Seneca Nation Opts For ‘Nuclear Option’ In Fight Over New York Gambling Revenue

March 24, 2017

The Seneca Nation of Indians and the state of New York have had a tumultuous relationship when it comes to gambling. That relationship looks like it’s about to become even more strained.

The Seneca Nation announced it will cease making payments (about $110 million annually) to the state from its gaming revenue … again.

This time around, the two sides are in disagreement over what the revenue payments of the compact require when it comes to the Seneca Nation’s obligations to the state.

“The Seneca Nation has followed the terms of our gaming compact since 2002, and we will continue to do so until it expires in 2023,” Seneca President Todd Gates said in a statement to local press. “As written in the compact, the Nation provided a share of our revenue to the state through the end of last year.”

Before we dive into the differing points of view on what the compact states, it’s important to provide some background on the often testy situation between the Seneca Nation and the state.

The backstory of Seneca vs. NY

New York and the Seneca Nation signed the compact in 2002. It included a sunset date 14 years out. But the compact also included an automatic seven-year renewal unless one of the sides objected. The renewal would have occurred at the end of 2016.

However, beginning in 2009, the Seneca Nation withheld revenue payments, citing the presence of video lottery terminals at three racetracks located within the tribes’ exclusivity zone. This amounted to hundreds of millions of dollars in lost revenue to the state and local communities and growing tension between the Seneca Nation and the state.

In 2013, the Seneca Nation and New York Gov. Andrew Cuomo reached an agreement on this issue, with the Seneca Nation renewing payments to the state. It retroactively paid the state a sizable portion of the money owed in exchange for some clarity regarding exclusivity. (The state recently opened three commercial casinosTioga Downs, del Lago and Rivers.)

The 2013 agreement also included an early renewal of the 2002 compact, which would extend it a further seven years, through 2022. That’s where things become complicated.

The problem for the NY gambling compact

I’ve read a lot of legislation and tribal compacts over the years, and almost without exception all the i’s are dotted and the t’s are crossed. But despite its 793-page length, the Seneca compact still creates a gray area when it comes to the tax rate the three Seneca casinos would pay in the renewal period.

The compact states for years:

  • 1-4, the casinos will pay 18 percent.
  • 5-7, the payments increase to 22 percent.
  • 8-14, the payments increase to 25 percent.

The renewal states:

“Unless either party objects in writing delivered to the other party no later than one hundred twenty (120) days prior to the expiration of the fourteen (14)-year term… the term of this Compact shall be renewed automatically for an additional period of seven (7) years.”

Absent from the renewal terms (and the initial payment terms) is any mention of the percentage of revenue the tribes would pay during the seven-year renewal period.

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No payments from Seneca?

The Seneca Nation is arguing this means it doesn’t need to make any payments to the state during the final seven years of the compact. As Gates said in his statement, “As written in the compact, the Nation provided a share of our revenue to the state through the end of last year.”

This argument seems rather absurd from my layman’s perspective. The compact expressly states that after year 14 it’s terminated, then renews; it doesn’t extend beyond year 14.

What isn’t absurd is to question if the compact renews from years one to seven, or for the most recent years 8 to 14, as this isn’t made expressly clear in the compact. The Seneca Nation may not get very far with owing zero revenue. But it might have a strong case that its obligation is 18 percent during the first four years and 22 percent in the final two, rather than 25 percent throughout.

The two sides appear ready for another standoff.

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