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State, not Falls casino, seen as obstacle;
Albany policies hurt businesses, mayor says

New York State drains most of the money it makes from Niagara Falls State Park out of this city.

It takes most of the electricity and revenue from the Niagara Power Project in nearby Lewiston.

So it was no great shock to people who live here that the state grabbed a bigger piece of the action nine years ago when the Seneca Niagara Casino opened.

It was just another kick in the ribs for a city that has had one of the highest unemployment rates in New York for the last 20 years.

"It's just unjust," Mayor Paul A. Dyster said, "and sometimes you have this feeling that there's almost this policy of economic genocide or something, like somebody in Albany doesn't even want this place to prosper, and I can't understand that, because a prosperous Niagara Falls would be so beneficial for the State of New York as a whole."

Niagara Falls finds itself at a crossroads as the Seneca casino pushes toward its second decade.

City and Seneca officials are working more closely together than ever, and say they see better times ahead. But downtown remains a tattered work in progress, Dyster and others say, in part because of the economic climate state lawmakers brought to bear.

"The state is a bigger obstacle than the casino," said Shawn Weber, the owner of Wine on Third, one of the few successful trades in the city's Third Street entertainment district.

The district could hardly be mistaken for the strips in other international tourist destinations.

The two-block patch between Niagara and Main streets has eight small retail and commercial buildings and five bars, including several with limited hours. There are four Indian restaurants, three other dining spots -- and 13 vacant properties.

New York State has tried to help here. It plowed more than $4.5 million into these blocks since the Seneca Niagara Casino opened on New Year's Eve 2002, but many of the businesses have had a hard time competing with their sovereign neighbor just across Niagara Street.

The casino -- and its nearly 600 hotel rooms, six restaurants and 10 retail shops -- has proved a daunting competitor to those who would set up tables, a bar and a cash register. The Senecas enjoy tax, cash flow and other advantages, not to mention the pull of the only gambling floor on the U.S. side of this world-famous destination.

"There was no thought of limiting development in terms of the number of restaurants in the casino," lamented Dan Vecchies, who thought he was on the verge of something big in the fall of 2003, when he opened the Shadow Martini Bar and Restaurant on Third Street. He went out of business three years later.

>Help needed

When state lawmakers decided to give the Falls a gambling complex, they not only chose to create an unequal playing field, but also to take three times as much in casino profits than they were willing to leave with the city.

The gambling compact between the Senecas and New York was hashed out between the Indian nation and the Pataki administration in 2002. Under its terms, which expire in 2016, the Senecas -- who built and run casinos in Niagara Falls, Buffalo and Salamanca -- keep 75 percent of slots revenue from those sites.

The state gets 18.75 percent and the localities get 6.25 percent, cuts designed to help address the taxes the Senecas could avoid on what would become sovereign gambling pockets off Indian territory.

Falls officials have used slots revenue for street, airport, hospital and other improvements, but complained for years that their cut is too low. The chorus of unhappiness has grown during the last two years, as the Senecas have withheld the state and local share amid discord over the collection of taxes on cigarettes sold to non-Indians. They're also upset over the emergence of "racinos" with betting machines in Hamburg and Batavia, which the Senecas maintain violate its exclusive gambling rights as part of its gambling compact with the state.

The Senecas now owe local governments $36.8 million from the Seneca Niagara Casino, $15.3 million from the Seneca Allegany and $5.1 million from Seneca Buffalo Creek Casino, for a total of $57.2 million, according to the state Division of Budget.

"We need some help here," Dyster said. "My little city of 50,000 people has to somehow lay out the welcome mat for these millions of people who come here every year, and then has to read in the New York Times that their experience is shabby."

>Reaching out

It will be up to the Senecas and a federal judge to decide if, and how, the Buffalo Creek Casino on the Buffalo waterfront will expand in the years to come. Meanwhile, leaders in the Falls wonder whether their city may be on the cusp of better times in part because of new efforts the Seneca Nation of Indians is taking to reach out to its neighbors:

The nation -- which donated $1 million in June to help build River Front Park in Buffalo's Old First Ward -- announced in June that it will pay nearly $1.3 million toward the effort to build a Niagara County Community College culinary school in the shuttered Rainbow Centre mall. It has helped underwrite a Friday night concert series this summer outside the Hard Rock Cafe, and plans to support a new Holiday Market this fall, as well as future efforts to market Niagara Falls International Airport.

The Senecas opened a golf course in Lewiston in July 2010 and are considering other projects off their sovereign land, Dyster said.

The Seneca Gaming Corp. also has expressed a willingness to open its Players Club program to businesses near its three casinos.

Seneca Nation President Robert Odawi Porter made clear in a recent interview with The Buffalo News that it is in the interest of the Senecas to be as profitable as possible on the gambling side of their balance sheet. Hospitality "is not our job," he said, maintaining that the Senecas would just as soon cede that to entrepreneurs.

Weber and his partner, Dave Giusiana, hope to be among those to start accepting Players Club dollars soon. They count casino workers among their Wine on Third customers, and also own the nearby Jefferson Apartments, home to several casino employees. Wine on Third has millions of potential customers, including many locals and tourists with no interest in gambling, Weber said, adding that unless customers are willing to lose quite a bit of money gambling to rack up Players Club dollars, his restaurant is going to be more affordable than those at the casino.

"We have a casino [to attract customers]," he said, "but we also have the falls."

>State seen as enemy

The business partners share a sentiment that seems universal in the Falls: the Senecas are not the enemy. That would be the state.

Niagara Falls residents have spent decades glancing across the Niagara River to see what progress looks like, while trying to withstand a continuous raid by Albany on its most valuable resources. So why doesn't Canada have these problems?

Because our neighbors to the north do gambling and planning differently.

Dyster often shares the story of he and his high school classmates reading aloud a copy of the Niagara Falls, Ont., newspaper in 1970, in which the provincial government announced it intended to build a tourism economy in southern Ontario.

"This was a joke to us," he said. "We knew what industry was. Chemicals. Steel. So they made a strategic decision, and there was a whole series of developments in the planning area."

By the time the Seneca Niagara Casino opened on New Year's Eve 2002, the Canadians already had plowed$7 billion to $8 billion in public and private money into the southern Ontario regional tourism economy, Dyster estimated.

"That's a big head start," he said.

The mayor also pointed out that developers on the Ontario side can build hotels with a straight-on view of the Falls -- there are about 20 of them, with a view impossible to duplicate on the New York side -- and that the provincial government, in Canada's largest city, is an hour away, much closer than Albany and its mostly downstate power brokers.

A system has been built on the Canadian side that continues to make the tourism economy, and its vibrancy, a key part of the provincial economy, said Tom DeSantis, senior planner in Niagara Falls, N.Y.

Niagara Falls, Ont., its regional government and the province planned southern Ontario as a region, creating a limited number of parks along the Niagara River, run by a parks commission that collects money from its tourist attractions and plows much of it back into the local tourism economy. Planners also established a "greenbelt" region further inland that works together in the wine and agriculture trades.

"There's nothing like that here on the U.S. side," DeSantis said.

The province also limits the number of things it offers inside the provincially run casino walls. The resort-style Fallsview for instance, has roughly only half as many hotel rooms as the Seneca Niagara Casino & Hotel across the Niagara Gorge.

As a result of the decisions on the front end, private hotels today are clustered around both casinos on the Canadian side.

"So you have this very deliberate strategy from the province to the region to invest in tourism infrastructure in a very deliberate way, over a long period of time," Dyster said. "That is the major difference between the Canadian approach to economic development and the U.S. approach to economic development."

Meanwhile, Weber, the owner of Wine on Third, counts himself among those concerned that the state, with its track record in the Falls, may have future designs on his city's casino -- and more of its revenue.

"If the state ran the casino here," he said, "I don't think we'd see a nickel."