Day At The Track

Kentucky Downs appeals License decision

01:50 PM 09 Jan 2019 NZDT
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The Oak Grove Meadows conceptual site plan from Kentucky Downs
The Oak Grove Meadows conceptual site plan from Kentucky Downs

Questioning a number of actions by the Kentucky Horse Racing Commission in awarding a Standardbred license in the Oak Grove, Ky. area to a partnership of Churchill Downs Inc. and KeenelandKentucky Downs has appealed the regulator's decision to the Franklin (Ky.) Circuit Court of Appeals.

In a Jan. 4 filing, Kentucky Downs asks the court to void a KHRC decision in late 2018 to award WKY Development (CDI-Keeneland) a license to conduct Standardbred racing and offer historical racing games.

KHRC executive director Marc Guilfoil and general counsel John Forgy were not immediately available Jan. 8 for comment on the appeal.

Kentucky Downs, in its appeal, says the KHRC acted arbitrarily in awarding a racing license to WKY Development. The track contends the regulator either failed to follow its process in awarding a license or that process was unclear. It says the regulator "admitted" in 2017 it didn't have a sufficient process or criteria in place to award a track license, but awarded a license in 2018 without putting that process in place.

The appeal also contends that WKY Development didn't meet statutory or regulatory criteria, including what Kentucky Downs says is a requirement for a binding horsemen's agreement, which in this case would be the Kentucky Harness Horsemen's Association. The appeal also argues that the historical racing games at CDI's Derby City Gaming in Louisville "did not comply with Kentucky law at the time the commission approved WKY's application." 

The KHRC voted Nov. 16 to award the Oak Grove license to WKY Development. At that time, the KHRC was fining Derby City Gaming $1,000 a day because the games there improperly included races where horses had been scratched. CDI has pointed out that the flaw didn't impact customers, as the system uses post positions to determine winning combinations. At a December meeting, KHRC staff said they hadn't found any evidence of customers being impacted, but also acknowledged that the fines continued.

Kentucky Downs has contended that the new track will negatively impact its historical racing operations. The court filing said the regulator should have done more research in this regard and overall economic impact in the region and for racing in the state.

"Based on the criteria that were in place in 2017 and 2018, the commission is required to consider construction cost estimates, revenue projections, market research studies, and to analyze whether the proposed projects are sustainable and in the best interest of the horse industry," Kentucky Downs wrote in its court appeal. "The commission must also consider the effect of the application on other existing racetracks."

The Nov. 16 vote by the commission to award the license followed an Oct. 30 special meeting that exceeded 4 1/2 hours and ultimately saw a 7-5 vote to defer the decision. The KHRC had considered proposals from WKY Development, Kentucky Downs, and Caesars Entertainment.

At that November meeting, WKY Development presented a plan that would see $150 million put toward a track, entertainment center, equestrian center, and hotel. Churchill Downs racetrack president Kevin Flanery noted the historic commitment of the two Thoroughbred tracks to Kentucky racing and the efforts they've made to generate support in the Oak Grove, Ky. area. He said historical racing would fund the Standardbred purses at the new track and additional money would be used to support Thoroughbred racing and The Red Mile harness track.

Besides the purses supplied at the new track for 12 days of racing, which could be increased in future years, Flanery envisioned the historic racing facility, which would start as 1,200 machines with the possibility to expand to 1,500, generating $10 million for both Thoroughbred and Standardbred purses in the state. 

Three days before the November meeting on the Oak Grove license, Kentucky Downs announced it had been sold to Kentucky Racing Acquisition, a new company co-founded by Ron Winchell and Marc Falcone. The new ownership continued Kentucky Downs' pursuit of the Oak Grove license.

Regardless of the outcome of the appeal, it has the potential to slow plans. When WKY was awarded the Oak Grove license in November, Flanery said plans were "well on their way" for the new facility with a construction schedule that would allow racing there by the fall of 2019.

Kentucky Downs' appeal said the KHRC had not put in place a process to consider requests for new licenses. It noted that in 2017, Churchill Downs and Keeneland had pursued racing licenses for two new facilities, but commission chairman Frank Kling Jr. and vice chairman John Roach issued a statement that they had informed Kentucky's tracks that the regulator would not be considering applications for new facilities in the state. 

"At this time, neither of us have any plans to take any action related to this application or any other application for a new race track facility," said the September 2017 statement, which is referenced in the appeal. "It is our hope that in the future we will be able to develop a process and criteria to determine whether any new race track facilities are needed in the commonwealth."

Kentucky Downs said it initially filed an appeal of the decision and request for an administrative hearing, but was summarily denied that request in a Dec. 28, 2018 letter from Forgy. 

In its court appeal, Kentucky Downs said that any simulcasting rights at the new track would be contingent on Kentucky Downs' approval. The 92-page court filing says state regulations don't allow another simulcasting outlet within 50 miles of an existing outlet without consent of the existing outlet and Kentucky Downs has not granted the proposed track simulcasting rights.

The Kentucky Downs appeal also contends that members of the KHRC may have conducted meetings in violation of Kentucky law and that, "on information or belief, one or more of the commissioners may have a financial interest in Churchill Downs, which is the principal member of WKY, but still voted."

The appeal also questions votes by commissioners Foster Northrop and J. David Richardson, who both voted in favor of awarding WKY Development the license. When WKY Development in September announced plans to pursue a new track in the Oak Grove area, a public relations firm hired by WKY issued statements supporting a new track from Northrop and Richardson. At the time, the WKY proposal was the only publicly known group pursuing a license for the Oak Grove area.

BloodHorse left phone messages with Northrop and Richardson offering a chance for comment that weren't immediately returned.

By Frank Angst

Reprinted with permission of Bloodhorse

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