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Legalized gaming was a hot topic in Western New York in 1998, as political and business leaders seized on casinos as a potentially lucrative fix for the downtrodden economy.

The initiative fizzled in the State Legislature, where Senate leaders failed to muster the votes for a constitutional amendment permitting a referendum on gambling. As a result, the future of gaming here rests with the Seneca Nation of Indians, who can build casinos without legislative approval.

Once again, the real action took place across the border, in Ontario, where gamblers continued to flock to the wildly successful Casino Niagara. Meanwhile, plans unfolded for a second, bigger, Niagara Falls casino and steps were taken to place thousands of slot machines in Fort Erie.

Casino Niagara's 1998 revenues and attendance had not been disclosed in time for this article, but reports circulated that the plush gaming hall on Clifton Hill topped its 1997 performance -- the most successful debut in casino industry history. First-year revenues exceeded $375 million, while attendance totaled about 10 million.

Those numbers -- and the fact that a majority of the dollars and the people who spent them came from Western New York -- prompted Mayor Masiello, County Executive Gorski and Niagara Falls Mayor James C. Galie to band together to push for casinos in both cities.

"The giant sucking sound we hear is thousands of jobs and hundreds of millions of dollars that should be ours instead of crossing the bridge into Canada," Gorski said at a joint April news conference. "We are getting all of the negatives and none of the benefits."

Masiello said gambling could help Buffalo tap the huge Niagara Falls tourism market.

"If we can add a casino to Buffalo in conjunction with waterfront development," Masiello said, "downtown will become a must-see destination for millions."

The quickest route was through the State Legislature, where all previous attempts to legalize gambling had failed. And the clamor for legal gaming here and elsewhere gained momentum when Gov. Pataki urged legislators to pass a constitutional amendment that would let voters consider the issue.

But in the end, the Senate's Republican majority killed the proposal, siding with anti-gambling advocates and out-of-state casino companies concerned about competition. Because the Constitution requires two separately elected State Legislatures to enact an amendment before it goes to voters for consideration, it will be at least 2002 before a referendum could be held.

That leaves the Seneca Nation, which could build a casino in Buffalo and Niagara Falls -- or both -- without the Legislature's approval, holding all the cards.

Even before the constitutional amendment died in Albany, the Senecas and Pataki had begun negotiating the terms under which casinos would operate in Western New York.

The advent of casinos seemed even closer at hand when the Seneca Nation elected as its president Duane L. Ray, who favors Indian-controlled high-stakes gaming at locations away from the Cattaraugus and Allegany reservations.

But governments and potential business partners of the Senecas need to proceed gingerly -- a fact underscored in December when Delaware North Cos. and Niagara Falls Redevelopment disclosed they had submitted a joint proposal to the nation for casinos for Buffalo and Niagara Falls.

The companies estimated the gambling halls would immediately create 2,500 jobs and generate gross revenues in excess of $350 million in the first year of operation.

The Senecas flatly rejected the fast-track proposal, and in the process sent the message that any Indian casino will be built on their terms, at their chosen speed.

The unresolved effort to bring gaming to Western New York contrasts with the foothold the industry has gained in Ontario in just two years.

In September, Falls Management Co., a consortium led by Hyatt Hotels, reached agreement with the provincial government on an enormous hotel and casino project that promises to transform Niagara Falls, Ont., into Monte Carlo-on-the-Niagara.

The project's centerpiece will be a 350-room Hyatt hotel and 100,000-square-foot gambling hall overlooking the Horseshoe Falls. As part of the development deal, Falls Management also would take control of Casino Niagara.

Other features of Falls Management's development plan include a 72,000-square-foot meeting and convention facility, a 50,000-square-foot family entertainment center, a 1,200-seat performing arts center and retail shops.

In addition, a theme park called River Country will be built in conjunction with Marineland at the southern edge of the city, near a new 12,000-seat amphitheater offering year-round entertainment.

The various venues will be connected by a monorail that will serve as the core of a new people-mover system for the falls.

As if for Western New Yorkers needed another reason to take their gambling dollars to Canada, Ontario approved construction of a new 40,000-square-foot casino containing 1,200 slot machines at Fort Erie Race Track -- practically in the shadow of the Peace Bridge.