The U.S. Department of Agriculture late Friday afternoon rejected the $3.25 million bid for the Yavapai Downs horse racetrack that was submitted by Gary Miller at a bankruptcy auction Tuesday.
"I was shocked and saddened," said Miller, who just resigned as president of the Arizona Horseman's Benevolent & Protective Association (HBPA). "It is not a good day for racing.
"My personal opinion is, you won't have racing at Yavapai this year."
The track traditionally opens for the season on Memorial Day Weekend.
Miller had previously stated he probably wouldn't get horses running by then, but he hoped to get the track open sometime this summer.
"I still remain very confident that I could have opened up the track this year," Miller said.
Arizona HBPA Executive Director Tom Metzen echoed Miller's comments.
"We're devastated," Metzen said. "Our people were so excited about coming back there. I don't know what the government was thinking."
Horsemen have to reserve stalls for summer racing now, Metzen said, so they're likely to give up on waiting for Yavapai Downs and go somewhere else.
"If this thing is closed another year, they might as well take a stick of dynamite and blow it up," Metzen added.
The Yavapai County Farm & Agriculture Association filed for bankruptcy last July while failing to operate its summer 2011 races.
The U.S. Department of Agriculture (USDA) has final say on the track sale price because it still holds $14.7 million in loans on the track facilities in Prescott Valley. The facilities include a one-mile horse racetrack, the 93,328-square-foot grandstands, about 860 horse stalls and a neighboring car racetrack.
The USDA filed a notice in federal bankruptcy court at 4:15 p.m. Friday that said it rejected Miller's bid and it would now negotiate with the "back-up" bidder Joe Davis, a Texas horseman. Davis capped his bidding Tuesday at $3 million. Two other bidders didn't break the $2 million mark.
The USDA will negotiate with Davis through 5 p.m. Thursday, then decide if it will accept or reject Davis' offer, said Dianna Jennings, public affairs officer for the USDA in Arizona.
Miller said he isn't happy about the USDA going to the second bidder after he already won during Tuesday's bidding.
Miller said USDA officials called him to a meeting Thursday night and said his $3.25 million bid was too low. He offered an extra $250,000 but they said they needed much more, he related.
Miller said he thought he already paid too much.
"There's a considerable amount of work that has to be done to get that thing open," he said.
"The USDA has its head in the sand if it thinks this thing is going to sell for more" than Miller's offer, said Metzen, who has a half-century of experience in the U.S. racing industry.
USDA Rural Development originally loaned the Yavapai County Fair Association about half the money it needed to build a new $22 million track in Prescott Valley in 2001 to replace the shorter track in Prescott. The summer racing meet in the Prescott area has been operating since 1960, and horse racing here dates back to territorial days.
When the YCFA was having trouble paying back the loan, it agreed to create a new group called the Farm & Ag Association with a new board of directors so it could get another USDA loan. That 2009 loan package added up to $13.6 million, including what the track still owed on the previous loan.
"Who made a bad decision on the loan in the first place?" Miller said. "They want me to pay for their bad decision."
The USDA decision to reject his offer will hurt hundreds of potential employees and horsemen, as well as the Turf Paradise racetrack in Phoenix, Miller said. And it hurts the Prescott area, Metzen added.
"I thought that was part of the (federal government) program these days, to put people back to work," Metzen said.
Putting people to work is the whole purpose behind the USDA's Community Facilities loans under the Rural Development program, Jennings said.
The Downs employed about 300 people each summer alongside hundreds of trainers, jockeys and assistants.
USDA officials in Washington, D.C. and Arizona were involved in the decision to reject Miller's offer, Jennings said.
Leonard Gradillas, community programs manager for USDA Rural Development in Arizona, has been here more than a quarter-century and never seen a large Community Facilities loan recipient go bankrupt, Jennings said.
"This is a very, very rare event," she said.