Slots At Tracks Legislation Nets Estridge Family $53.5 Million

If you want to see an example of how your Indiana legislature gets to pick winners and losers, look no further than the deal just announced for the sale of the Estridge family's interest in Shelbyville's Indiana Downs race track after the legislature this year approved legislation allowing the track to purchase a franchise from the state to operate slot machines at the track. According to the IBJ, father and son Estridge are selling their stake in Indiana Downs to South Bend-based Oliver Racing for $53.5 million. The IBJ reports:

The high-stakes competition for control of Indiana Downs has entered the homestretch. And South Bend-based Oliver Racing LLC is poised to win.

According to a binding term sheet filed July 18 with the Indiana Horse Racing Commission, Oliver Racing has agreed to pay $53.5 million for the 34-percent share of the track owned by Carmel-based LHT Capital LLC, which is led by custom-home builder Paul Estridge Jr. The deal, which must be approved by regulators, would boost Oliver’s stake to 97 percent. Then, Oliver has big plans for Shelbyville-based Indiana Downs, public records show. The company has hired New York-based investment bank Jeffries & Co. to raise $545 million in a pair of debt transactions.

Oliver would use $53.5 million to buy out Estridge and his father, Paul Estridge Sr., and to pay the $250 million license fee the Legislature mandated this spring when it authorized 2,000 slot machines at the track. That would leave $241.5 million for redevelopment of the track as a “racino”—or $141.5 million more than the minimum required by the state for the project.

“Obviously, with a war chest like that, a lot of things could certainly happen,” said Indiana Downs General Manager Jon Schuster.

Prior to the enactment of the slots at tracks legislation, both of Indiana's horse race tracks were crying a river over how they couldn't survive financially unless the legislature allowed them to turn their horse race tracks into casinos. Just months later, the Estridges are pocketing enough money to rescue Indianapolis' unfunded pensions for firefighters and police. This is just the first of two shoes to drop. I can't wait to see how much money the legislature made for the investors in the Hoosier Park race track at Anderson.

The response from Sen. Luke Kenley made me want to throw up. "The terms of the Oliver-LHT buyout suggest the state struck the right balance when it set the slots licensing fee at $250 million, said state Sen. Luke Kenley, R-Noblesville, who oversaw much of the Statehouse slots debate and now leads the Indiana Commission on State Tax and Financing Policy," the IBJ reports. “The Estridge group and Oliver … all seem to be good businesspeople." "I think they’re just making a good business decision between them,” Kenley said. “The Estridges get a nice gain, but it also appears to validate the $250 million license fee we came up with. If they were getting $250 million, I’d think we’d undervalued the license fee.” As I see it, a minority investor is making off with bucco bucks from an investment we were told as recently as a few months ago was virtually worthless because it couldn't make any money. If anything, it tells me the state's $250 million franchise fee was too small, but then again, Sen. Kenley did manage to bankrupt the family grocery business so I wouldn't expect him to be a financial wizard even with a Harvard law degree.

The Star editorializes today in favor of ethics reform, including a revolving door law for Indiana lawmakers. "In Indiana, there is no wait. Legislators can immediately cash in on their connections, as several have done recently," it opines. Chew on this. Word on the street is that one former lawmaker is being paid $300,000 to sign on with a local law firm to lobby the legislature after he played a critical role in the passage of the slots at tracks legislation earlier this year. That same law firm lobbied for the passage of the slots at tracks legislation. Yes, the Star is right, we need to enact a revolving door law in Indiana for the legislature. One year or even two years won't cut it. A life time ban seems more appropriate. And while you wait for a measly property tax rebate check in the mail that same legislature is funding with the slots at tracks franchise fee, you can be comforted knowing the Estridges will have already collected their millions for a job well done.