Counting on casino revenue-sharing payments from the Seneca Nation amounts to high-stakes gambling. Whether it’s the City of Buffalo or New York State including the payments in their budgets for the fiscal year, there’s no such thing as a sure bet.
The Senecas paid $1.4 billion in casino revenues to the state from 2002 to 2017, but cut off payments after that, maintaining that their gaming compact did not require any revenue sharing with the state after the agreement’s 14th year.
Gov. Andrew M. Cuomo, in his state budget proposal for the coming year, included $450 million from the Senecas in revenue-sharing payments counted as coming in this fiscal year, which ends March 31.
The Senecas and New York State have been battling over the revenue sharing dispute for four years.
The dispute was sent to a three-person arbitration panel, which in January 2019 ruled against the Senecas, saying the nation owed the state $255 million in back payments.
The original compact took effect in 2002 and was automatically renewed at the end of 2006 for seven years. The Senecas stopped making the agreed-upon payments because the renewed compact made no mention of the requirement. We have noted before that it was remarkably careless on the state’s part not to insist that the document clearly state the Senecas’ payment obligations.
Binding arbitration is an agreement between two parties to let a third party consider evidence in a dispute and make a ruling that both sides agree to accept. There are no do-overs or mulligans – that’s what the binding part means – but the Senecas decided that since they lost the dispute, the arbitration panel’s decision didn’t count.
Rickey Armstrong Sr., then Seneca Nation president, said the arbitration decision “effectively amended the agreed-upon terms” of the casino compact between the state and Senecas.
That is equivalent to claiming voter fraud because your candidate lost an election, or refusing to pay on a losing sports wager because you disagree with a referee’s call against your team.
Nevertheless, the arbitrators ruled 2-1 that applicable laws made clear “that the compact was continued on the same terms and conditions that were in place immediately prior to the expiration of the compact’s initial term …”
The ruling added that, “To conclude otherwise and interpret ‘renew’ to mean that the Nation gets exclusivity without sharing revenue would render several provisions of the compact meaningless, ignore the purpose of the parties’ agreement, challenge common sense and produce a commercially unreasonable result.”
The dispute remains tied up in federal court. The Senecas issued a statement in late January saying “the Nation is and has been willing to discuss a resolution to litigation, as well as negotiating a new compact for 2023.”
But why would New York want to negotiate a new agreement with an untrustworthy business partner? The risk is obviously high. If the Senecas actually want a new compact, they need first to pay state the $450 million they owe. That’s where that process begins.
The last compact was working pretty well for the state and municipalities that shared 25% of slot machine revenues from the three Seneca casinos, in Buffalo, Niagara Falls and Salamanca. The compact included the revenue sharing in return for an exclusivity deal for casino gambling in a large region of Western New York.
Millions of dollars are at stake in the compacts. When negotiating the next one, lawyers for both sides will spend many hours ensuring that the language is crystal clear on what is being agreed to.
There is, of course, a history in the United States of government entities breaking treaties with Indian nations or otherwise treating them poorly. This is not one of those cases. The Senecas maintain they followed the letter of the law in breaking off payments in 2017. The arbitration panel, in a process they agreed to, ruled otherwise. If the Senecas honor their financial obligations now, it will make negotiations on the next compact run much more smoothly.
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