10/02/2012 3:08PM

Churchill proposal to race in September comes at Turfway's expense


LEXINGTON, Ky. – The Kentucky racing circuit is facing its biggest potential change in decades by a well-received proposal from Churchill Downs to hold a 12-day race meet in September next year.

The proposal would mean the end of live racing in September at Turfway Park, where handle and purses have been in decline for a decade. Churchill officials said that they would offer $200,000 to $240,000 a day, “conservatively,” if they were awarded the dates, more than twice the amount that Turfway currently offers in purses. Churchill would race on the four weekends in September after Labor Day, running Friday through Sunday.

Though Churchill had floated a trial balloon about the possibility several weeks earlier, the company officially unveiled the proposal on Monday at a meeting of the dates committee of the Kentucky Horse Racing Commission. Members of the committee appeared to welcome the proposal not only because it is an opportunity to improve racing on the Kentucky circuit, but also because Turfway’s current owners have not endeared themselves to the commission over the past five months.

Majority ownership in Turfway is held by Rock Ohio Caesars, which holds the rights to operate casinos in Cincinnati and Cleveland. A subsidiary of the company had previously owned 50 percent of Turfway, but in April, it reached an agreement to acquire an additional 40-percent stake in the track from Keeneland, thereby ensuring that it could protect its Cincinnati casino if Kentucky authorized casinos at racetracks in the future.

When the racing commission approved the 40-percent acquisition, it did so after extracting promises from Rock Ohio Caesars that it would be committed to live racing. Those promises were non-binding, and when Turfway announced just before the September meet that it was cutting the purse of every stakes race to maintain overnight purses, some members of the commission felt that the company had gone back on its word.

Also, several members of the commission took Rock Ohio to task on Monday for failing to pursue approval of Instant Racing machines, the slot-machine-like devices in place at Kentucky Downs and Ellis Park that have generated sizeable amounts of revenue for the tracks and their horsemen. Chip Bach, Turfway’s director of operations, told the committee that Rock Ohio didn’t want to install the machines because the partnership – which includes the multi-state casino operator Caesars Entertainment – feared jeopardizing gambling licenses in other states if the machines were deemed unconstitutional through ongoing legal challenges.

“They want this vetted out in the court system before they commit to it,” Bach said.

“Isn’t it true that anything legal today could be illegal 30 days from now?” committee member Betsy Lavin responded.

Turfway’s owners have little incentive to install Instant Racing machines at the track. The machines typically generate half the revenue produced by slot machines, and it would make no sense for Rock Ohio to operate machines at Turfway that would compete with the more lucrative machines that will soon be in operation at its casino in Cincinnati.

To commission members, that might look as if the company were not committed to do whatever is possible to help live racing at Turfway, since the installation of Instant Racing machines would unquestionably mean more revenue for the track and horsemen. Ned Bonnie, a racing commission member who sat in on the meeting Monday, called the track’s purses an “embarrassment for Kentucky racing” before making a curious demand for the track’s owners to subsidize purses at Turfway through its Ohio casino revenues.

“You’re no longer the poor kid on the block, if you ever were,” Bonnie said.

It is likely that Rock Ohio Caesars is not going to close or sell Turfway because it fears that another company could scoop up the racing license and compete with its Cincinnati casino. But it’s also likely that Ohio Rock Caesars will not want to pour money into a racing operation whose time appears to have come, especially with slots-subsidized purses at Ohio racetracks on the way. Turfway is likely to become a less and less relevant player on the Kentucky circuit regardless of whether the September dates go to Churchill, and the racing commissioners are beginning to come to grips with the issue.

But it’s not just dissatisfaction with Turfway’s direction that could determine the committee’s decision on whether to accept Churchill’s proposal. Foster Northrup, a Kentucky veterinarian who is on the dates committee, said that horsemen on the backstretches at Keeneland and Churchill were excited about the prospect of a September Churchill meet for the simple reason that it will mean the opportunity to race for far higher purses in the month leading up to the highly popular Keeneland fall meet.

The proposal makes enormous financial sense to Churchill, which operates the largest account-wagering company in the United States. After Labor Day, racing in Southern California shifts from Del Mar to Fairplex Park for three weeks, giving Churchill an opportunity to grab a significant slice of the national simulcast market while the major Southern California tracks are on a live-racing respite. Running in September would also allow Churchill to become the host track for all simulcast revenues throughout Kentucky in September, a designation that would reap a sizeable amount of additional revenue for the company.

The racing committee tabled all the dates requests at the Monday meeting to consider the pros and cons of the Churchill September meet, along with two requests for additional days by Ellis Park and Kentucky Downs that would result in overlaps on the circuit (the “host track” designation is an issue for those tracks as well). The full commission will likely make a decision on the dates at its Oct. 17 meeting, and the smart money is on live racing at Churchill next September.