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LET THE GAMES BEGIN; Senecas set sights on Catskills?

Internal investigation a sovereign exercise

In Upstate New York, the recent spotlight has shone most brightly on the
Catskill region and Governor George Pataki's latest attempts to get at
least three Indian-owned casinos up and running. But not forgotten is
western New York, where the Seneca Nation has offered to locate its third
casino in downtown Buffalo rather than in suburban Cheektowaga. In return,
according to a Jan. 20 Buffalo News report, the nation seeks a casino in
the Catskills. Why is this big news?

A bit of history: Legislation passed by the General Assembly in October
2001 authorized six Indian-owned casinos to be established in New York.
Three were planned for the Catskills and not awarded to specific tribes.
None of these casinos will open anytime soon. Pataki recently proposed
adding two more Catskill casinos.

The other three casinos were to be owned by the Seneca Nation and located
in the western part of the state. The nation made its dramatic entry into
casino gaming on New Year's Eve 2002, with the opening of the Seneca
Niagara Casino in the City of Niagara Falls. Last May, the Seneca Allegany
Casino opened its doors at Salamanca on the Allegany Reservation.

Sitting the third casino has been contentious. Officials from the City of
Buffalo and the nation shared initial optimism toward placing a casino in
that city's ailing downtown. Disagreements erupted over several issues,
including location, and the resulting acrimony caused the nation to
adamantly vow not to site the casino in Buffalo. The Seneca last year
acquired the 57-acre site near the airport in Cheektowaga, but litigation
has thus far stymied any development.

Hence, the Seneca reversal on Buffalo is not only big news - it also
demonstrates the draw of a potentially lucrative Catskill casino, a
tantalizing 90 miles from metropolitan New York City, Not that a casino
couldn't perform well in Buffalo; Mayor Anthony Masiello and other city
officials have long desired a casino and the resulting jobs and revenue.
But a Buffalo casino would have strong nearby competition in Niagara Falls
and across the border in Ontario with a smaller market from which to draw

Pataki has previously spoken in favor of a Buffalo casino, so perhaps this
proposal indeed has a faint chance of becoming reality. To be sorted out
first are other issues: The uncertainty over the actual number of available
Catskill casinos (either three or five), and the fact that Pataki has
already agreed to award three of the Catskill casinos to Wisconsin and
Oklahoma tribes, a move of questionable legality. Then again, the Seneca
proposal may give Pataki an out with a New York tribe. It's a long shot,
but as recent events clearly show, anything can happen in the ongoing Great
Catskill Casino Follies.


The Seneca Nation is also conducting an internal investigation into the
initial financing of the nation's conversion of the old Niagara Falls
Convention Center into the Seneca Niagara Casino. According to a Dec. 31
Associated Press report, "The probe will determine whether the financial
transactions were conducted in the best interests of the nation, free of
conflicts of interest and according to state, federal and tribal law."

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According to the AP, the probe was initiated after the November election of
Barry Snyder, who during his campaign championed fiscal accountability, as
president of the nation. The nation hired Roscoe Howard Jr., a former U.S.
Attorney in the District of Columbia, to conduct the investigation; his
results are due next month.

At the time, conventional means of financing such a large-scale operation
where unavailable to the Seneca as lending institutions cannot foreclose on
property within Indian country. Instead, the nation borrowed $80 million at
30 percent interest from Malaysian billionaire Lim Kok Thay to finance
their first gaming venture.

To help finance the Salamanca casino and to raise funds for a 26-story,
600-room hotel currently under construction in Niagara Falls, the nation
last May sold $300 million in bonds at 7.25 percent, a successful bond
issuance by any standard, but particularly so for Indian country. Tribes
are just beginning to enter the debt markets; continued success in gaming
and other industries will make tribal governments a much larger player in
the future.

Meanwhile, the Seneca investigation has not gone unnoticed. The credit
rating firm Standard & Poor's in early January revised its outlook on the
Seneca bonds to "negative" but did not change its overall assessment of
their quality. S&P said that its rating may or may not change, depending
upon the outcome of the investigation. If the issues raised by the
investigation are resolved quickly, S&P could return the outlook to

The internal investigation is a strong sign of Seneca sovereignty and
responsibility. Its results will likely offer an interesting look at a part
of the Indian casino business that receives minimal public attention.


In 2004, the Seneca Niagara Casino garnered net slot revenue of $248.7
million, while the Seneca Allegany Casino had net slot revenue of $68.5
million, according to a report in the Jan. 12 edition of the Buffalo News.

The 2002 compact created a sliding scale of "contribution" payments by the
Senecas to Albany. During years one through four, 18 percent of the net
gaming-device take (after payment and before expenses) is to be paid to the
state on an annual basis. The percentage rises to 22 percent on a
semiannual basis during years five through seven, and jumps to 25 percent
quarterly for years eight through 14. The 14-year deal contains an
automatic seven-year renewal, which kicks in if no objection is made within
120 days of expiration.

For 2004, Albany's take amounts to some $57.1 million. Of that, the City of
Niagara Falls gets about $11.2 million, up from $9.5 million in 2003.