The Seneca Nation Gambled on the Future, and Won
In 2002, at a time when New York State and its local communities were facing financial uncertainty, the many powers that be looked for relief wherever they could find it. The one form that seemed feasible was entering into a compact with the Seneca Nation of Indians to allow Class III Gaming (a stylish term for casino gambling) in New York State. With the blessing of the federal government, this agreement would produce gaming proceeds that would be shared with the State, and then shared with the local communities that hosted such gaming facilities (Niagara Falls, Buffalo and Salamanca).
It was not always a joyful union, and there were tensions that ultimately lead to the Seneca Nation ceasing to make payments to the State. That naturally upset the host communities and the State, and the dispute lasted for a few years. But in 2013, an agreement was reached and the funds flowed once again. All was right with the world.
Allegedly.
It would seem that, using gambling parlance, there was one card left to be played. The Seneca’s crafters of the 2013 compromise used the State’s desperation to get the proceeds moving again, against them.
At the time, in a press release, Gov. Andrew Cuomo hailed the agreement as a “win-win-win” for the host communities, the Seneca Nation, and all New Yorkers, and “the beginning of a new chapter between the Seneca Nation of Indians and New York State, built on trust and mutual respect.”
There was obviously trust, as the new agreement served to extend the original compact an additional ten years to 2023. However, while it gave additional life to the operating terms, it did not explicitly do so for the payment terms. So when the Seneca Nation announced in March of this year that it was ceasing to make payments in accordance with the 14 year payment schedule set by the 2002 Compact, there had to be a sense among some that we’ve been played.
So much for mutual respect…
A careful review of the 2002 Compact exposes the ticking time-bomb that was within the document. As a contract, it clearly laid out when and how it would be terminated. The Termination Date would be the 14th anniversary of the Effective Date of the agreement, unless it was renewed pursuant to terms provided in Paragraph 4 (c), which would renew the agreement automatically for another seven years; or unless it was terminated pursuant to the terms of Paragraph 4 (d), which addressed early termination in the face of material breach.
The primary source of the dispute between the Seneca Nation and the State was the concept of exclusivity, specifically how it addressed who would be allowed to operate gaming facilities in New York state. The Nation felt that the State’s introduction of gaming tables at racetracks violated the exclusivity supposedly granted to them. Since the Compact explicitly tied the granting of exclusivity (the consideration of the contract) to the payment of gaming proceeds to the state, the withholding of the payments makes sense.
The 2013 agreement, on its face, restored the payments. According to a press release, “the State of New York recognizes and reconfirms the exclusivity of Seneca casino operations in the Western New York region, and the Seneca Nation agrees to resume payments and to make pro-rated repayments for past amounts that were in dispute.” The State was able to keep its video lottery facilities in Western New York racetracks, and the money would keep coming in. Problem solved.
The payment schedule set in the 2002 compact had escalating payment terms that fell within the 14-year term (18% for years 1-4, 22% for years 5-7, and 25% for years 8-14). Nothing was provided for any years subsequent to year 14. While one could presume the payments would continue in the event of a renewal, that presumption could also be rebutted for lack of any supporting language in the contract. Which is exactly what the Seneca Nation has asserted.
Gov. Cuomo’s negotiating team has to be asking themselves how this happened. If they aren’t, they should be. Whose interests were they looking after when they were making the deal in 2002, and how did they forget in 2013?
There is talk that the Seneca Nation may reach separate agreements with the host communities to make payments to them in the spirit of being good neighbors. At this point, nothing has been finalized, and no timetable has been set. In the meantime, the deal that was supposed to bring financial security has ultimately done the exact opposite.
