Kentucky horsemen expected backlash from Churchill Downs' decision to charge the maximum takeout rates allowed by state law, but they hope positives follow from increased purses that improve the racing product enough to outweigh those negatives.
Beginning with the upcoming meet, which begins April 26, Churchill plans to increase takeout—the percentage of the wagering pool retained by the track and split with horsemen—on win, place, and show wagers from 16% to 17.5% and on all exotic wagers (exacta, trifecta, pick three, etc) from 19% to 22%. The remaining percentage of the pools is paid back to bettors.
Track officials noted Churchill has fallen under the $1.2 million threshold in terms of average daily on-track wagering during its live meets. (In fact, experts say every track in the state is under that threshold.) Kentucky statute sets the maximum takeout rates for tracks under $1.2 million in average daily handle at 17.5% for win, place, and show and 22% for exotic wagers, and Churchill will put those maximum rates in place.
The Kentucky Thoroughbred Association estimates the change will generate an additional $8 million for purses at Churchill Downs. The track would receive a similar figure.
Based on last year's Kentucky Derby Presented by Yum! Brands (gr. I) handle, the new rates will result in an additional $3 million removed from the pools to be split between Churchill and the purse fund from that race alone based on last year's win, place, and show wagering as well as vertical exotic bets (exacta, trifecta) and horizontal exotic wagers (daily double, pick three) that end in the Derby.
Some of the money will be committed to graded stakes purses. The Louisville track is facing some mandatory purse increases for some of its stakes races if it wants to maintain their graded status. The American Graded Stakes Committee announced Aug. 12 it will raise the minimum purse required for a stakes race to be eligible for grade I or grade II status in 2014 by $50,000 for each.
Minimum purse levels will be increased to $300,000 for grade I stakes and $200,000 for grade II stakes races. Minimum purses for grade III, listed, and grade-eligible stakes races will remain at $100,000, $75,000 and $75,000, respectively, for 2014.
Kentucky Horsemen's Benevolent and Protective Association executive director Marty Maline said Churchill had run the idea of increasing takeout by his organization as a way to increase purses. Maline said he understands the decision but regrets that the track felt it had no other options.
"I mentioned to them that obviously the organizations representing bettors will probably give them a lot of grief over it but I sure understand the purpose behind it," Maline said. "From the horsemen's perspective, we can obviously use the extra purse money. I think they're looking for all avenues to try to supplement purses."
Upset handicappers expressed their frustration through social media and the Horseplayers Association of North America revised its track rankings, moving Churchill from fifth to 22.
Maline said the track is facing considerable competition from states that supplement purses with money from added gaming, including Indiana, New York, Pennsylvania, West Virginia and, beginning this year, Ohio. But, as more money is committed to Churchill and purses, bettors will be missing out on millions of dollars.
Churchill and industry leaders hope the added purses help maintain and improve the product by offering top horses and larger fields. Those trends could offset some of the negatives of charging more for wagering.
"Hopefully it doesn't have so many negatives with the betting public that the negatives outweigh the positives," Maline said.
Churchill did not have to ask permission from the Kentucky Horse Racing Commission to increase the takeout rate because the maximum rates already are in place in state statute. Commission executive director John Ward said the Louisville track did inform the KHRC of its plans.
KTA executive director David Switzer has mixed feelings about the takeout increase.
"Of course we like the fact that we are going to increase our purse account it looks like by about $8 million which will help races at Churchill be competitive with (racino tracks)," Switzer said. "The problem is what effect this could have with our horseplayers. I certainly appreciate and fully understand the importance of the wagering folks, particularly those who wager large sums of money. I don't think the $2 bettor is going to notice it. From that standpoint, it's a little bittersweet."