Buying a stake in the Saratoga Casino and Raceway will give Churchill Downs Inc. a better chance at landing a piece of the gaming action coming to New York in the near future, company officials said Thursday.
The Kentucky-based company views its pending 25 percent ownership in Saratoga Harness Racing Inc. — the parent company of the Saratoga Springs-based racino and Saratoga Casino Black Hawk in Colorado — as an investment that will make its application more competitive for one of four gaming licenses being offered by the state. In addition, the move will better position Churchill Downs to jump into the online gaming business, should it become legalized in New York and Colorado, Chief Financial Officer Bill Mudd explained during a conference call Thursday.
“Not only does this equity investment make sense economically, it is also strategically important as it provides [Churchill Downs] with an option on Internet gaming in two states should Internet gaming be legalized,” he said.
Becoming a minority shareholder will also allow Churchill Downs to get in on the casino license action in the lucrative Hudson Valley-Catskills Region — an area that is expected to draw tens of thousands of gamblers from the New York City area. Saratoga Harness has submitted an application with Rush Street Gaming to build a casino in the Orange County town of Newburgh.
But predominantly, the newly acquired stake in Saratoga Harness coupled with the five-year management contract announced this week is an arrangement that will make the joint application the two companies filed in June a lot more competitive. Mudd said the bid to secure a license for Capital View Casino & Resort in East Greenbush is “very competitive” and will also ensure the profitability of the racino — a facility with 1,782 video lottery terminals that contributed $76.5 million to the state between April 2013 and March 2014.
“We are really excited to expand our relationship with the Saratoga Harness Racing team and believe it will improve our chances of being awarded a license to build and operate the Capital View Casino & Resort,” Mudd said.
There’s also a chance Churchill Downs sees a new opportunity to edge in on an agreement to operate New York’s three thoroughbred tracks. The company was among several business entities that joined Empire Racing Associates’ bid for the franchise in 2006 before the partnership unraveled a year later, ultimately leading the state to award a 25-year contract to the New York Racing Association in 2008.
But NYRA is now undergoing a three-year period of public operation and reorganization. The future look of NYRA when it is reprivatized is anything but clear.
A spokesman for NYRA declined to comment.
The prospect of online gambling in New York was a much clearer incentive for Churchilll Downs’ acquisition — one company officials talked about freely Thursday. Even though the state doesn’t allow such sites to operate, there is legislation in both the Assembly and Senate that could one day make way for the legalization of online poker sites in New York.
Churchill Downs is already in the video poker business. Its online gambling portfolio, which also includes the wagering site TwinSpires.com, earned $57.1 million during the second quarter of 2014 — an increase of 9 percent over the previous year’s figures.
In 2013, Republican state Sen. John Bonacic pitched an amendment to the racing, pari-mutuel wagering and breeding law, in addition to the penal law that would allow certain interactive poker games to operate online. Though the measure didn’t gain traction during the recently concluded session, the bill was referred to the senate’s Racing, Gaming and Wagering committee, which is chaired by Bonacic.
Officials with Churchill Downs did not disclose the price of acquiring a quarter of the voting shares of Saratoga Harness or the exact specifics of its management contract.
Bill Carstanjen, Churchill Downs’ chief operating officer, said the prospect of online gaming wasn’t a driving factor in reaching an agreement with Saratoga Harness. Rather, it was a contributing element to a deal his company views as potentially lucrative.
“It’s always a plus,” he said. “It’s always something we factor into the mix as we look at the population demographics of the different states that are out there.”