By T. D. Thornton
Turfway Park's new grandstand and historical racing machine (HRM) facility won't get built until the state of Kentucky clears up the ambiguity surrounding the apparent illegality of that form of video gambling, which contributes tens of millions of dollars annually to purses in the state.
That news was delivered by Bill Carstanjen, chief executive officer of Churchill Downs, Inc. (CDI), in an Oct. 29 third-quarter earnings call with investors.
CDI, a gaming corporation with six Thoroughbred tracks in its portfolio, acquired Turfway last year and soon thereafter embarked upon a $200 project to revitalize the track and build an accompanying wagering facility 12 miles to the northeast. That satellite facility has recently been completed and is up and running with 500 HRMs, but the track itself is slated to begin its December-March racing season without permanent infrastructure that will be open to the general public.
On Sept. 24, the Supreme Court of Kentucky reversed and remanded a previous ruling by Franklin Superior Court that had determined that the Encore brand of HRM gaming used by some tracks constitutes legal pari-mutuel wagering. Although the court opinion applied to only that one specific brand of gaming machinery, it theoretically could apply to all makes and models of HRM in Kentucky.
The Kentucky Horse Racing Commission (KHRC) and Keeneland have already petitioned the Supreme Court for a rehearing, and elected officials have been lobbied hard by Thoroughbred interests to come up with a legislative fix to ensure that HRMs remain legal and operational.
“Regarding the Turfway Park HRM and grandstand project, we have temporarily paused the construction of this facility,” Carstanjen said. “In late September, the Kentucky Supreme Court issued a decision concerning the legality of the company called Exacta HRMs under Kentucky law. While we do not have any Exacta HRMs at any of our facilities, and therefore are not directly impacted by the Kentucky Supreme Court ruling, we feel it is prudent to refrain from further significant capital investment until the Kentucky legislature has an opportunity to review the decision and the technicalities in the current law during the legislative session starting in early 2021.
“We appreciate the support of Gov. [Andy] Beshear, the KHRC, and many legislators on both sides of the aisle who are actively reviewing and discussing this decision. While the Kentucky Supreme Court decision was technically a narrow one, we anticipate that the Kentucky legislature may consider revisions to the relevant statute in the first quarter of 2021.
“It appears there is a broad recognition that it is important and necessary to address any ambiguity to protect the thousands of jobs created by the horse industry, the purse money that is generated for the benefit of the horsemen and the downstream Kentucky breeding and related farms, and the millions of dollars in annual tax revenues that are generated by HRMs for funding various programs in our state,” Carstanjen said.
A hotel and HRM facility at Churchill Downs, the flagship property of the gaming corporation, also remains on hold. But the reason cited by Carstanjen was the ongoing COVID-19 pandemic, and not the Supreme Court ruling on HRMs.
“We remain paused on building the hotel and HRM facility at Churchill Downs racetrack until we are past the pandemic and can again model the future with more certainty. This is just being prudent with our shareholders' capital,” Carstanjen said.
The Churchill construction pause is not new. It's been halted since April, just after the onset of the pandemic, when Carstanjen said in another CDI earnings call that the $300-million project was on hold “until after we have completed” the 2021 GI Kentucky Derby.
Looking ahead to that 2021 Derby, Carstanjen said CDI is aiming for a return to the traditional first Saturday in May calendar spot, which falls on May 1. In 2020, the Derby got pushed back to Sept. 5 because of the pandemic.
“We do not anticipate moving off our traditional date of the first Saturday in May,” Carstanjen said. “We are starting with the assumption that we will limit the number of reserved seats to 40 to 50% of capacity, and we will delay selling any general admissions tickets which do not come with seats until we are closer to the date of the Derby.”
If circumstances surrounding the pandemic improve, CDI will revisit that plan and open up more ticketing options, Carstanjen said.
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