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Patience urged for localities, schools banking on disputed casino revenue

ALBANY – Since arbitrators in January declared the Seneca Nation wrongly withheld $100 million in annual casino revenue sharing payments, some Western New York localities have been planning how to spend the coming money.

Top officials in Buffalo, for instance, are going so far as to plan possible pay raises for elected officials in the city thanks to the restarted payments.

The check is not in the mail, though.

And the new, 2019 state budget approved Monday by the Legislature makes no mention of the disputed Seneca casino payments coming before next March 31.

Assemblyman Angelo Morinello, a Niagara Falls Republican, has a simple message to localities and schools – from Niagara Falls to Buffalo to Salamanca – banking on the Seneca money: Be patient.

"They should be cautious in proceeding" and start their budget "based upon reliable income without the Seneca money," the lawmaker said.

"They need to consider the Seneca money as a potential lottery win, some kind of bonus," added Morinello, comparing the situation to a family that can't rely on a lottery win to balance "daily, household expenses."

State officials, however, are confident the issue is going to be resolved soon. They believe that, by the terms of the compact and the arbitration rules itself, there is little room for the Senecas not to turn over the level of funding that will be contained in what is expected to be a soon-to-be-released final order by a three-person arbitration panel. That group began work last year to end the stalemate.

The January arbitration ruling, by a 2-1 vote, has been declared binding, as envisioned by the terms of a compact between the state and the Seneca Nation going back to the days of former Gov. George Pataki in 2002.

But the January action by the panel was merely an opinion, though an important one at that. The panel has yet to issue a final decision in the matter. Such a document is expected to include a precise number it believes is owed by the Senecas to New York State and whether, for instance, there might be a structured payment plan to resolve the financial obligation.

[Related: Arbitration panel: Seneca Nation wrong to halt $100M in annual casino payments]

But some Seneca members, according to sources, are less willing to pay New York the disputed money, even if ordered to do so by the arbitration panel. The Senecas, as well as the one dissenting arbitrator who was appointed to the panel by the Seneca Nation, have been sharply critical of the January ruling in favor of the state. (The state’s pick to the panel ruled on behalf of the state and was joined by another member, who was a joint pick of both the state and the Senecas.)

Given the number of months since the dispute erupted, more than $200 million is at stake. Per the terms of the compact, the Senecas share 25 percent of the slot machine revenues from its three Western New York casinos with New York. The state keeps most of that money, but shares 25 percent with local “host” communities in the area.

The original casino compact between the Senecas and the state was automatically renewed at the end of 2016. The Seneca Nation in early 2017 notified the state it was halting future casino revenue payments, noting that its obligations had been met because the compact did not specifically state that payments had to continue after the deal’s 14th year.

The arbitration opinion in January noted the “silence” in the compact over future payments, but said the terms of the compact went beyond the 14th year both for revenue payments and the state's guarantee the Senecas would be given exclusive rights to operate Las Vegas-style casinos in a large area of Western New York.

After the panel acts on a final order in the matter, the Senecas can either pay or not pay. If they don’t pay, the compact permits the state to seek redress in federal court in Western New York.

Whether the Senecas have a path to seek federal assistance in the matter – through, say, the U.S. Department of the Interior – is uncertain.

Seneca Nation leaders declined to comment this week.

[Related: More dead trees, fewer repaved roads as casino cash dispute drags on]

Asked why a dollar amount was not counted among the revenues expected in the new state fiscal plan, a Cuomo administration official seemed to acknowledge the uncertainty.

“The arbitration panel is expected to make a determination of the amount and when it will be paid, and we are waiting on that," said Freeman Klopott, a spokesman for Cuomo’s budget division.

Klopott said the issue “will be addressed” in what’s called the “enacted budget financial plan," an official document that shows a range of information about spending, revenues and other actions in the budget. That will be out 30 days after Cuomo is done reviewing the newly enacted budget.

The budget division official declined to specify how the Seneca revenue sharing issue will be addressed in the financial plan, one of the documents Wall Street credit agencies use to assess the financial condition of the state. The comments from the budget division suggest the administration is optimistic the disputed revenue sharing money, or much of it, will be flowing sooner than later.

Grant Christensen, an associate professor at the University of North Dakota law school and an expert in Native American legal issues, said that any act of government – including an arbitration panel – can be challenged by tribes as unlawful because treaties between the federal government and Native American tribes are “supreme law of the land” under the U.S. Constitution.

Christensen, who cautioned that he is not directly knowledgeable about the Seneca Nation’s casino compact with New York, said arbitration issues between tribes and governments in the United States are a matter of many legal contests. While courts have backed “sovereign immunity” claims by tribes in cases like cigarette sales tax collections, he said it can be more difficult for tribes in arbitration award cases such as the casino revenue sharing issue in Western New York.

[Related: How the revenue from Seneca slots used to flow to cities]

Morinello cautioned that there is considerable speculation and conjecture about the ongoing dispute.

“What I’ve been advised by both sides is that the Senecas did submit the amount they believe is owed. The state has not responded to that. The exact number has not been agreed to and until they get an exact amount owed nothing can move forward,’’ he said.

Morinello said the Seneca Nation seems to be getting the “brunt of negative” reaction to the casino dispute. “But look at what the state and federal governments have done to the Senecas," the lawmaker said, citing the controversial Kinzua dam project in the 1960s that condemned villages over the fierce objections of the Senecas.

“I don’t think we can say the Senecas are bad actors in this. It is a dispute and the Senecas are exercising their treaty rights or their contractual rights," Morinello said.

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