In 2002, the Seneca Nation and New York State entered into a "compact" under Nation, state and federal law permitting the Nation to open three casinos in Western New York.
In exchange for the highest-allowable percentage of revenues generated by the Nation's slot machines and other gaming devices, the state agreed under the compact that we would have exclusive rights to operate those devices in the region west of State Route 14.
The compact also states that the Nation has no obligation to make the exclusivity payments if the Nation is denied its bargained-for exclusivity.
The two sides recognized that economic development at and near the casinos would impact the host municipalities with demands for services. To address this, the state agreed it would reach financial agreements with Niagara Falls, Buffalo and Salamanca to help them adjust.This is spelled out in paragraph 11(d) of the compact, available at www.sni.org/Files/PDF/gaming.pdf.
Although not required to do so, the state used part of the $476 million in exclusivity payments it received from the Nation to compensate the cities.
The Nation stopped making exclusivity payments when the state violated the Nation's exclusivity rights. These violations include allowing "Moxie Mania" slot machines at bars and restaurants and permitting casino games at Buffalo, Batavia and Finger Lakes race tracks in our exclusivity zone.
The Nation has no obligation to make exclusivity payments for non-existent exclusivity. And, it should be noted, this dispute is completely unrelated to state efforts to interfere with our treaty-protected tobacco commerce.
Arbitration regarding the exclusivity violations is expected to take about a year. While this dispute is pending, the Nation is placing the withheld money, now approaching $400 million, in escrow.
Since the Nation stopped making exclusivity payments to the state, the state stopped meeting its independent obligations to the three host cities. Over two administrations, the state attempted to blame the Nation for the state's failure to pay the host municipalities.
To be clear, the state's obligation to make payments to the cities is not conditioned upon the Nation paying the state. This obligation is independent of the ongoing dispute between the Nation and the state.
Reasonable people ask why the Nation doesn't directly pay the cities, since the Nation repeatedly maintained it has no disagreements with these good neighbors. We specifically raised that idea in October 2010, but then-Gov. David Paterson rejected it.
He affirmed the gaming compact and other state laws require exclusivity payments be made to the state and it is the state's obligation under the compact to pay the cities.
Western New York then-legislators introduced legislation to permit direct payments from the Nation to the cities with appropriate credit to the Nation upon resolution of the dispute. The Nation no longer has that option because the state moved to legalize commercial gambling without expressly protecting our exclusivity zone. That creates legal risks that require us to strictly follow the compact's dispute resolution process.
Of course, another solution also within the state's control is for the state to simply meet its financial obligations under the compact to directly compensate the three host municipalities.
We are genuinely perplexed that the state treats its obligations under the compact, and its three cities most affected, with such disregard. We urge the governor and state legislative leaders to work with us to resolve the dispute or provide needed funding for our neighbors to end the state-enabled financial crunch.