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New York moves Seneca-state exclusivity dispute toward arbitration

Gale Courey Toensing
12/23/10

SALAMANCA, N.Y. – The Paterson administration has said negotiations with the Seneca Nation over a gaming compact dispute have broken down and the state will take the issue to an arbitration panel to resolve. Seneca Nation officials responded that the nation will welcome the intervention of the third party in the dispute.

Seneca Nation Council Chairman Richard Nephew issued a statement Dec. 16, a day after Peter Kiernan, counsel to Gov. David Paterson, accused the nation of refusing to negotiate a settlement for more than $200 million, which the state claims it is owed in slot revenue payments. Kiernan said the state will ask an arbitration panel to find if the nation has “materially breached” the nation-state 2002 Class III Gaming Compact.

The Seneca council voted in August to withhold slot revenue payments, saying the state has violated the exclusivity provision of the gaming compact by allowing private businesses and state-run racetrack casinos to operate slot machines in the Seneca’s exclusivity zone in western New York.

“It is now clear that this matter is only resolvable through arbitration and the nation welcomes it. The state may feel as though it has reached an impasse with the Seneca Nation, but the nation has done everything according to the letter of the Gaming Compact to deliver its end of the bargain,” Nephew said. “Let us be clear: The nation’s decision to withhold the exclusivity payments is based on the state allowing casino gaming machines within the nation’s exclusive jurisdiction; hence the term exclusivity payments.”

In an interview with Buffalo News, Kiernan also accused the nation of manufacturing the casino stalemate as a way to pressure the state over its attempt to end tax-free cigarette sales by Indian retailers. A new law to force Indian nations to collect state taxes on cigarettes sold on sovereign Indian land has been challenged in federal court.

“They’re trying to link it to the cigarette issue. We’re not going to permit that linkage. It’s all about cigarettes. This is all tactical,” Kiernan said.

Nephew dismissed the allegation as unfounded.

“The casino dispute and the cigarette tax dispute are two completely separate and distinct, unrelated issues. Outgoing Gov. Paterson knows this, but keeps trying to tie the two together. The nation can only hope for better relations and improved reasoning with Governor-elect Cuomo,” he said.

Kiernan said the state notified the Senecas Dec. 14 that it would seek arbitration. A determination of a “material breach” would invalidate the compact, Kiernan said.

It is not clear what the consequences would be if that were to happen. Closing down the nation’s three casinos in Buffalo, Niagara Falls and Salamanca would result in thousands of lost jobs and an economic meltdown in the region.

But if arbitration finds the state in violation, the entire state would feel the loss of revenues.

“If the nation prevails in its dispute with the state, there is no obligation to ever make exclusivity payments again, which means that the city will never see local share dollars again,” Seneca President Robert Odawi Porter said, according to the report.

The nation notified the state of the compact violation last January, but repeated requests to address the issue were unanswered, Seneca officials said.

Then on Oct. 6, Kiernan sent former Seneca President Barry E. Snyder Sr. a letter saying that Seneca owed the state $105.5 million from 2009 and $109 million for 2010 in “exclusivity payments.”

Under the gaming compact, the nation pays 25 percent of net slot revenues to the state for the exclusive right to operate Class III gaming in its exclusivity zones. The state in turn pays the cities their share.

Seneca Gaming Corporation officials said the nation’s casinos have sent $475 million to the state since opening the first casino in Niagara Falls on New Year’s Eve of 2002.

In October of this year, Nation officials offered to make payments directly to the local municipalities as long as the state then credited those payments against what the state said the nation owes, but the state rejected the offer.

State Sens. George D. Maziarz of Newfane and Catharine M. Young of Olean, and Assemblymen Mark J.F. Schroeder of Buffalo and Joseph Giglio of Gowanda, publicly supported the nation’s proposal to send a portion of gaming revenue directly to local governments, rather than having the money pass through state government. The four legislators said they would introduce legislation to require it.

Porter said Seneca would prefer to send money directly to the local communities “rather than have the state’s bureaucracy play middle man.”

“One-fourth of the $475 million has been distributed by the state to local governments, but typically, it takes the state a year or more to release the money.”

Also in dispute is a payment over state police services to the nation’s gaming facilities in Salamanca, Niagara Falls and Buffalo.

The state says they also owe more than $40 million to the state police for security and employee background checks, and millions more to the state Racing and Wagering Board. But the nation says the state overbilled it for state police services and has failed to provide “a proper and reasonable accounting.”

If the disagreement is not settled this month, nation officials said, they fully expect to schedule additional meetings to inform officials of the incoming administration of Governor-elect Andrew Cuomo.

Porter, formerly the nation’s counsel, said the parties can take whatever time they need to talk through compact disputes. A 30-day window at the conclusion of negotiations is a cooling off period designed to ensure the parties have fully explored resolving the issue in good faith. The next step, arbitration, is not mandatory, he said.

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