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Talks to resolve new fight over casino money off to slow start

ALBANY – Two months after the Seneca Nation surprised state officials by declaring an end to the tribe’s casino revenue sharing payments to Albany and local communities, substantive negotiations to resolve the dispute have yet to commence.

Considering the last time the state and tribe squared off over gambling money the issue was not resolved for four years, such inaction at the negotiation table does not bode well for a quick fix to the latest clash.

The situation has implications for the state’s newly enacted budget and is leaving localities in Western New York, which have come to rely on a smooth flow of revenue-sharing payments from the tribe’s casinos, in their own financial bind.

Still, the sides are expressing optimism that some sort of deal can be made to resolve the dispute – though it is uncertain what the Seneca Nation actually wants in a trade to resume at least a portion of the more than $100 million it has been paying each year to the state and localities across the region.

Officials involved in the matter say they expect a private meeting soon between Gov. Andrew Cuomo and Seneca President Todd Gates. The casino disagreement could lead to side deals on tourism, transportation and economic development matters pending between the state and tribe.

But if negotiations don’t go well, there are proscribed courses the casino dispute can take under the terms of the original 2002 compact between Albany and the Senecas, including arbitration and, ultimately, federal courts.

“I know the state has a totally different read on the situation than the Senecas. I trust that the governor is going to work things out,’’ said Niagara Falls Mayor Paul Dyster, whose city receives more money than any other local government from the Seneca casino payments to the state.

State caught off guard

A week before the April 1 start of the state’s new fiscal year, Gates and other Seneca representatives notified Cuomo, Dyster and the mayors of Buffalo and Salamanca – where the tribe’s three casinos are located – that the Senecas were writing their final casino revenue sharing check. Unlike the last revenue dispute that began in 2009, the Senecas did not issue proclamations that the state had allowed its original compact to be violated and that payments due the state would be held in escrow until the dispute could be resolved.

This time, the Senecas simply said the money flow is over. The most recent payment – which the Senecas call the “final” one – came on March 31. It was a quarterly payment, covering the final three months of 2016, and totaled $30,402,565.

Since 2002, the tribe has been paying 25 percent of slot machine revenues to the state, which in turn paid 25 percent of that to the casino “host” localities of Niagara Falls, Buffalo and Salamanca. The Senecas' payments have totaled nearly $1.5 billion. “Non-host” counties in the region get 10 percent of the state’s annual casino take.

Seneca President Todd Gates (File photo)

But the Senecas, citing specific wording in the 800-page casino compact from 2002, said those payments no longer needed to be made after the 14th year of the deal. They said a 2013 amended deal the tribe cut with Cuomo also did not specify that the payments continue after year 14 – which ran through the end of 2016. Seneca leaders quietly planned their bombshell before dropping it while Cuomo was negotiating a state budget. Some lawmakers said the tribe may have caught the state off guard and that the compact was, indeed, silent about what happens with revenue payments to Albany after the compact’s 14th year.

Since then, the Senecas have indicated a willingness to meet with state and local officials about the situation. To what end, though, has not been made clear.

“The Nation remains committed to being good neighbors and President Gates looks forward to meeting with the governor and the mayors in the near future to ensure the long-term viability of our casino properties and the thousands of jobs they support,’’ said Victor A. Redeye, the chief of staff to Gates.

Did the Seneca Nation just outmaneuver Albany?

Nearly two months after the matter arose, neither side has invoked the terms from the original compact to begin a formal dispute resolution process. In 2002, then-Gov. George Pataki and then-Seneca President Cyrus Schindler signed a compact that included set procedures in which disputes would be handled in “a spirit of cooperation and efficiency.’’ Once either side submits a “written notice of claim,’’ a first formal negotiating session must commence within 14 days. If there is no resolution within 30 days, either side can commence a binding arbitration process.

The victor in binding arbitration can seek to enforce the decision in federal court in Western New York. As seen in the previous dispute that began in 2009, however, the arbitration process itself can be delayed by either side, or both, for years.

The new disagreement is the second major one over casino revenue sharing payments. The last one, settled in 2013, eventually saw the Senecas withhold more than $600 million in payments to Albany and localities. The Senecas claimed the state violated the 2002 compact by letting racetrack-based casinos in the region, including one in Hamburg, to install devices that increasingly worked like real slot machines and to market themselves as full-scale casinos.

The 2002 deal gave the Senecas an exclusive right to operate casino gambling in a sprawling area of upstate: all land to the west of Route 14, a state road that runs from Sodus Point on Lake Ontario to the Pennsylvania border just south of Elmira.

Then the state gave permission to a major new casino – del Lago Resort & Casino in Seneca County – to open earlier this year just seven miles or so from the eastern edge of that Seneca Nation exclusivity zone. That casino has not had a major impact on the Seneca casinos, but the tribe still has not been happy about it.

New York Gov. Andrew Cuomo speaks during an event to highlight the newly passed state budget at the Rev. Smith Family Life Center, Tuesday, April 11, 2017. (Derek Gee/Buffalo News)

The Cuomo administration says the tribe has no legal right to halt the annual payments to Albany. “We believe the ongoing obligation is clear, and administration officials have continued to be in contact with the Seneca Nation, its representatives and other stakeholders. Discussions on a resolution to this issue are continuing,’’ said Richard Azzopardi, a Cuomo spokesman.

“We’re hopeful we can work together and resolve (the dispute). If not, we’ll go the arbitration route,’’ he added.

The Cuomo administration is confident enough of the outcome that it put language into the recently adopted state budget that assumes $129 million in the coming fiscal year from continued Seneca Nation payments. The budget again authorizes the state's receipt of casino revenue payments from the Senecas and then the re-distribution of part of those funds to Niagara Falls, Buffalo, Salamanca and 17 counties in the region.

There is a key asterisk, however, not fully clear in the language of the budget bill: If the money does not flow to the state, funds do not flow to the localities.

Do Senecas hold the edge?

The Seneca Nation appears well-poised in the latest dispute. As it was the tribe that took the initial action to halt the payments, it is now up to the state – barring an arbitrator’s edict – to convince the Senecas why it should re-start the money flow.

“It seems the ball’s in the governor’s court,’’ said Sen. Catharine Young, an Olean Republican who chairs the Senate Finance Committee and represents communities in and around Seneca lands in the southern tier.

But what is the state’s muscle in this case? The last time it halted casino payments to Albany, Cuomo in 2013 threatened to end the tribe’s casino exclusivity arrangement from the 2002 compact. He warned the tribe he would consider letting a private developer open a new casino in downtown Niagara Falls near the Senecas’ flagship casino.

Such a threat today could be a hollow one. The upstate casino market has become so saturated with casinos it remains unclear if developers would even risk opening a new casino in Western New York. Three new casinos open have opened since 2013 in central and western New York and the Southern Tier, and another one is planned near Syracuse by the Oneida Indian Nation. The Seneca Nation has seen revenues at its casinos fall in the face of new competition.

For now, it’s a waiting game for local officials. Michael Smith, the mayor of Salamanca, which is located on the Seneca’s Allegany reservation, said he has a meeting scheduled next week with the Seneca president to hear what he calls his “initial proposal.’’

What might the Senecas want? The stated answer from Seneca leaders is they are done giving away part of their casino revenues to the state and have no intention of paying Albany at least $700 million in scheduled payments over the next seven years. If there is something else they want, the tribe is not saying, at least publicly. One possible route for the state is to offer a long-term extension of the tribe’s 2002 casino exclusivity compact with Albany. That compact expires at the end of 2023 – and with it, technically, the tribe’s authority to operate its three casinos.

But it appears unlikely the Senecas will cut a deal with Cuomo that extends the compact’s length unless it also lowers the 25 percent revenue sharing level from the 2002 compact. Their argument, say people who talk to both sides in this dispute, is that the gambling industry in New York has greatly changed since 2002 and the state needs to recognize not only the past financial contributions by the tribe but also the thousands of non-Indians the Senecas employ at its three casinos.

Dyster, the Niagara Falls mayor, said his city received $21 million in casino payments one year several years ago. This year, it expects a bit less than $17 million, and a portion of that is shared with other stakeholders in the county. He said he sides with Cuomo in the dispute and that the scheduled full payments are due the state – and localities – through 2023.

Having said that, Dyster envisions the Senecas want to continue enjoying a casino exclusivity arranged “but they might not be as interested in paying as much for it” as they have since 2002. Dyster hopes the dispute could prod the Senecas and state to negotiate other issues, including infrastructure and tourism investments by the state in Niagara Falls that could benefit the Senecas’ casino.

“Knowing Gov. Cuomo, I think he’s a big picture guy. He probably views this as an opportunity to try to establish a better overall system of relations between the state and Seneca Nation than has existed historically. There’s an opportunity for the governor and president to discuss a whole wide range of issues,’’ Dyster said.

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