DOES TURFWAY PARK HAVE A LONG-TERM FUTURE?

Earlier this week, on June 15, the governor of Ohio, John Kasich, announced a revised agreement with the licensees of the four casinos about to be built in Ohio that provides more revenue to the state. Part of the pact granted permission to Ohio’s seven racetracks to install video lottery terminals. The three Thoroughbred racetracks—in Cincinnati, Cleveland, and Columbus—are all owned by casino companies.

Once casino and racino operations are up and running in Cincinnati, the implications for apparently struggling Turfway Park in Northern Kentucky are dicey.

The Horseshoe Casino Cincinnati will be owned by Rock Ventures and managed by Caesars Entertainment Corporation, which is the world’s largest casino company. Rock Ventures is controlled by Daniel Gilbert, founder of Quicken Loans and owner of the Cleveland Cavaliers of the National Basketball Association. Rock Ventures also will own the Horseshoe Casino Cleveland and is likely to be a partner with Caesars Entertainment in Thistledown racetrack. The Horseshoe Casino Cincinnati will be located less than 12 miles from Turfway Park.

River Downs racetrack is owned by Pinnacle Entertainment, with casino operations in Indiana, Louisiana, Missouri, and Nevada. Pinnacle Entertainment started out in horse racing as the Hollywood Park Turf Club founded by Jack L. Warner, Bing Crosby, Walt Disney, and other Hollywood legends in 1938. River Downs is situated on the Northern side of the Ohio River and is 15 miles from Turfway Park.

Turfway Park is jointly owned by Caesars Entertainment and Keeneland and offers Thoroughbred racing, but is not permitted to have video lottery terminals or any other form of gaming per Kentucky law. Thus Turfway Park will be confronted by the Horseshoe Casino Cincinnati providing almost all kinds of gaming except sports betting and by the River Downs racino providing Thoroughbred racing and slots.

The interesting twist in all of this is that Caesars Entertainment would, on the one hand, lose in the closure of Turfway Park since it owns 50 percent of the facility. On the other hand, the Horseshoe Casino Cincinnati that it manages would have less competition for the gambling dollar and Caesars Entertainment might recover much of its investment in Turfway Park by selling the property for commercial development.

Turfway Park has four realistic courses of action. First, it can attempt to survive solely as a racetrack with pari-mutuel wagering. Second, it can try to hang on in an increasingly adverse competitive milieu and keep up the effort to get video lottery terminals legalized for Kentucky racetracks. Third, it can close almost immediately on the reasoning that it simply cannot compete effectively in the face of the ramped-up gaming situation in nearby Ohio, while conceding that the legalization of racetrack slots in Kentucky is an idle fancy. A final possibility is for the owners of Turfway Park to shutter the plant temporarily until the slots issue is resolved by the Kentucky governor and legislature.

Without access to the financials for Turfway Park, it is not possible to adequately evaluate the stay open or close decision. Yet it is possible to say with a high degree of certainty that Turfway Park’s financials will deteriorate dramatically as soon as the Horseshoe Casino Cincinnati and the River Downs racino are up and running.

Turfway Park’s decision hinges largely on estimating the likelihood of the Commonwealth of Kentucky legalizing slots soon enough to have them in place by the time the Horseshoe Casino Cincinnati and the River Downs racino are operational, or at least shortly thereafter. With the governor’s election in full swing in Kentucky, the slots issue won’t be meaningfully addressed by the legislature at least until after the election in November 2011, if then.

Turfway Park’s options come down to choosing the least-worst decision. Readers can draw their own conclusions regarding the likely outcome. (Turfway Park has some “out-of-the-box” possibilities, but discussing them is beyond the scope of this analysis.)

Why a state governor and/or a legislator would stand by while the state’s flagship industry slips away and jobs and tax revenues atrophy is a question that is easy to answer:  The individual is playing to his or her base rather than placing the economic well-being of the state first.

Copyright © 2011 Horse Racing Business

Comments

  1. Governor Beshear (D) has done everything humanely possible to bring this vote to the people. He has been stopped at every turn by David Williams (R) who controls the majority in Frankfort. The author is exactly correct in that it is beyond belief that a politician can single handedly bring down the signature industry of an entire state without even allowing the people he is supposed to represent have a say in the matter. This is why many lifelong Republicans like myself will be voting for Mr. Beshear, and all Democrats who will bring the gaming issue to a vote, in the upcoming Gubernatorial election. Hopefully we will be able to override Mr. Williams self serving agenda and save the horse industry in Ky.

  2. I intend to vote likewise, Albert. However, even when Beshear wins, Williams will still be heading up the senate. Looks almost hopeless.

  3. C. Merriweather says

    This is very superficial analysis. The fact is Turfway has been at a competitive disadvantage because of already existing casinos in the region and racinos in Indiana for quite some time. You miss the fact that River Downs, being just 15 miles away, has been in even worse shape than Turfway and was gobbled up by Pinnacle at fire-sale prices just in the last year.

    Turfway and Caesars are now positioned to get all the benefits of a racino without putting the slots in the same building and having to share space. The slots go downtown and the racing takes place out in Florence.

    You also discount the role Keeneland will play in this. Considering the competitive advantage Caesars will have in the Tri-State over the two existing riverboats and the VLT parlor at River Downs, they will be in a great position to work with their business partner to improve the quality of racing at Turfway. Other than the deepest part of the winter, Turfway already offers a potentially great lead into Keeneland in March and September. The Caesars slots money could make those two sessions ‘elite meets’ a la 2010 Monmouth. Lesser horses in the area could go to the soon-to-be better funded River Downs.

    I think all the businesses involved should have the chance to make out O.K. The potential losers are Kentucky taxpayers. Turfway can be propped up by Caesars, but those tax revenues are heading to Columbus. The Kentucky government could have made things better by giving Turfway, Ellis and Churchill slots so they could compete with other states as they expanded gambling. The racing in Cincinnati, Lexington and Louisville will survive, but their potential as revenue producers is not being maximized and places like Ellis and Red Mile will be in trouble in short-order.

    As far as Turfway’s property being flipped for commercial use, that’s not likely in this current marketplace. The nearby airport has two of their three terminals shuttered and there are oodles of undeveloped commercial acres nearby. It’s not like Hollywood in L.A., or even Bay Meadows. Those two places were seemingly the last big tracts available in their areas, but then the economy turned. The development that went up at Bay Meadows has yet to make money and Hollywood is in no rush to make the same mistake.

  4. C. Merriweather,

    The Cincinnati casino is owned by Dan Gilbert, not Casears. Caesars is only managing it. Why would Gilbert want to do Turfway any favors? You are whistling past the cemetery.

  5. Turfway Park, as this piece points out, has very few options left. Too bad, it has a long history in the Cincinnati area as Latonia. It comes down to how long Keeneland and Caesars decide to subsidize it. Rumors were flying not long ago that one or both of them were trying to sell Turfway.

  6. C. Merriweather says

    Ren434
    Because Caesars also owns Thistledown in Gilbert’s home market. And because Caesars wouldn’t get into a deal that would be detrimental to their existing investments in the market. All the casino owners have to work together. It’s all a giant backscratching festival. It can’t be a coincidence that VLTs are coming to the Ohio tracks once all the private track owners got out of the way. They’re all owned by casino companies now, and conveniently, there’s now no more political resistance to the tracks getting VLTs? They’ve carved up the state’s markets to their benefit and the tracks on both sides of the river have been hedges against what the governments went along with.

  7. Bill Shanklin says

    If Turfway Park were to flounder further or close, the mortal wound would have been inflicted directly by the Commonwealth of Kentucky. The reverberations would be devastating to all of the loyal Turfway employees and to the many agribusinesses and others that would be affected. Turfway Park is like the relatively small portion of the economic iceberg showing above the surface, with many dependant businesses below the surface and largely out of view. The elected officials responsible have jobs, so their attitude toward the people whose livelihood comes from Turfway Park operations is basically one of “let them eat cake.”

    The situation calls for some pretty creative approaches, rather than business as usual. I am rooting for Turfway’s success.

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