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Historical Horse Racing Trends: Proposed Additional Machines Could Earn CDI $3.4 Billion Per Year

Historical horse racing (HHR) machines have made a strong contribution to the horse racing industry in several states over the last five years or so, thanks to the fact that HHR revenues have been used by various racetracks to supplement purses for races.

In Kentucky, HHR machines have recently been classified by the legislature as a form of pari-mutuel wagering after a court ruling questioned their legitimacy from a state constitutional perspective. The reclassification allows HHR machines to continue to operate and racetracks and gaming centers across the state plan to expand the number of machines.

Using Kentucky Horse Racing Commission reports of monthly revenues from 2016 to 2021, the graph below shows the trend in the contributions in gross revenues – or handle – per month for all HHR machines in the state. The upward-sloping trend line reflects gross revenues per day per machine.

According to this data, each machine contributes an average of $143,000 per month to total gross revenues. Payouts to customers usually are at least 90 percent of gross revenues, leaving $14,300 profit per machine per month.

With the low labor and maintenance costs that accompany HHR machines, it is easy to see why racetracks and gaming centers in the state want to add more of these machines.

According to recent press reports, Turfway Park in Florence, Ky., and Derby City Gaming in Louisville plan to add approximately 2,000 machines combined over the next several years. According to the information above and holding all else constant, such machines could earn Churchill Downs (the owner of Turfway Park and Derby City Gaming) around $286 million more per month or $3.4 billion per year. At a tax rate of 1.5 percent, this increase could produce around $51 million in tax revenues for the commonwealth per year.

All data is adjusted for and accounts for reduced operating hours in 2020 due to COVID-19 restrictions and precautions.

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Lucrative Kentucky Downs Meet Opens Sunday

FRANKLIN, Ky. – With huge purses offered during a mighty short season all run over a distinctive European-style turf course, the FanDuel Meet at Kentucky Downs has emerged as a gem of American racing.

It's different, to be sure. Once an obscure little meet quietly contested at a track called Dueling Grounds in a small town on the border with Tennessee, much closer to Nashville than Kentucky's big cities, Louisville and Lexington, it has flourished, gotten noticed and embraced. This year it features six graded stakes, three of them with $1,000,000 purses. Two of them are part of the Sept. 11 program with five graded stakes card and are Breeders' Cup “Win and You're In” races that will be broadcast live on Sept. 11 on NBC.

The season opens Sunday and continues with the second program on Labor Day.

Following an off day Tuesday, the meet rolls on with programs Wednesday, Thursday, Saturday and Sunday over the undulating 1 5/16 miles course. Post time is 12:20 p.m. Central.

“All signs point to a spectacular meet,” said Ted Nicholson, Kentucky Downs' Vice President for Racing. “We think jockeys will be thrilled with the extensive renovation to our turf course. We know horseplayers love our full fields and large betting pools. For the final four days, Kentucky Downs will be the center of American racing, and we look forward to putting on an outstanding show.”

Horsemen know all about the purse money available, the highest daily figures in North America, and fill the entry box for the six-day season contested over eight days.

“The most difficult thing about Kentucky Downs is getting in the races,” trainer Al Stall said.

Grace Clark photo

Reacting to the demand this year, track officials have split a pair of races. When there were 31 entries for a maiden special weight race for 2-year-old fillies on opening day, it was divided into two full 12-horses divisions, with a total of seven on also-eligible lists, and bumped the program from 10 to 11 races. The $400,000 listed TVG Stakes on Wednesday drew 21 entries and it was split into two divisions, both with $400,000 purses.

Horseplayers relish the large fields, the lowest blended takeout rates in America and big payouts. In 2020, with no fans on track, the all-sources handle for the first six-day meeting was $59,828,441.

Track officials market Kentucky Downs as a bettors' paradise. The $2 win payoff average of $16.73 keyed strong returns in exotic wagers. According to the track stats, last year's average return for a $1 exacta was $65.32, the $1 double average payout was $75.99, the 50-cent trifecta average was $269.20, the 50-cent Pick 3 averaged $374.06, he 50-cent Pick 4 average payoff was $3,295.88. and the average payout for the 50-cent Pick 5 was $23,076.

Ken Kirchner, the Director Wagering Development at Kentucky Downs, spent many years in that role with the Breeders' Cup. He said the meet is distinct in America because its large fields are made up of horses from across the country.

“One of the highlights for handicappers and for fans is that you get this amalgamation of horses from different racing circuits around the country that you normally only get at a meet like the Breeders' Cup,” Kirchner said. “When you have more than $2 million a day in purses, not only are your stakes races this mix of New York, Kentucky, Florida, California and other horses, you have that in the maiden and allowance races across the board. It's just a fascinating exercise for the handicapper to say, 'Gosh, I can find great value every single race of this meet.'”

Average Purses on Opening Day $218,890

In the decade since the pari-mutuel electronic gaming machines, now called Historical Horse Racing (HHR), were approved to fund purses at the track, the daily average purse has skyrocketed from a nondescript $25,600 in 2011. The average purse for the 11 races on opening day is $218,890.

Earlier this year, the HHR program survived a serious challenge in the Kentucky legislature to the legality of the 3,625 machines in the state. If the HHR pari-mutuel gaming bill had not passed in the legislature, the track likely would have closed.

The three $1 million races are part of the $10 million that is available in the 16 stakes scheduled during the meet. Including that stakes money, purses total $15,259,400. The is a notable jump from the $11.69 million in purses in 2020. The meet's overnight races – maiden, allowance and claiming – are scheduled to average $876,000 a day.

On Aug. 9, the track announced an eight percent increase in the purses for non-stakes races, except the four $100,000 starter allowances that are qualifiers for the Claiming Crown at Gulfstream Park in December. Maiden special weight races for Kentucky-breds carry a purse of $135,000; first-level allowance races $145,800 and second-level allowance races $156,600. By comparison, the maiden and first-level allowance purses are about double the purses Sunday for similar conditions at Del Mar, while the maiden special weight purses at Saratoga are $100,000 and the allowance purses are $103,000 and $105,000.

Two-time Grade I winner Got Stormy (Get Stormy) is the headliner in the six-furlong $1 million FanDuel Turf Sprint where she will face males again. She earned her second win over males in the GI Fourstardave on August 14. No filly or mare has won the Turf Sprint, which was first run in 1998.

Got Stormy has won 12 of 30 starts, with five seconds and three thirds, and $2,398,403 in purse earnings. In addition to her Fourstardave victories, Got Stormy has finished second four times against males in Grade I stakes in New York, California and Canada.

In the Turf Sprint she is expected to face the Bill Mott-trained Casa Creed (Jimmy Creed) in third consecutive race. Casa Creed picked up his first Grade I victory in the Jaipur on June 5 while Got Stormy was fifth. Got Stormy surprised in the Fourstardave at 12-1 and Casa Creed was third.

Donegal Racing's Arklow will try to become the first three-time winner of the $1 million Calumet Turf Cup. He won the race in 2018 and 2020 and was second in 2019. Arklow is expected to face Calumet Farm's Grade I winner Channel Cat (English Channel) and the 2019 winner Zulu Alpha (Street Cry {Ire}).

Bloom Racing's veteran Snapper Sinclair (City Zip) will race at the track for the fourth time when he starts in a division of the TVG Stakes on Wednesday. He has won two stakes at the track and last year finished second in the race now called the Mint Million Mile.

“We always look forward to-actually point our stable to-this boutique yet premium meeting at Kentucky Downs, said owner Jeff Bloom. “It's unique and charming and it doesn't hurt that that it provides incredibly lucrative purses.”

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KY Committee Unlikely To Recommend Tax Increase for HHR Machines

A special legislative committee charged with studying the taxes and rates paid by Kentucky racetracks, including the tax rates on profits from Historical Horse Racing (HHR) machines, seems set on recommending the status quo rather than a tax increase. That's good news for the state's racing and breeding industries, which have flourished since HHR machines were introduced in the state some ten years ago.

The Pari-Mutuel Wagering Taxation Task Force met Monday and the meeting turned into something of a cheerleading session for the sport, its economic impact and the advancements it has made since HHR machines were legalized. A higher tax rate on the HHR machines would no doubt lead to less money being available for racing.

The task force is co-chaired by Senate Majority Floor Leader Damon Thayer, considered one of the more pro-racing lawmakers in the state.

“In this deck, the most important pages are the ones that show the industries that benefit by racing in Kentucky,” Thayer said following a presentation from Elisabeth Jensen, the executive vice president of the Kentucky Equine Education Project (KEEP). “As Elisabeth noted, there are many here, and some you wouldn't think offhand, that are benefitted by the racing industry…One of my favorite graphics is the one that shows how one race horse equals many jobs. We see lots of numbers on a page, paragraphs and power points on a whole host of industries and topics, but this is a pretty compelling page. Look at all the jobs that are provided by one race horse here in Kentucky. That's a very compelling slide.”

The task force was created after the General Assembly passed legislation that formally paved the way for the state's Thoroughbred and harness tracks to offer HHR machines. Senate Bill 120 was needed after the Kentucky Supreme Court voted unanimously that the machines did not represent pari-mutuel wagering and were therefore unconstitutional. After the bill was passed, a coalition led by the Kentucky Center for Economic Policy argued that HHR machines were taxed at a rate that was costing the state an estimated $91 million in annual revenue. The state tax on HHR machines is just 1.5% of total handle, considerably lower than the tax rates on slots and other forms of gaming in other states that have slot machines or slot machine-like games.

HHR machines and the tax rate were mentioned only sparingly by the task force members during the session. Instead, the committee focused on what the money from the machines is used for and how that money has helped not just racing but the state in general. Jensen was one of two individuals to testify. The other was Chauncey Morris, the executive director of the Kentucky Thoroughbred Association (KTA).

“I want to talk to you about the broader impact of the horse industry and its affect on Kentucky's economy and how Historical Horse Racing has already grown that impact and positioned us for even greater growth in the very near future,” Jensen said. “Adopting Senate Bill 120 paved the way for continued significant investment in Kentucky's horse industry, which will lead to new jobs and economic growth in communities all across the commonwealth. Thanks to the success of Historical Horse Racing, Kentucky's horse industry is well positioned to continue strengthening our local communities and their economies through investment in new facilities, increased jobs and the tax revenue to come with it. One of the most important things we have to talk about is the economic impact of Kentucky's horse industry on the entire state.”

Jensen came armed with slides that showed, among other things, that the horse industry in Kentucky is responsible for nearly 80,000 jobs and had an economic impact of $6.5 billion.

Morris painted a similar picture, one where HHR machines had greatly helped the sport, which, in turn, has greatly helped the state.

“Thanks to Kentucky's friendly business environment, we have thrived through major reinvestment in infrastructure for horses and fans,” he said.

This was the second meeting of the task force, which is scheduled to meet once a month before presenting its findings and recommendations to the Kentucky Legislative Research Commission by Dec. 1, 2021.

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Kentucky’s Harness Horsemen Embracing New ‘Corbin At The Red Mile’ Dates

The reaction from standardbred horsemen to Kentucky gaining an additional harness meet has been overwhelming. Now the problem facing racing secretary Kevin Mack is trying to accommodate as many stables as possible for The Red Mile meet that will serve as a prelude to Kentucky's third harness track. The 12-date meet runs Sunday July 4 through July 27, with racing on Sundays, Mondays and Tuesdays over the famed Red Mile's red-clay oval in Lexington. Post time will be 1 p.m. EDT.

“I couldn't be more pleased with the response,” Mack said. “We have an overwhelming number of stalls applied for — more than we have stalls. We're delighted with the response for a new meet. Looking forward to seeing all the horsemen and to hit the ground running coming July 4.”

Ron Winchell and Marc Falcone, Kentucky Downs' majority owners and managing partners, are building a harness track in Corbin in southeastern Kentucky in partnership with Keeneland Race Course. The Kentucky Horse Racing Commission granted the owners dates at The Red Mile while the Corbin facility is being constructed. A satellite Historical Horse Racing gaming operation also will be built in nearby Williamsburg to create money for purses as well as jobs in the region.

“Marc and Ron believe in this industry and really want to make a big difference,” said Ted Nicholson, Kentucky Downs' vice president for racing who will oversee the Corbin at The Red Mile meet. “This is the first step. We thank the racing commission for granting us the dates until Corbin can be up and running and can't say enough about The Red Mile for working with us.”

Winchell said that he believes harness racing can mirror the growth that Kentucky Thoroughbred racing has experienced since Kentucky Downs introduced Historical Horse Racing into the state in 2011.

“That includes expanding entertainment and job options in the southeastern part of the Commonwealth,” Winchell said. “We so believe in this project and its bright future that we didn't want to sit out a year while building the track. By funding a 2021 Corbin meet at The Red Mile, we are showing our commitment to harness racing.”

The meet will include two days showcasing Kentucky's county-fair circuit, offering racing for 2- and 3-year-old trotters and pacers. The Mercer County Fair races will be conducted at the meet on July 13. The highest point-earners from the seven-stop fair circuit will face off in the $200,000 series finals on July 20.

The Corbin at Red Mile meet also will include prep races for the Kentucky Sire Stakes Championship and the Commonwealth Series. Both series are for Kentucky-sired horses, as well as the foals of mares who spent at least 180 days in Kentucky in the year of the foal's conception.

The meet's regular races, not counting those funded by the Kentucky Sire Stakes program, is scheduled to average about $45,000 a card while being underwritten by the owners of the Corbin track.

“This is a much-needed boost to harness racing in Kentucky,” Mack said. “We were down at one point to having only one track, The Red Mile, after some of the others closed. Then we added Oak Grove last year and now the new Corbin meet. It's giving Kentucky-sired horses better money to go for, and it's going to provide more days of racing in the state, which was desperately needed.”

Entries for the July 4 opening card will be taken July 1.

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