Churchill Downs plans casino-like gambling venue in downtown Louisville

Churchill Downs plans casino-like gambling venue in downtown Louisville

LOUISVILLE, Ky. (WDRB) – Churchill Downs Inc. is buying the US Bank building at Fourth and Market streets and plans to open its fourth casino-like facility there.

Construction on what Churchill calls "Derby City Gaming Downtown" would start later this year, with a projected opening in early 2023, the company said. 

Churchill has suggested for months that downtown would be the site of the next “historical horse racing” venue and its second in Louisville, joining Derby City Gaming on Poplar Level Road. The horse racing and gambling company has opened similar locations near Turfway Park in northern Kentucky and at Oak Grove on the state’s southern border with Tennessee.

The deal was made public Thursday, a day after Churchill said it was selling its Arlington Park racetrack in Illinois to the Chicago Bears for $197.2 million. The building is home to a US Bank branch and a parking operation run by Riverside Parking.

In an announcement at the Kentucky International Convention Center, Churchill CEO Bill Carstanjen said the project "will be an important step forward for the city of Louisville, for downtown, and for communities and neighborhoods nearby."

Besides seizing on the success of the popular -- and revenue-producing -- games that resemble slot machines, Churchill has pledged $1 million to the West End Opportunity Partnership, the newly formed organization that will direct future economic development projects in the city's western neighborhoods. 

Churchill reported net income of $108.3 million during the most recent quarter that ended in June and net revenue of $515.1 million during that time.

The company has promised to spend at least 20 percent on minority-and women-owned firms during the construction work on the bank building overseen by Messer Construction of Louisville. 

And it says it will work with the OneWest community development group and other organizations to provide job opportunities at the gambling venue to people living in “Louisville’s most under-resourced neighborhoods,” along with training and other services meant to retain and develop workers.

"At Churchill Downs, we believe that we have an obligation to devote resources to places where inequities exist," Carstanjen said. "It is important that Louisville is a city that is thriving, a great place to live, work and visit. Investments like Derby City downtown help us to achieve those things. Economic vibrancy should be possible for every part of this community."

Plans call for 500 gambling machines at the downtown site, more than 200 onsite parking spaces and a "fresh-air gaming area." Also envisioned are a sports bar with a live entertainment stage, a "bourbon library" and an "elegant wine and charcuterie lounge," in addition to a Kentucky Derby retail store.

Canstanjen said the project, coupled with more machines being added at Derby City Gaming, is expected to generate an extra $10 million to $12 million annually for purses -- the money that's awarded to top finishers of horse races at the company's flagship track on Central Avenue.

Churchill wasn't able to provide an anticipated cost of its investment, including an estimated sale price of the building, or a closing date for the transaction.

The work would not involve razing the bank building, spokeswoman Tonya Abeln said. The company estimates 350 jobs would be created during construction, along with 100 permanent positions once the venue opens. 

Abeln said in an email that there is no plan for Churchill to pursue any public or state tourism incentives, or a tax increment financing district. She said the company is evaluating whether a zoning change is needed for the site.

Historical racing involves machines that resemble slot machines but aren’t – since casinos remain illegal in Kentucky. Churchill has operated the devices in a legal gray area for years, but state lawmakers voted to legalize them earlier this year in response to a Kentucky Supreme Court decision.

Churchill’s Poplar Level Road site now accounts for more gambling revenue than any of the company’s casinos, according to the most recent quarterly data analyzed by WDRB News this summer. Carstanjen told analysts in July that the venue was a “juggernaut.”  

While the machines have boomed, Kentucky doesn't reap the same tax benefit as if they were actual casino games. 

The state imposes a 1.5 percent tax on the “handle,” or the total amount bet, in the machines. After returning most of the handle to winning gamblers, the taxes account for about 18 percent of the rest.

Indiana and Ohio tax 27 percent and 34 percent of their casinos’ gross revenues, respectively, according to a WDRB News analysis of data from the American Gaming Association.

In Kentucky, players have pumped at least $10.2 billion into the machines since 2011, WDRB reported earlier this year, with most going to purses for the horse racing industry. Overall, the machines have generated at least $62 million in general tax revenue for Kentucky since they were introduced.

Due to the success of Derby City Gaming, Churchill revealed plans in July to spend $76 million there in an expansion that includes 400 more gambling machines and a five-story, 123-room hotel. Derby City now has 911 machines.

Churchill’s foray into downtown comes as facilities like the KFC Yum! Center and the Kentucky International Convention Center look to rebound from event cancellations and a shift in in-person office work in the central business district due to the COVID-19 pandemic.

Fischer said the project can be "an important component of downtown local revitalization that has displayed tremendous momentum over the last several years." 

The US Bank building being sold has offices for about 50 employees in various business lines, with many of those working remotely during the pandemic, according to the company. It's also home to a bank branch that has been closed during that time. 

Rick Rothacker, a US Bank spokesman, said the company is finalizing a lease for a new main office in Louisville, along with an agreement for a new downtown branch.

"U.S. Bank has been in Louisville for more than 100 years, and we look forward to continuing that relationship for years to come," he said. 

The addition of a casino-like structure in downtown is likely to reignite calls for the Kentucky General Assembly to consider full-fledged expanded gambling or sports gambling. 

House Speaker David Osborne, R-Prospect, who attended the event at the convention center, said that's "always an ongoing conversation."

"It's been a conversation since long before I got to the legislature. It is something that I have personally supported. But it remains a very divisive issue in the legislature," he said. 

State Sen. Gerald Neal, D-Louisville, said it's clear that states surrounding Kentucky and elsewhere in the U.S. have moved forward with legalizing forms of gambling. 

"I don't know how it manifests itself," he said, "but we can't just be a bump on a log."

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