Floyd County officials are worried the county could be on the hook for more than $2 million over a failed deal between Keeneland and the owners of Thunder Ridge harness racing track in Prestonsburg.
For several years, Keeneland was in talks with Appalachian Racing Inc., which owns and operates Thunder Ridge, to buy that track’s license. The plan was for Keeneland to move the license to a quarter horse track it wants to build in Corbin.
Floyd County officials hoped that deal would include paying off the debt left on a $2.7 million bond the county issued in 1993 to help the Thunder Ridge project.
But Keeneland Chief Operating Officer Vince Gabbert said Tuesday that Keeneland would no longer pursue the Thunder Ridge license and will instead apply for the state’s ninth license, which is currently not assigned to any track.
“We originally had contemplated buying the assets of ARI, but our current plans do not contemplate that, so we will make application to the racing commission for the vacant racing license,”Gabbert said.
Gabbert said Keeneland’s potential deal to purchase Thunder Ridge never included debt on the Floyd County bond, but Floyd County Attorney Keith Bartley said the county had an agreement with ARI that if Keeneland bought the Thunder Ridge license, the debt would be covered.
As it is, only the fiscal court is responsible.
“A $2 million hit at this point would essentially bankrupt the county,” Bartley said.
Thunder Ridge has been losing money for years, said Floyd County Judge-Executive Ben Hale.
Hale said the county took part in the bond issue more than two decades ago with hopes the track would boost the economy. It wouldn’t be fair to stick the county with that debt when all it did was participate as a technical matter to help the project, he said.
“The taxpayers of this county should not be responsible” for the debt, Hale said.
The county has no surplus to pay the $2.1 million. It is weathering a significant drop in revenue because of the downturn in the coal industry. The county’s annual budget has dropped from $20 million to $11 million in five years.
Hale said the county will research its options relative to the bond.
So far, ARI has made all the lease payments necessary to satisfy the bond payments, Hale said.
A year ago, ARI asked for an injunction against Keeneland and the Kentucky Racing Commission to stop Keeneland from getting the state’s ninth racing license. A Floyd County Circuit judge granted the injunction, but it was eventually overturned by the Kentucky Supreme Court.
Keeneland applied for the ninth license under the former Racing Commission, which was reconfigured under Gov. Matt Bevin, said Marc Guilfoile, executive director of the Kentucky Racing Commission. The new commission has not yet decided on that application.
Bartley said county officials might ask the Racing Commission to deny the application, forcing Keeneland to buy the Thunder Ridge license instead.
Thunder Ridge was created in 1993 by the late Terrell Ross, the co-founder of the politically-connected Ross, Sinclaire & Associates, a financial company that frequently puts together public bond deals across Kentucky.
The Thunder Ridge deal was set up with a $2.7 million bond issued by the Floyd County Public Properties Corporation. Thunder Ridge declared bankruptcy in 1994 but reorganized and stayed open, sometimes asking for Floyd County’s help with bond payments.
Former Gov. Julian Carroll, now a state senator from Frankfort, served as a vice president at the track, which also offered stock car racing.
Bartley said the county essentially signed a mortgage when it issued the bond to help Thunder Ridge.
It was a “huge mistake” to have issued the bond in the first place, Bartley said, but there was an expectation that it would create jobs. Also, throughout the mid and late 1990s, there was a movement to expand casino gambling in Kentucky, which might have placed a lucrative casino at the Thunder Ridge site.
Ross died in 2006, and his partner, Murray Sinclaire of Cincinnati, inherited his shares of ARI.
Related to the issue is a $250,000 fine issued against Ross, Sinclaire & Associates by the Financial Industry Regulatory Authority because of disclosure violations by the firm over Thunder Ridge. According to FINRA, Ross, Sinclaire & Associates acted as the financial adviser on refinancing deals in 2011 and 2015 without disclosing that ARI was owned by Murray Sinclaire.
The debt on the bonds is now at about $2.2 million. According to the FINRA settlement, the most recent refinancing deals have been for one-year terms because of a potential sale of ARI, which has not happened. Another refinancing deal was issued in April 2016 and will be due May 1, 2017.
“The circumstances involving ARI and the FINRA settlement all were inherited from Terrell Ross’ operation of the firm in Kentucky,” said Bill May, a Lexington attorney who represents Sinclaire. “Since Terrell’s death, Sinclaire and ARI have done the best they can to resolve all these issues. It’s a very complicated situation.”
May would not comment on whether Sinclaire would commit to paying off the Thunder Ridge bond.
No one answered the phone at Thunder Ridge, but local officials said the track remains open for one or two harness racing meets a year, along with simulcasting. The 50-acre property has a track and barns; the county owns the parking lot and the grandstand, Bartley said.
“You’d probably find about four people there,” if you went there today, Bartley said.
Keeeneland announced in April 2015 that it had chosen a site near Corbin for a track and entertainment venue that would have live quarter-horse racing, year-round simulcasting of races and hundreds of betting terminals similar to slot machines. Keeneland said construction would start in the summer of 2015 and that it hoped to begin live racing in the summer of 2016.
Construction has not started on the track, however.
Bruce Carpenter, economic development director for Corbin, said Keeneland is in the process of finishing agreements with investors.
Carpenter said he anticipates construction will start within the next six months. Local officials believe the track will be a significant economic boost.
“I feel like it is something that will move forward,” Carpenter said this week. “It will be a great thing for all of Southern Kentucky.”
BY LINDA BLACKFORD AND BILL ESTEP
