Taxpayer Subsidized Horse Racing

Flagging Churchill Downs race profits could lead to boutique spring meets
Many fear that Churchill will reduce race dates
May. 12, 2012
Written by Gregory A. Hall
The Courier-Journal

 

The Derby field passes the twin spires at Churchill Downs after leaving the starting gate for the 133rd Kentucky Derby. (2007 Couirer-Journal file photo by Arza Barnett) / Arza Barnett

The Derby field passes the twin spires at Churchill Downs after leaving the starting gate for the 133rd Kentucky Derby. (2007 Couirer-Journal file photo by Arza Barnett) / Arza Barnett
FEWER HORSES

About half of the fields this week at Churchill Downs — the first after the Derby — drew eight or fewer horses before scratches.

Flagging-Churchill-Downs-race-profits-could-lead-boutique-spring-meets"

Asked three years ago about Churchill Downs’ future in Louisville without the addition of slot machines, the company’s top official predicted fewer race dates.

“We probably become more of a boutique (meet),” said Bob Evans, the chairman and chief executive officer. “Just exactly how big, I don’t know. It kind of depends on what’s happening at that time with everybody else.”

Today, what’s happening is this: The Kentucky General Assembly recently refused once again to allow expanded gambling. Breeders and trainers are being lured increasingly to tracks where casino revenues boost purses — most notably in New York.

And Kentucky is considering becoming the first state to ban the race-day use of the anti-bleeding drug furosemide for certain stakes races.

Those conditions worry horse owners, trainers and breeders groups, who fret that as early as next year, Churchill Downs Inc. — which, despite record Kentucky Derby Week profits, says it loses money on racing the rest of the year — will cut back on race dates at its 138-year-old Central Avenue namesake.

Shortages of horses since 2009 cut the spring meet to 38 days last year and 39 this year — the shortest meets since 1975. About half of the fields this week — the first after the Derby — drew eight or fewer horses before scratches. Bigger fields give bettors a chance for better returns on their bets.

“I wouldn’t be surprised that they don’t apply in 2013 for going back to a 30-day meet or something like that,” said David Switzer, executive director of the Kentucky Thoroughbred Association and Kentucky Thoroughbred Owners and Breeders. “The business model doesn’t show that they’re making money on racing.”
No immediate changes

Evans said in an interview before Derby Week that there are no immediate plans to significantly alter the spring meet, when the Louisville track conducts most of its racing.
But Evans attached major caveats to that promise.

For example, while he expressed confidence that there will be racing at Churchill Downs 138 years from now, Evans said, “The question becomes, how much? That depends on whether we’ve got enough fans and enough horses to conduct as much racing as we do today.”

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Efforts such as night racing help shore up the fan side; he said: “I’m confident we’ll have fans.”

But horse supply is jeopardized by declines in the number of thoroughbreds and the increasing trend of entering those horses at tracks where casino revenue is boosting purses.

Churchill officials have long argued that Kentucky racing needs such revenues to compete and supported a constitutional amendment to allow casinos, which failed in this year’s General Assembly regular session.

“If the horses all disappear,” Evans said, Churchill’s racing “becomes a boutique meet not by choice but by just dealing with reality.”

Additionally, he said he’s concerned owners and trainers may take their horses elsewhere because of efforts to put Kentucky on a regulatory island, chiefly through a ban on race-day anti-bleeding medication injections. An effort to pass a ban died on a 7-7 Kentucky Horse Racing Commission vote earlier this month, but another attempt is expected to pass a more limited ban, for certain stakes races on a phased-in basis.

“Put that all together in the stew and mix it up; we could have a pretty big problem in Kentucky for everybody, not just Churchill Downs,” Evans said.

One of the challenges is larger purses at New York’s three biggest tracks, because of slots at Aqueduct Racetrack.

The increases already have led one of Churchill’s top trainers — Dale Romans — to shift many of his horses to New York that previously would have been at Churchill, while top jockey Julien Leparoux has shifted his base after Derby Week to Belmont Park, where purses are increasing 44 percent, and then Saratoga Race Course, where purses are jumping 39 percent.

State Sen. Damon Thayer, R-Georgetown, who sponsored the casino bill that was defeated, said he believes Churchill can still be competitive nationally.

“Not all the horses can race in New York,” Thayer said. “Some of them are going to need to race other places, and Churchill Downs still has a compelling purse structure.”

Any reduction in race dates at Churchill would have to be made — under the state simulcasting law — with the approval of two horsemen’s groups. Officials indicate that the one headed by Switzer likely would be willing to reduce dates, while the other, the Kentucky Horsemen’s Benevolent and Protective Association, likely would oppose it.

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“We have to look at reality,” Switzer said. “And what is real versus what we would like may not be the same thing. And reality is, nationwide, we’ve got too much racing. … We’ve got to make adjustments.”

The HBPA traditionally has opposed date reductions, saying horsemen need the most opportunities possible to make money, although it went along with cuts in the past three years as Churchill had trouble filling races.

But HBPA executive director Marty Maline said his group expected those cuts to be temporary, and the group of owners and trainers likely would oppose further cuts.

“It’s pretty much a boutique meet now because we’re actually running less days in the spring than Saratoga is, which is considered the most (prized) boutique meet in the country,” Maline said. “… We should be trying to figure out ways to increase days so horsemen can justify to their owners staying here.”

Is shorter better?

Maline said Churchill could explore other alternatives to improve racing, such as installing the slot-like Instant Racing game in use at Kentucky Downs.

Simply cutting dates isn’t a long-term solution, he said.

And indeed, horsemen agreed to cuts at Turfway this winter, but the Florence track still cut purses 25 percent.

To justify further cuts at Churchill, Maline said, the company will “have to make an awfully strong case. I think they know where we’re coming from. … We can’t cut any more. We’re a boutique meet now. Less is not better in this situation, because you’re going to lose more and more horses.”

Evans, meanwhile, said in the recent interview that he believes a small meet can be successful, citing Keeneland’s success with fans and horsemen. The Lexington track’s 15-day spring meet ended last month with a record cumulative attendance of 269,292 and a record average of 17,953 per day. Betting from all sources jumped nearly 14 percent to $133,483,793.

Boutique meets work, in part, because they limit access both to the quantity and quality of racing, forcing fans and bettors to take advantage of it while it’s there.

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Regardless of the length of the spring meet, the biggest thing going for the long-term future of racing at Churchill is Derby Week — beginning with opening night and running through the Kentucky Oaks and Derby.

“It’s very important because the rest of racing as an economic event is pretty unattractive,” Evans said.

Churchill Downs Inc. doesn’t disclose how much it profits from Derby Week, although it does release year-to-year comparisons and acknowledges they’re at record levels.


Derby Week profitability — before taxes and other accounting factors are considered — is up nearly $15 million since 2008, including a $6.4 million increase last year and an estimated increase this year of between $4.5 million and $5.5 million, according to annual figures released by Churchill.

The only year-to-year decline in the run was in 2009, when the company said the larger economy contributed to softness in sponsorships, supplemental seating and corporate hospitality areas.

Banking on Derby Week

Churchill’s successes — including its record profits, Derby Week performance and stock price at its highest levels in a year — are all factors cited by casino opponents who question whether Churchill really needs the boost from casino gambling.

But casino proponents say Churchill shouldn’t be faulted for making Derby Week profitable.

“People continue to get upset that Churchill is doing everything they can to maximize the value of the Derby,” said state Rep. David Osborne, R-Prospect, who is a horse owner. “But it’s the only day of the year they get to make any money. And I think that until we … can get to a situation where racing is a profitable venture for them — normal (everyday) racing — then I think that you will continue to see those race dates compress. It only makes sense.”

Osborne said year-round racing should still be the goal for Kentucky because of the jobs that go with it, but he said he wouldn’t be surprised to see Churchill’s spring meet cut to 30 days. How much the meet is compressed also could be influenced by other tracks, Osborne said, both in Kentucky and in nearby states like Indiana.

Louisville Mayor Greg Fischer echoed that concern, bemoaning legislators’ resistance to approve expanded gambling to help the horse industry.

“It’s like having a company and you have the leading product in the world, and you’re just knowingly watching it go away,” he said. “That’s not very smart.”

And fewer racing days would affect Louisville’s economy on several fronts, he said.

“When people come here, they expect there to be some action (at the track), not just for one weekend a year,” Fischer said. “So there’s that touristic element to it as well. And then of course there’s the whole supply chain of the thoroughbred industry. Many of those businesses are located here. … So we need to be expanding and growing our presence in the thoroughbred industry, not shrinking it.”