(This analysis appeared in the April 10 edition of The Blood-Horse)
By William Shanklin
Envision that you are on the board of directors of Churchill Downs Inc., which owns the home of the Bluegrass State’s most recognizable calling card, the Kentucky Derby (gr. I). Your own state government stubbornly refuses to allow your racetrack to add video lottery terminals to its product line, has scotched Instant Racing, and has attempted to levy an additional 1.5% tax on advance deposit wagers.
To compound matters, you must try to compete with a full-scale casino across the Ohio River in Indiana.
The CDI board asks itself what is the best course of action, given that powerful Kentucky elected officials are openly antagonistic to the Commonwealth’s flagship industry. In answering such a question, directors of a publicly traded company are legally obligated to act in the best financial interest of all shareholders, rather than on sentiment or emotion.
Suppose CDI gives up on going hat-in-hand to Kentucky government for assistance with expanded gaming and, instead, settles on a bold and controversial proactive strategy. Working with eager economic development officials in Indiana, CDI decides to replace its historic Louisville racetrack with a new facility in Southern Indiana and move its corporate headquarters to the site.
In return, CDI receives state and county support for infrastructure—roads, sewer, and water—tax abatements for 20 years, and licenses to offer horse racing, VLTs, and table games.
At first, the CDI board was concerned about running the Kentucky Derby in Indiana, even though it was only minutes away by car from the Kentucky shore of the Ohio River. These concerns were assuaged when the board realized it would not be unique. The National Football League’s New York Giants and New York Jets play their home games in East Rutherford, N.J., and the Washington Redskins play in Maryland.
CDI directors were also worried about the criticism they would take over abandoning such a revered landmark as Churchill Downs. What swayed them was the tasteful way in which the sports icon of icons, Yankee Stadium, was replaced. The signature twin spires from the old Churchill Downs were moved to the new location and incorporated into a state-of-the art racetrack that mimicked the endearing features of the original.
This scenario is not unimaginable. Many venerable professional sports franchises (Baltimore, Cleveland, Houston, and Los Angeles, for example) have abruptly pulled up stakes and moved to cities where they got lucrative stadium or arena deals, as well as strong support from the business community and government.
Losing a Fortune 500 headquarters, a manufacturing plant, or a professional sports franchise often results from taking the company or team for granted. Many times, the move could have been averted.
Just because Churchill has been on the Kentucky side of the Ohio River since 1875 does not mean it always has to reside there.
William Shanklin, a longtime contributor to The Blood-Horse, is the publisher of the Web site horseracingbusiness.com.