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More dead trees, fewer repaved roads as casino cash dispute drags on

Plans to expand pre-kindergarten for 3-year-olds in Niagara Falls are on hold. Residents can expect to see more dead trees and fewer newly paved roads.

In Salamanca, the city never restored police and firefighters laid off eight years ago. Blacktopping roads is off the table.

Buffalo budgeted $7 million in casino revenue for the 2017-18 fiscal year, but got zero, said City Controller Mark J.F. Schroeder.

As a stalemate between the Seneca Nation and New York State over slot machine revenue drags on, the three cities that host the Seneca casinos are feeling the effects.

And there's no quick fix in sight.

A resolution still hangs on the two sides selecting a third arbitrator to help settle the dispute over whether the Seneca Nation violated its compact with New York State when it stopped sharing casino revenue 13 months ago.

“They haven’t even been able to decide on an arbitrator and we anticipate that’s going to be at least another year to two," said Assemblyman Angelo Morinello, a Niagara Falls Republican. "At this point, the city is close to bankruptcy."

The Senecas, per the nation's agreement with New York, paid the state 25 percent of its slot machine revenues in exchange for exclusive rights to operate three Las Vegas-style casinos in Western New York. The revenue sent about $110 million annually to Albany. The state, in turn, shared part of the proceeds with various local entities.

How the revenue from Seneca slots used to flow to cities

The Senecas' required payments to the state stopped after the 14th year of the deal, according to their reading of the 21-year compact. The state disagrees.

"The arbitration process is ongoing, but the state's position is unchanged," said Richard Azzopardi, a spokesman for Gov. Andrew Cuomo. "The Senecas have an obligation to pay in exchange for exclusivity and when they breached their obligation, they breached the compact.''

Heading to arbitration

The state and Seneca Nation 16 years ago agreed that any disputes between the two governments would be resolved “in a manner that will foster a spirit of cooperation and efficiency.”

If they could not resolve disputes on their own, the two governments said disagreements over the casino compact would go through a three-member arbitration panel. The state and Seneca Nation each get one pick, and those two members would select a third – meaning New York and the tribe would ostensibly have to agree on the final panel member.

Last fall, the two sides took the first step to resolving their disagreement by appointing their panel members. The Seneca Nation tapped University of New Mexico law professor Kevin Washburn, a member of Oklahoma’s Chickasaw Nation and a top official for Indian Affairs during the Obama administration. The Cuomo administration appointed Henry Gutman, a lawyer whom the governor turned to during a 2013 casino revenue fight with the Senecas.

Cuomo has threatened to find a developer to build a commercial casino in Niagara Falls to directly compete with the Senecas, a threat Seneca President Todd Gates last year called foolish. In September, the Cuomo administration activated the arbitration process outlined in the original compact 16 years ago between the state and tribe.

While the dispute has been nasty at times, the Seneca Nation and the Cuomo administration agree on one thing: both sides have pledged to go through the arbitration process and are working to find an acceptable third panel member. The Senecas in November, when the dispute went to arbitration, said Cuomo declined to meet face-to-face with Gates over the previous six months.

"While the state chose to initiate the arbitration process, the Nation is committed to see that process through to the end. That's our focus," said Philip Pantano, a spokesman for the Seneca Nation. "The Nation will be ready to state its case, rooted in black and white language of the compact, as soon as the panel is officially in place and a schedule has been set."

'Close to bankruptcy'

The affects of the casino money cutoff came up late last month during a floor debate over the state budget. Morinello, the Assemblyman representing Niagara Falls, asked if the budget contained any relief for the localities hurt by the dispute.

He noted the city is behind in receiving casino revenue by about $22 million.

Assembly Ways and Means Committee Chair Helene Weinstein, a Brooklyn Democrat, told Morinello the “easiest solution” would be for the Senecas to resume the payments. “But at the moment it’s still in discussion with the anticipation of it being resolved,’’ she said.

“That was the same answer last year,’’ Morinello told her.

The effect in Niagara Falls

In Niagara Falls, Mayor Paul A. Dyster and School Superintendent Mark R. Laurrie said they gave up on some plans they had for this year after the Seneca spigot stopped flowing.

The last year of full casino payments to the Falls, in 2016, gave the city $10.8 million to spend. That would have been about 12 percent of this year's $91 million budget.

Dyster said the city has followed the policy of using casino money to match state highway aid to double the amount of streets it repaves each year. This year, Niagara Falls intends to use $1.8 million in state aid to pave about 15 streets.

"We might be able to do 30 or more streets if the casino money were in place," Dyster said.

Throughout the Falls, streetscapes feature ash trees that are dead or dying because of the emerald ash borer, a pest that has been attacking them in recent years.

"We would be spending $200,000 on removal and $100,000 on planting new trees," Dyster said.

Dyster has said his city will leave casino money out of its 2019 spending plan if there is no deal.

The city's economic development agency, NFC Development Corp., used to be given $500,000 a year in casino money to replenish its grant and loan fund to assist businesses. That's not going to happen this year, Dyster said.

"We're unable to do our part in the revitalization of downtown Niagara Falls," he said.

The city used to help fund a downtown ranger program, in which uniformed employees walked the streets to help tourists. It cost $140,000, funded from casino cash. There won't be any rangers this year, Dyster said.

The city also used to give $40,000 a year to the Niagara Military Affairs Council, a citizen group that lobbies on behalf of the Niagara Falls Air Reserve Station. Dyster said this year, it will be given $2,500.

Others get cut, too

Eight other agencies were promised a slice of casino profits, too, including the USA Niagara Development Corp., a state agency that owns the Conference Center Niagara Falls.

The city gives $1.5 million a year in casino revenue to subsidize the Conference Center. Not this year, Dyster said.

The Niagara Falls Board of Education and Niagara Falls Memorial Medical Center each received 5.5 percent or $750,000 of the local casino revenue each year, whichever is less.

Laurrie, the school superintendent, said the school district has been using the $750,000 to pay off its debt.

This year, the debt payments will have to come from tax revenues. Laurrie said that means the district will have to do without $750,000 worth of other programs.

"It's no secret I want to add more 3-year-old classes. They've been very successful," Laurrie said.

Thirty-five toddlers missed out on the classes this year because they did not win a lottery for pre-kindergarten.

"We had 115 (applicants) for 80 spots this year. I'm sure I could have filled two more classes," Laurrie said. Without casino revenue, extra classes won't be offered.

Laurrie also wanted to hire social workers to help children ages 7 and under who have attendance issues, part of an idea he had for early intervention for young kids.

"It's something I'd love to have," Laurrie said.

But those jobs aren't in the budget voters will consider at polls next month.

At Memorial Medical Center, casino money was used in large part to build a 54-bed behavioral health unit.

"It wasn't to plug holes. It was to invest in capital improvements on our campus," said Judi Nolan Powell, Memorial's vice president of community relations.

Losing that $750,000 a year means the hospital will be more cautious in making improvements.

"It's not going to impede our forward motion," she said. "It will slow down the process, but we're still on target for job creation."

Tough times in Salamanca

Salamanca's situation is even worse.

Salamanca, which started a new fiscal year April 1, did not include any casino revenue in its $9.1 million budget, City Clerk Tracy Chamberlain said.

The city of less than 6,000 faces unique issues. Most of the city is built on Seneca Nation land, and Native American residents can opt out of paying property taxes.

Seventy-three percent of Seneca citizens choose not to pay property taxes, Chamberlain said. Salamanca's budget includes special state aid to make up for that.

"Our tax levy is under $1 million," Chamberlain said.

In the 2017-18 fiscal year, Salamanca expected $5.5 million from slot machine profits at Seneca Allegany Casino. It received $1.3 million, the final quarterly check the Senecas sent.

Municipalities upstate feel the pinch as Senecas end casino payments

Mayor Michael Smith and the City Council decided to use surplus instead of laying off employees or raising taxes.

As of March 2017, Salamanca had $16.9 million in unappropriated surplus, a healthy figure for a city with a $9.1 million budget. Chamberlain said it's being spent down to keep the city running.

"They don't want to put it on the back of our relatively few taxpayers," Chamberlain said. "At least Niagara Falls still has a tax base."

Chamberlain said Salamanca never restored all the fire and police layoffs it imposed the last time the Senecas cut off funding, in a 2010 dispute with the state over casino exclusivity in Western New York.

"Our department heads are trying to keep expenditures under control, but it's pretty bare-bones," Chamberlain said.

Smaller effect in Buffalo

Buffalo also is losing revenue from the slots at Seneca Buffalo Creek Casino.

The casino money, however, amounted to only 1.4 percent of the city's $500 million general fund budget.

"Buffalo's got some new financial woes, but (the casino loss) is relatively minor," Schroeder said.

Schroeder said the 2017-18 budget called for spending $10 million from surplus funds, but the city has spent $34.5 million in surplus, and has only $6.5 million left.

"It's still a factor. It's something we're tracking," Schroeder said.

Looking ahead

The Niagara Falls City Council is expected to adopt a policy Wednesday on how to use casino money – if there ever is any more. It focuses on stashing 12 percent of it in a reserve fund each year.

But if the state loses the arbitration or it doesn't cut a deal with the Senecas, trouble looms.

"We have various strategies," Dyster said.

But he declined to say what those are, because it might hurt the chances of bargaining an arrangement with the Senecas.

"We're hoping the state will come through with something," Chamberlain of Salamanca said.

Niagara Falls officials want a new plan if casino money ever comes back

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