How Churchill Downs wins a sure bet on property taxes
The tax value of your house has probably gone up in the last 16 years. But that's not the case for Churchill Downs' iconic racetrack.
LOUISVILLE, Ky. (WDRB) -- If you own a house or a condo in Jefferson County, chances are that your home’s official value – and your property taxes – have gone up during the last 16 years.
That’s not the case, however, for Churchill Downs Inc. and its iconic racetrack at 700 Central Avenue, where the 144th Kentucky Derby was run on Saturday before a crowd of 157,813.
Records and experts consulted by WDRB News raise questions about whether Churchill, a public traded corporation headquartered in Louisville, is getting a sweetheart deal on the tax value of its racetrack.
That value has remained the same $20.4 million since at least 2002 – despite more than $250 million that the company has spent renovating and adding to the facility’s footprint during that time.
Had Jefferson County Property Valuation Administrator Tony Lindauer’s office raised its assessment of the track’s tax value – as it likely would for your house if you built an addition or a garage – the change would have meant more revenue for Jefferson County Public Schools.
“There is a lot of money that has been left on the table if this was an oversight,” said Janet Kelly, a professor of urban and public affairs and director of the Urban Studies Institute at the University of Louisville.
But Lindauer said the case isn’t so clear because of some “very odd and unusual” circumstances that differentiate the racetrack from other commercial properties.
It’s Louisville Metro government – not Churchill Downs – that technically owns the 142-acre property that includes the track, and Churchill Downs pays no taxes on it except to JCPS through a special agreement between the company and the school system.
Lindauer said his office wasn’t aware of that agreement, and he isn’t sure the racetrack should have been revalued over the years like other commercial properties. He noted that JCPS has never complained about the situation.
“I don’t know how we would treat it differently,” Lindauer said in an interview. “… I would have to have a little bit more information before I could say whether we could have or should have reassessed it at a different rate or incrementally, because this is a real anomaly.”
But the agreement between JCPS and Churchill Downs seems predicated on the assumption that Lindauer’s office would continually reassess the racetrack’s value like any other commercial property, according to Kelly and a tax lawyer who reviewed documents at WDRB’s request.
City ownership of track dates to 2002
The city government took title the racetrack, as well as about 70 several surrounding properties, in 2002 as part of a plan to help Churchill Downs raise $153 million in bonds for improvements to the facility.
Local governments often lend their borrowing power to private companies – what are called “industrial revenue bonds” – to help those companies make investments that will grow the local economy, according to Kelly, an expert in local government finances.
It makes sense for Louisville to help Churchill Downs, she said, because “the contribution to the local economy of the Derby is phenomenal.”
When the city government became the owner of the racetrack and surrounding properties as part of the 2002 deal, those pieces of real estate became exempt from taxes – a break that will last until 2032, when Churchill Downs is scheduled to take the properties back.
But the city, then under the leadership of the late Mayor David Armstrong, didn’t want to deprive Jefferson County schools of tax revenue from Churchill Downs for 30 years, according to records.
Such concerns are typical with industrial revenue bonds, Kelly said.
“The complaint you most frequently hear is that the school districts suffer at the expense of an advantage to the corporation,” she said.
The school system receives by far the largest share of local property taxes, which also go to city and state government and suburban fire departments.
Louisville’s bond deal required Churchill Downs to agree to make annual payments to JCPS “equal to the amounts” that the company would have owed to the school system had the racetrack continued to be taxed normally.
When Churchill Downs cuts a check to JCPS every year, the amount paid is based on the PVA’s current value of the racetrack.
Churchill Downs has held up its end of that bargain, according to documents obtained under the Kentucky Open Records Act. Last year, it paid JCPS about $174,000 in real estate taxes.
The issue is whether the $20.4 million assessment for the racetrack should have gone up in the last 16 years.
The PVA re-values properties on a rotating basis, and assessments are typically adjusted – up or down, in some cases -- at least every four years.
Lindauer’s office caused a minor outcry in 2015 when thousands of homeowners in neighborhoods like Audubon Park, Cherokee Triangle and Germantown got notices that the assessed values of their homes had gone up by 15 percent or more.
Besides normal inflation and growth, a sale on the open market, addition or new garage can also prompt the PVA to reset tax values.
Churchill Downs spokesman Darren Rogers said last month that the company has made more than $250 million in “improvements around the facility” since 2005.
For example, Churchill Downs just added 77,250 square feet, including 1,800 new seats and 36 luxury suites, to the track’s north end at a cost of $37 million.
But the racetrack’s value hasn’t been reassessed because of its status as government-owned property, said Jason Hancock, a top official in Lindauer’s office.
Hancock, who has been with the PVA’s office since 1999, said no one made the office aware of Churchill Downs’ agreement with JCPS to continue the tax payments and tie the amounts owed to the PVA’s value.
“We are not privy to any of these conversations or deals,” Hancock said. “They may well have said that, but no one has made us aware or given us a copy of these agreements.”
Lindauer added that JCPS has made no complaints over the years about being shortchanged by the racetrack’s tax value.
“If they want something else, they would have called us or at least called (state government in) Frankfort,” he said.
The school district’s chief financial officer, Cordelia Hardin, declined an interview for this story, but in an email she said “JCPS does not assess property values” and referred questions to Lindauer’s office.
Churchill Downs spokesman John Asher did not provide a comment for this story.
Kelly said some special tax agreements with school districts do include provisions that “freeze” the base on which the company’s payments are calculated for years into the future.
But the agreement between JCPS and Churchill Downs, which Kelly reviewed at WDRB’s request, appears to have no such provisions, she said.
Mike Grim, a tax lawyer at Louisville accounting firm MCM, also reviewed the documents for WDRB.
He agreed that the documents suggest the racetrack property “would continue to be ‘assessed’ by the PVA in the normal course, notwithstanding the property’s exempt status.”