Keeneland, Churchill join forces on racetrack-casinos

LEXINGTON, Ky. – Keeneland and Churchill Downs Inc. plan to partner on the construction of two new facilities in Kentucky near the border with Tennessee featuring short Quarter Horse and Standardbred race meets and hundreds of slot machine-like devices that have proved lucrative to small tracks in the state, the two companies announced Friday morning.

One of the racetrack-casinos would be located in Corbin, in southeastern Kentucky, with plans to offer about 12 live Quarter Horse dates each year, according to Vince Gabbert, Keeneland’s chief operating officer. The other facility, intended for Standardbred racing for 12 to 15 racing dates, would be located in Oak Grove, in the southwest of the state just miles from Fort Campbell, a military base on the Tennessee border, and 40 miles from an existing gambling parlor and racetrack at Kentucky Downs. The gambling devices will operate year round.

The announcement joins two heavyweights in the Thoroughbred industry that have rarely worked together but which have both recently embraced the state’s authorization seven years ago of so-called historical racing machines, devices that closely resemble slot machines. While Keeneland partnered with a Lexington harness track, the Red Mile, on a historical racing facility near downtown Lexington that opened late in 2015, Churchill announced just this year that it would open its own gambling parlor in Louisville next year.

The announcement said the decision had the support of the Kentucky Horsemen’s Benevolent and Protective Association, which represents horsemen in the state, and the Kentucky Thoroughbred Association, which represents owners and breeders. Revenues from the two facilities will be used to bolster Thoroughbred purses at Keeneland and Churchill, Gabbert said.

“The goal is to put as much money into Thoroughbred racing as we can,” Gabbert said.

The announcement said both facilities would be “state-of-theart.” Renditions of the facilities distributed by the partners show two glitzy, low-shouldered buildings that resemble casinos more than racetracks.

Gabbert said that the partners decided to forgo Thoroughbred dates at the two new facilities because the companies “think it’s best to bolster the current [Thoroughbred] circuit” with the revenues from the new machines. The Corbin facility is expected to house 250 devices, while the Oak Grove facility – which is 60 miles from Tennessee’s largest city, Nashville – will have 500 devices.

“We’ve reached a point where we think we have the right amount of Thoroughbred racing dates,” Gabbert said.

The total budget for the two facilities is $80 million to $90 million, Gabbert said. The facilities could open approximately one year after they are granted licenses by the Kentucky Horse Racing Commission, according to Gabbert, who added that license applications were to be filed Friday.

A representative for the Department of Public Protection, which regulates the racing commission, did not return a phone call Friday. Kentucky Gov. Matt Bevin has said that he is opposed to any expansion of casino gambling in the state, but the governor’s office earlier this year did not publicly raise any opposition to the Churchill plan to open a parlor in Louisville.

Gambling in Tennessee is illegal with the exception of the lottery. Kentucky Downs, a small, all-turf track near the Tennessee border in Franklin, has used revenues from its year-round casino, open since 2011, to offer the highest purses in the United States during a brief meet. The track closed its 2017 meet Thursday after five racing days that shattered its own records for handle.

Approximately 80 percent of the historical-racing handle at Kentucky Downs is generated by customers from Tennessee, track officials have said, with the vast majority of those customers coming from Nashville, about a 40-minute drive away. The Oak Grove parlor will be located approximately one hour from Nashville customers, potentially presenting a competitive threat to the casino at Kentucky Downs for the first time.

In a statement released Friday afternoon, Corey Johnsen, president and part-owner of Kentucky Downs, said he was “disappointed” in the proposal by Keeneland and Churchill, noting that the two new tracks would draw from the same base of customers as Kentucky Downs.

“A track a short drive away in Oak Grove would provide undue competition to Kentucky Downs’ already established and successful historical horse racing, simulcasting, and liver acing operations,” Johnsen said in the statement. “It makes no sense to put a new track in an existing track’s market. We would never consider applying for a racetrack license in close proximity to Louisville or Lexington.”

In fiscal year 2017, which ended in June, wagering through approximately 1,700 historical-racing machines at parlors around the state was $920 million, according to KHRC records, up 43 percent over fiscal year 2016. Tracks retained approximately $71.6 million in commissions from that total. In comparison, the wagering generated $5.9 million in revenue for the state’s Thoroughbred fund.

Kentucky Downs led the way with $572 million in historical racing handle for the last fiscal year, generating $45.6 million in commissions.

The announcement by Keeneland and Churchill came one month after Keeneland confirmed that it would raise its takeout rates beginning with the upcoming three-week October meet. Gabbert said the decisions were “entirely mutually exclusive” when asked whether the takeout increase was designed to raise revenue to fund the construction of the two new gambling facilities.

“As with everything that we do, it was done solely to further our mission, which is to put more money back into the industry,” Gabbert said.

Keeneland is a not-for-profit that also operates the largest Thoroughbred auction house in the world.

COURTESY OF CHURCHILL DOWNS AND KEENELAND Here is a rendering of the planned casino-racetrack in Corbin, which would conduct about 12 days of racing a year.