With the Seneca gaming compact coming to an end, will the state and local municipalities finally see the error of their ways?
As the sun set on 2016, the world trembled in anticipation of what the Trump era of U.S. national politics would bring. Meanwhile at the New York State level, in spite of on-going corruption allegations and a lack of long-promised ethics reform, Governor Andrew Cuomo seems to be riding a surge of popularity perhaps due to the backlash against Trump’s first two months in office. But beyond the typical dirty politics, pay-to-play and general corruption is the never-ending tensions that exist between Native people and their governments, and non-Native governmental officials and agencies.
The tension between the Seneca and New York State may start to ramp up quickly here in 2017. I say “may” because this next issue should not really be a conflict, regardless of the financial implications. With budgets being proposed by the State and the municipalities around Seneca gaming sites, it appears that a huge oversight has been made by those counting on the more than $100 million they seem to expect to receive from the Seneca Nation. For 14 years the Seneca have made payments that now total more than $1.5 billion for an almost nonexistent “exclusivity” zone. And while the State’s breach of that portion of the Gaming Compact between the State and the Seneca made plenty of headlines a few years ago and resulted in the State surrendering $200 million in payments for that breach, little attention was paid to the future of the revenue-sharing clause of the Gaming Compact. Certainly those receiving the free money would like to ignore the terms. And while the “exclusivity” portion of the revenue-sharing deal was a lesson in word-smithing and lopsidedness, the payment side couldn’t have been more clear:
“In consideration of the exclusivity granted by the State…, the Nation agrees to contribute to the State a portion of the proceeds from the operation and conduct of each category of Gaming Device for which the exclusivity exists,”
“Years 1-4; 18%. Years 5-7: 22%. And Years 8-14; 25%.”
(Gaming Compact between the State of New York and the Seneca Nation)
Nowhere in the Compact is there even the implication of payments beyond 14 years. Even in the automatic renewal of the Compact that extends much of the agreement, there is NO mention of payments continuing through the seven-year renewal period.
The State cannot tax Native gaming! Period! In fact, according to the federal law that binds the State, the Indian Gaming Regulatory Act (IGRA), any revenue sharing agreements entered into under IGRA must rely on “meaningful concessions” from the State that represent “substantial and quantifiable economic benefits for the Indian nation.”
The Seneca may not have known as they sat at the negotiation table with State negotiators three administrations ago how much the State would reduce the value of their concession or how unquantifiable the economic benefit would actually be, but they knew exactly what percentages they would be giving up and for how long; the latter clearly being 14 years.
In 2013, when the Seneca Nation settled the impasse over revenue sharing caused by the State’s breach of the “exclusivity” clause, they knew full well that a settlement without disrupting the terms of the Gaming Compact not only would allow for a smooth transition on to the renewal of the agreement but also would see the end of the lopsided revenue-sharing clause. This part of the compact was clear.
There is certainly no question regarding the substantial and quantifiable benefit that the State gained from this arrangement; over $1.5 billion in 14 years, most of which came in the last seven years. There are, however, significant questions related to value of the “exclusivity” the State claims to have granted to the Seneca. Did the Seneca gaming enterprises really have a State-granted exclusivity? Was the State held back in any capacity by the “concession” for which they were paid? Or did they compete directly with all the tools at their disposal almost from the start? Sure, the State could not open Class III gaming facilities, their laws prohibited it until recently. And the least viable location of all for a large scale Class III facility would be a market saturated by Seneca and Canadian gaming. However, they certainly rushed to build facilities at their racetracks, then called them racinos and filled them with slot machines that looked and played every bit like the electronic games with which the Seneca shared their revenue. And they did so clearly within the “exclusivity zone” for which the Seneca paid so dutifully. The State also used their relationship with “Indian Gaming” and their own presence in gaming to push through a constitutional amendment that would finally allow Class III gaming to expand the State’s gaming beyond the lottery and racetrack casinos. The State’s campaign for gaming expansion and a constitutional amendment made the case to their constituency that they were already in the gaming industry. Clearly they were. And some of it ran along that blurry line of legality. An argument definitely could be made that the revenue-sharing agreement with Seneca gaming existed in violation of IGRA especially since the value of the State’s concession may be neither “substantial” or “quantifiable.”
New York State was not just involved in their own gaming enterprises. They were in Native gaming as well. They had become both the regulators of Native gaming and the chief competition to it at the same time.
That fact raises an ethical and moral question to another area of payments to the State: regulatory payments. It wasn’t just $200 million in revenue sharing the State gave up for the breach of the Seneca Gaming Compact. There were also millions of dollars of un-itemized billing that the State had been submitting to the Seneca.
The settlement from 2013 erased $90 million of those fees and required the State to itemize their bills going forward. To this day, no such details are provided with the State billing and as such, the Seneca are holding back on those payments. But beyond the billing, the fact that the State has had unfettered access to Native gaming throughout the State even as they were increasing their presence in direct competition and pursuing Class III gaming as well would be unheard of in any other industry. Yet this is still where the debate still rages on where the rights for Native gaming come from. The Feds will say IGRA. The States will say from their “compacts.” Native people still insist it comes from their sovereignty.
So as money for nothing terms out in the State/Seneca Gaming Compact even as the State ignores the end of the gravy train, the question is how will this shortfall and apparent “news to them” be dealt with. It certainly isn’t the first time this governor has written fake money into a state budget. In 2011, as Andrew Cuomo boldly charged into his first 100 days, he produced a state budget that included $130 million that he claimed would come from taxing Native tobacco sales. That surely didn’t happen. But the State still wages a war against Native commerce with fines, arrests, seizures and lawsuits, although they stopped counting money they will never see from those businesses. The question is, will someone from the State do that simple reading of the Gaming Compact and realize just how fortunate the State is to have been made a billion and a half dollars richer for nothing over the last 14 years rather than fighting the Seneca people over an ill-conceived entitlement going forward?
For the Seneca, the end of these payments couldn’t have come at a better time. With the State opening up more gaming sites and saturating an ever shrinking gaming market, the Seneca will need that once free gift to the State to stay competitive and to allow their margins to create the exclusivity zone the State never saw fit to honor. It’s now up to the local municipalities to stop treating Seneca gaming revenue as an entitlement and look for the opportunities to forge new and more meaningful relationships with the Seneca, not soiled by the State and out of the region agendas. It is said that all politics is local. We’ll see if the local politicians see it that way.