Churchill Downs Inc. Pauses Turfway Park Construction

With a recent Kentucky Supreme Court decision on historical horse racing generating concern, Churchill Downs Inc. said Oct. 29 that it had paused construction at Turfway Park as well as the hotel planned for its flagship track in Louisville while expressing hope that lawmakers will soon take action to protect HHR.

Speaking with analysts and investors during a conference call, CDI CEO Bill Carstanjen said the company wants to get a clearer picture on HHR's standing before moving forward on those projects.

On Sept. 24, the Kentucky Supreme Court issued an opinion that at least one brand of historical horse racing that has operated in the state is not pari-mutuel. The games have continued to operate as the Kentucky Horse Racing Commission and several Kentucky tracks have requested a rehearing before the court on some critical issues in its recent opinion.

Churchill Downs Inc. has pointed out during the litigation process that it doesn't believe the court's decision applies to the brands of games it uses at its various outlets. Still, the company wants to wait for more information before moving forward on major construction projects like the rebuild of the Turfway grandstand and the hotel planned at Churchill Downs.

"Regarding the Turfway Park (historical horse racing facility) and grandstand project, we have temporarily paused the construction of this facility in late September," Carstanjen said. "The Kentucky Supreme Court issued a decision concerning the legality of the Exacta (Systems, a brand of HHR) under Kentucky law. While we do not have any Exacta (Systems) at any of our facilities, and therefore are not directly impacted by the Kentucky Supreme Court ruling, we feel it is prudent to refrain from further significant capital investment until the Kentucky legislature has an opportunity to review the decision and the technicalities in the current law during the legislative session starting in early 2021."

Carstanjen expressed optimism that Kentucky lawmakers will support historical horse racing in the state and clear up any concerns of the courts. The Kentucky legislature has been reluctant in recent years to pass legislation deemed an expansion of gambling. Gov. Andy Beshear has voiced his support for continued HHR.

"We appreciate the support of Gov. Beshear, the Kentucky Horse Racing Commission, and many legislators on both sides of the aisle who are actively reviewing and discussing this decision," Carstanjen said. "While the Kentucky Supreme Court decision was technically a narrow one, we anticipate that the Kentucky legislature may consider revisions to the relevant statute in the first quarter of 2021. 

"It appears there is broad recognition that it is important and necessary to address any ambiguity to protect the thousands of jobs created by the horse industry, the purse money that is generated for the horsemen in the downstream Kentucky breeding and related farms, and the millions of dollars in annual tax revenues that are generated by (HHR) for funding various programs in our state."

Though Churchill paused those capital projects, it completed two other HHR projects in the past three months: the Oak Grove Racing, Gaming & Hotel in Oak Grove, Ky., which offers Standardbred racing; and Newport Racing & Gaming in Newport, Ky., which generates purse revenues for CDI-owned Turfway Park.

Carstanjen noted that Keeneland, which had been a minority partner on the Oak Grove project, was bought out, making CDI the sole owner.

"We recently purchased the remaining outstanding minority equity interest in our Oak Grove venture for approximately $3 million from the Keeneland Association, and we now own 100%," Carstanjen said.