ALBANY – The Cuomo administration wants to settle its casino revenue sharing dispute with the Seneca Nation of Indians through binding arbitration.
“The answer is clear: The Nation has breached the compact," lawyers for the state wrote in the demand for arbitration it filed Thursday.
At stake are Seneca casino payments to the state and Buffalo area localities amounting to $100 million annually. The sides are battling over whether the wording in a 2002 casino compact between the state and the nation permits the tribe to end revenue sharing payments after the 14th year of the deal.
The Buffalo News obtained the arbitration demand paperwork Friday.
The Seneca Nation said that Cuomo's bid for arbitration was “no surprise” while noting that Cuomo who has canceled meetings scheduled in July and August with Seneca President Todd Gates.
“After all, rather than take President Gates’ offer and willingness to meet in person, the governor repeatedly chose insults, attacks and threats through the media,’’ Seneca spokesman Philip Pantano said in a statement.
The dispute has grown increasingly nasty in recent weeks, with both sides accusing the other of not following the terms of the 2002 compact that allowed the Senecas to open successful casinos in Niagara Falls, Buffalo and Salamanca.
In return for exclusive rights to operate the Las Vegas-style casinos in Western New York, the Seneca Nation agreed in 2002 to pay the state 25 percent of slot machine revenues on an annual basis. Over the years, that has translated to over $1.4 billion in payments to Albany, which today shares a portion of the Seneca casino proceeds with local governments, as well as at least one hospital and several school districts in a 16-county region.
The Seneca Nation says the compact includes a payment structure that extended through the first 14 years of the compact. After that, the Senecas maintain, no more money is owed to the state. In March, as the state’s new budget was being crafted, Seneca leaders notified the state that it was ending all payments as of March 31 and a last payment of $30 million, which covered revenues collected by the casinos during the final three months of 2016.
Gov. Andrew M. Cuomo has insisted the Seneca Nation is violating the terms of the compact.
On Thursday, his lawyers made it official. The arbitration demand document submitted on behalf of the state notes that the compact automatically renewed for an additional seven years on Dec. 9, 2016. That renewal automatically kicked in when neither side objected to how the compact was being adhered to.
“The Nation seeks to retain the benefits of the compact, including exclusivity, but not the obligation to pay for them. But the Nation’s position is illogical and has no basis in the compact, in law or otherwise. The Nation cannot pick and choose the terms that are renewed," wrote lawyers at Case & White, a Manhattan law firm working for Cuomo.
The state notes that the casinos have been “hugely profitable” to the Seneca Nation and that revenue sharing payments have helped fund local governments as well as the state’s education funding program.
“The Nation’s obligation to pay the state contribution was (and is) for the state an essential condition of the compact. The state contribution constitutes the sole consideration flowing back to the state,’’ the state’s lawyers added.
Pantano , the Seneca spokesman, said the state’s arbitration demand fails to identify any specific language in the compact that identifies the Seneca Nation’s payment obligations after the compact’s 14th year.
“It was not the Seneca Nation’s preference to put this before an arbitration panel. The Nation was open to dialogue. Instead, we are now seeing a repeat of the same behavior as when the state previously violated the compact. The Seneca Nation is not intimidated. The Nation will commit its resources to defending the agreement we made, which the state now wishes to disavow,’’ Pantano said.
The arbitration route calls for each side to pick one person to help settle the dispute. Those two individuals then jointly select a third person. The decision of the panel is binding. However, both sides also agreed that the arbitration decision can be challenged in federal court. Only one court location is permitted: Buffalo.
In is arbitration demand, the state proposes that New York City be the location for the arbitration process to take place.
While arbitration experts recently told The Buffalo News that such a process can speed up resolution of disputes, it is also possible either side can delay for months who is selected for the arbitration panel.
Some stakeholders that rely on the annual casino revenue flow have worried that the arbitration process will end up heading to federal court in the end – a possibility that could take years to resolve.
Optimists, though, noted that neither side was seriously engaged in talks since the dispute began in March and so arbitration can help get both sides to lay out their cases before an independent panel.
Cuomo settled a revenue dispute in 2013 – at a time when an arbitration panel was just getting started to resolve a money fight that began in 2009 – as part of a deal that made more firm the tribe’s exclusivity rights to operate casinos in Western New York.
Gates has said that he has offered to meet Cuomo on numerous occasions since the dispute erupted six months ago. He has said Cuomo canceled several scheduled sessions. Cuomo recently said the state could not sit down with the Seneca Nation at a time when the Erie County District Attorney’s office was investigating a claim by Cuomo’s Gaming Commission that surveillance equipment had been secretly installed in a room used by state regulators at the Buffalo casino.
“The Nation’s contention that it can unilaterally end paying the state contribution while continuing to enjoy the benefits of the compact has no basis in the compact, law or logic," the state’s lawyers wrote in the arbitration document.
The state claims that the Seneca Nation is reading an “implied term” into the wording of the compact – allowing the payments to stop – that is not actually there. “The fundamental bargain of the compact is that, so long as the state continues to authorize the Nation to operate gaming devices on an exclusive basis in Western New York, the Nation must continue to make the state contribution," the lawyers wrote.
Cuomo officials said the costs of hiring the Manhattan law firm are uncertain because a contract has not yet been finalized. The compact calls for either side in the dispute to pay their own legal fees, no matter the outcome of the arbitration award. The state has not yet made its pick to the arbitration panel.
“The Nation’s reading of the compact cannot be seen even as a good faith misinterpretation of the agreement,’’ they added.
Cuomo has also recently threatened to let a private developer open a new casino in Niagara Falls if the Senecas do not resume the payments. Such a threat, though, would require a change in state law and the challenge of luring a casino operator in an upstate market saturated with gambling outlets.