Officials: Kentucky Losing Too Much Ground

Officials: Kentucky Losing Too Much Ground
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Churchill Downs president Alex Waldrop: "I'm afraid what we're finding is that Kentucky is no longer at the forefront of racing."
During a Tuesday morning hearing one legislator called "an eye-opener," representatives from Kentucky's horse racing and breeding industry outlined its current status and the economic challenges it faces. It wasn't a pretty picture, and chances are there will be a push for relief during the 2002 legislative session.

What form any relief package will take remains to be seen, and track officials wouldn't discuss whether alternative gaming would be a part of it. But during the two-hour hearing at the Northern Kentucky Chamber of Commerce, they weren't afraid to discuss the problems facing the industry. And they're not too happy that other racing states are taking bites out of their lunch.

"I'm afraid what we're finding is that Kentucky is no longer at the forefront of racing," Churchill Downs president Alex Waldrop said. "We're in real danger of losing our prominence as a racing state. We're facing our biggest challenges in history, and we can't respond to the competition effectively. Nothing short of an all-out war is necessary to deal with this problem."

Waldrop was one of about a half-dozen officials who made presentations during the hearing facilitated by the Kentucky Racing Commission. He said from Churchill's perspective, there are three main issues: excessive taxes and fees, aging facilities, and a decline in purse money.

"Simply put, Kentucky's tax and fee structure is in need of major reform," Waldrop said. "At the center of the problem is an inflexible excise tax. It creates a disincentive to bet on our product."

Waldrop said the state takes 19% of gross revenue. Combined with the 45% that goes toward purses, a racetrack such as Churchill is left with 36%. In 2000, that amounted to roughly $10 million, which leaves little play money for the aging Louisville facility.

From 1997-2000, Churchill Downs spent $25 million on capital improvements. Waldrop said the Caesars riverboat casino in nearby Indiana invested $430 million in improvements during the same period.

Waldrop offered other numbers, too. The ones that drew a few gasps from the audience follow: In 2000, about $13 billion was wagered on riverboat casinos in Indiana. Total pari-mutuel handle in the United States was only $15 billion last year.

Bob Elliston, president of Turfway Park in Northern Kentucky, told how on-track handle at his track has plummeted from $150 million in 1995 to $86.2 million in 2000. Purses are down 26% since 1996, he said, because simulcasting revenue hasn't kept pace with revenue generated from live dollars.

Elliston said that in 1995, before riverboat gambling in Indiana, and full-card simulcasting in Ohio, Turfway claimed 71.5% of the gaming share in its market. In 2000, that percentage dropped to 1.15%, he said.

"We're losing money, and the competition is only going to get worse," Elliston said. "As developable property in our region goes away, that 197 acres (on which the track sits) will go up in value. If things don't change, the value of our acreage will be worth more for development than it is for critical racing dates on our circuit."

Both Waldrop and Elliston discussed the effect competition from racetracks with alternative gaming has had on the Kentucky product. They both singled out Mountaineer Park, the West Virginia track that has actively targeted Kentucky horsemen with its fattened purse structure, particularly in the claiming ranks.

Turfway, which runs most of its 115 dates in the winter, has been hit particularly hard.

"What's on the mind of a trainer whose owner is asking him, 'Why are you running at Turfway Park when you can face half the competition for double the money at Mountaineer?' " Elliston said.

One owner, Larue Simpson, attended Tuesday's hearing. He said the problem is that racetracks haven't been on the same page when it comes to alternative forms of gaming. He said he planned to ship a horse to Mountaineer next week because of the purse structure.

"I hope this is the last stage of you getting off your butts and doing what needs to be done-putting in alternative forms of gaming at racetracks," Simpson told the 60 or so members of the audience.

After the meeting, Elliston and Keeneland president Nick Nicholson wouldn't comment on whether in fact the tracks are on the same page, or whether they even intend to pursue gaming. Rep. Jim Callahan, whose district includes Turfway, told tracks officials they need a game plan before the legislative session begins next January. He called the track's financial situations "an eye-opener," and said many legislators would be surprised to hear about it.

The hearing, the first of three scheduled for this summer, began with an update by David Switzer, executive director of the Kentucky Thoroughbred Association, on mare reproductive loss syndrome. The ramifications may not be known for years, but in the meantime, the industry is looking for financial assistance.

Switzer and Nicholson both said there is no way to gauge the long-term damage done by the foal-loss crisis. Switzer did throw out some numbers a legislator may understand-a $1.5-million to $2-million loss in sales taxes for the state.

"Success in the past is not a guarantee of survival in the future, and we've learned in brutal terms this spring how fragile this business can be," Nicholson said. "This is not a time for complacency. It's a time for us to be serious, diligent, and cognizant of the fact our future isn't guaranteed."

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