Kentucky gaming is getting an upgrade. Churchill Downs Inc. announced a new gaming facility in downtown Louisville called Derby City Gaming.
This could be a major boost for the Kentucky economy, but it’s causing some representatives to wonder if Kentucky is missing out on vital tax dollars by not legalizing casino gaming.
HHR expands in Kentucky with Derby City Gaming
This new 43,000-square-foot casino-like entertainment venue will feature 500 historical horse racing (HHR) machines. Not to be confused with slot machines, these HHR games allow users to wager on video replays of previous horse races.
Kentucky has had an on-again off-again relationship with HHR gaming over the past few years.
Back in 2020, the Kentucky Supreme Court deemed these machines illegal for a brief period. They were then reinstated in February after being determined different from slot machines because of their method of calculating odds.
Now that the state once again permits this type of gaming, the industry can continue its expansion.
Along with these machines, CDI’s new facility will incorporate a sports bar, wine lounge, bourbon library, entertainment venue, and a retail store.
Construction will begin later this year, with a grand opening scheduled for early 2023.
Fostering community growth in Louisville and beyond
This new facility will help Louisville compete with southern Indiana, which offers gamblers access to multiple casinos across the river. Keeping money within the state is also an important step for the local community.
The project will create a total of 450 new employment opportunities, including 350 construction jobs and over 100 permanent positions.
Moreover, CDI plans to contract these services with full diversity and inclusion in mind, reaching out to women and minority-owned businesses in particular.
Louisville Mayor Greg Fischer said Thursday.
“Derby City Gaming Downtown will bring even more life to Fourth Street with just shy of an acre’s worth of space for more entertainment offerings, another stop for bourbon fans, a shopping outlet for Kentucky Derby merchandise and permanent jobs to downtown. Thank you, Churchill Downs, for your commitment, your investment and for your belief in our great city.”
Derby City Gaming
This new downtown location of Derby City Gaming will be CDI’s fourth facility in Kentucky and its second in Louisville. Its original Louisville location, however, happens to be the state’s only licensed gaming facility.
CDI opened Derby City Gaming in Sept. of 2018 on Poplar Level Road, just 12 minutes east of downtown Louisville.
According to the July 2021 Historical Racing Report, visitors have wagered almost $3.3 billion at this location since inception. That averages out to around $1.1 billion wagered per year.
The Kentucky Lottery brings in a similar amount annually. However, the state collects far less in taxes from HHR gaming than it does from the lottery.
Of the money collected, Churchill Downs allocates 18% of that to various programs.
The state receives 8% of this as taxes, while the other 10% goes to fund equine industry initiatives. This is how the CDI generates purse money for the Kentucky Derby and other Churchill Downs Racetrack events.
This newest facility will likely contribute an additional $10 to $12 million per year to these purse funds.
Many in Kentucky see this as money the state could be benefiting from instead.
Kentucky missing out on key tax income with HHR
States surrounding Kentucky are able to tax casino facilities at a much higher rate than Kentucky’s 8% HHR tax.
The Caesars Southern Indiana Casino, Louisville’s closest casino competition, currently pays an average of 22% in taxes.
Kentucky Senate Minority Floor Leader Morgan McGarvey views the state’s laws as a major misstep, saying he’s tired of seeing other states benefit from money that could remain in Kentucky:
“We’ve watched carloads of cash cross the river into other states. Instead of allowing that money to stay here, now we’re building slot machines in downtown Louisville, but we’re not calling them slot machines and we’re not taxing them like slot machines.”
Indiana accrued almost $15 billion in tax revenue from its casinos during the same three-year timespan that Kentucky collected less than $300 million from Derby City Gaming.
While McGarvey still sees Churchill’s expansion as a positive step for the Kentucky economy, he believes the bigger benefit would come from redefining casino legislation.
“It’s clear that we already have gaming in Kentucky. We need to make sure that we have the ability to have full casinos here, for the people that are coming in for the bourbon trail, for the conventions, for the revenue that it could generate for the state, that we could put toward education, infrastructure, and healthcare.”
Until casino gaming becomes legal in Kentucky, advocates are exploring potential avenues available for raising horse race taxes. Kentucky representative Kim King has pre-filed Bill Request 367, and the Pari-Mutuel Taxation Task Force is researching additional options.