Appalachian Racing Inc., which owns and operates Thunder Ridge, to buy that track’s license. The plan was for Keeneland to move the license to a quarter-horse track that it wants to build in Corbin.
Floyd County officials had hoped that deal would include paying off the debt left on a $2.7 million bond that the county issued in 1993 to help the Thunder Ridge project.
But Keeneland chief operating officer Vince Gabbert said Tuesday that Keeneland would no longer pursue the Thunder Ridge license and will instead apply for the state’s ninth license, which is not assigned to any track.
“We originally had contemplated buying the assets of ARI, but our current plans do not contemplate that,” Gabbert said.
Gabbert said Keeneland’s potential deal to buy Thunder Ridge never included debt on the Floyd County bond.
However, Floyd County Attorney Keith Bartley said the county had a separate agreement with ARI that if Keeneland bought the Thunder Ridge license, ARI would pay off the bond debt.
In the absence of that deal, the fiscal court is responsible for the debt.
ARI so far has made all annual payments required under the bond, but local officials are concerned that the company someday either won’t or can’t keep up the payments.
“A $2 million hit at this point would essentially bankrupt the county,” Bartley said, though he added that the county would make other arrangments to pay the debt rather than declare bankruptcy.
Expenses at Thunder Ridge have outstripped revenue for several years, according to a document from the Financial Industry Regulatory Authority.
The county took part in the bond issue more than two decades ago in the hope that the track would boost the economy, said Judge-Executive Ben Hale.
It wouldn’t be fair to stick the county with that debt when all it did was participate as a technical matter to help the project, he said.
“The taxpayers of this county should not be responsible” for the debt, Hale said.
The county has no surplus to pay the $2.1 million. Like several others in Eastern Kentucky, Floyd County is weathering a significant drop in revenue because of the downturn in the coal industry.
Five years ago, the county’s annual budget neared $20 million, but that has been cut to $11 million, Bartley said.
Hale said the county will research its options.
A year ago, ARI asked for an injunction against Keeneland and the Kentucky Horse Racing Commission to stop Keeneland from getting the state’s ninth racing license. A Floyd County Circuit judge granted the injunction, but it was eventually overturned by the Kentucky Supreme Court.
Keeneland applied for the ninth license under the former Horse Racing Commission, which was reconfigured under Gov. Matt Bevin, said Marc Guilfoile, the commission’s executive director. The new commission has not yet decided on that application.
Bartley said that if given an opportunity to intervene, county officials will ask the racing commission to deny the application because of the potential impact on Floyd County. Officials hope that would prod Keeneland to reopen negotiations for the Thunder Ridge license.
Thunder Ridge was created in 1993 by the late Terrell Ross, the co-founder of Ross, Sinclaire & Associates, a politically connected financial company that frequently puts together public bond deals across Kentucky.
The Thunder Ridge deal was set up with a $2.7 million bond issued by the Floyd County Public Properties Corp. Thunder Ridge declared bankruptcy in 1994 but reorganized and stayed open, sometimes asking for Floyd County’s help with bond payments.
Former Gov. Julian Carroll, now a state senator from Frankfort, was a vice president at the track, which also offered stock car racing.
Bartley said the county essentially signed a mortgage when it issued the bond to help Thunder Ridge.
It was a “huge mistake” for the county to take part in the bond issue, Bartley said, but there was an expectation the deal would create jobs.
Also, throughout the mid- and late 1990s, there was a movement to expand casino gambling in Kentucky, which might have placed a lucrative casino at the Thunder Ridge site.
Ross died in 2006, and his partner, Murray Sinclaire of Cincinnati, inherited his shares of ARI.
Related to the issue is a $250,000 fine issued against Ross, Sinclaire & Associates by the Financial Industry Regulatory Authority because of disclosure violations by the firm over Thunder Ridge. According to the regulatory authority, Ross, Sinclaire & Associates acted as the financial adviser on refinancing deals in 2011 and 2015 without disclosing that ARI was owned by Murray Sinclaire. The firm paid the fine as part of a settlement.
The debt on the bonds is now about $2.1 million. According to the FINRA settlement, the most recent refinancing deals have been for one-year terms because of a potential sale of ARI, which has not happened. Another refinancing deal was issued in April 2016 and will be due May 1, 2017.
“The circumstances involving ARI and the FINRA settlement all were inherited from Terrell Ross’s operation of the firm in Kentucky,” said Bill May, a Lexington attorney who represents Sinclaire. “Since Terrell’s death, Sinclaire and ARI have done the best they can to resolve all these issues. It’s a very complicated situation.”
May would not comment on whether Sinclaire would commit to paying off the Thunder Ridge bond.
No one answered the phone at Thunder Ridge, but local officials said the track still seeks a few race dates each year and offers simulcasting. The 50-acre property has a track and barns; the county owns the parking lot and the grandstand, Bartley said.
“You’d probably find about four people there,” if you went there today, Bartley said.
Keeeneland announced in April 2015 that it had chosen a site near Corbin for a track and entertainment venue that would have live quarter-horse racing, year-round simulcasting of races, and hundreds of betting terminals similar to slot machines. Keeneland had said construction was to start in summer 2015 and that it hoped to begin live racing in summer 2016.
Construction has not started on the track, however.
Bruce Carpenter, economic development director for Corbin, said Keeneland is finishing agreements with investors.
Carpenter said he anticipates that construction will start in the next six months. Local officials think the track will be a significant economic boost.
“I feel like it is something that will move forward,” Carpenter said this week. “It will be a great thing for all of Southern Kentucky.”