Niagara Falls Finances Remain Uncertain

Danny Spewak

September 19, 2017

city council

Originally published in WGRZ

NIAGARA FALLS, N.Y. – Six months have passed since the Seneca Nation announced it would no longer share casino slot revenue with the state of New York.

The two sides have been unable to resolve their differences over the interpretation of a 2002 gaming compact, leaving millions of dollars in limbo not only for the state but also for the cities of Niagara Falls, Buffalo and Salamanca.

The loss of casino revenue could especially cripple the city of Niagara Falls, which the state comptroller's office predicted will run out of fund balance by the end of the year and face a $12 million budget shortfall by 2019. Comptroller Thomas DiNapoli's audit criticized the city for a perceived overreliance on casino funding, warning of dire consequences if the slot revenue disappears forever.

So as the city of Niagara Falls prepares for 2018 budget discussions this year, it faces a whole lot of uncertainty, especially since there's really no telling when this casino dispute may end. The state has requested an arbitration process, hoping an outside entity will rule in its favor to restore the revenue-sharing agreement. There's no guarantee that will happen, though, and the Seneca Nation remains adamant that its payment obligation ended six months ago.

So where does that leave Niagara Falls?

Unsurprisingly, Niagara Falls Mayor Paul Dyster sides with the state and Gov. Cuomo. He believes the Seneca Nation legally owes the state – and in turn, his city – millions of dollars in continued slot revenue payments. As the arbitration process moves forward, Dyster said the city has already put into place a few safeguards, including a freeze on all non-essential spending.

The city has also been actively forming a plan to lessen its reliance on casino funding, even though it fully expects to be paid.

"What we're trying to do is make certain that no money goes out the door that isn't for an absolutely essential expenditure," Dyster said. "We're tracking it as we go along."

In an interview on Tuesday afternoon, Dyster, a Democrat, also signaled he'd be interested in asking for the state for some type of temporary assistance, essentially stopgap funding that might replace the lost revenue until the arbitration process finishes. No such request has been made yet, however, and Dyster said it's a "fine line" to walk since the city doesn't want to give off any signal that the Seneca Nation should be forgiven for its payments.

State Senator Robert Ortt, a Republican who represents the city of Niagara Falls, said he'd be open to advocating for some short-term funding for the city to supplement the lost casino revenue. However, in an interview on Tuesday, he was also clear that he does not want to see the city receive any state funding unless it shows a commitment to long-term financial reforms.

"Getting the money for the short-term, that's certainly something that can be discussed. But that's treating the symptom, not the disease," Ortt said. "The disease is the overreliance and sort of the misuse of casino funds."

The city is working on that problem, however, according to its response to the audit. It also noted in the response that casino revenue is not a free handout; after all, the city allows the Seneca Nation to occupy an enormous property in the city that could be used for other developments.

The city has not given any indication that it will need to raise taxes to help replace any lost funding from casino revenue. However, Dyster conceded that past city councils have often used the casino revenue as an alternative to tax increases, so it's unclear what exactly would happen if the arbitration process lingers or if the Seneca Nation wins the legal battle.

"(The council) has chosen to use casino payments, rather than raise taxes, to pay for the same expenses. You can't blame the city council members for doing that, and I'm guessing the majority of taxpayers don't have an issue with that strategy," Dyster said. "The problem is, when there's uncertainty about the delivery of casino revenues, then you've got to make some very difficult choices about how to proceed."

In arbitration, both the Seneca Nation and the state will choose a member to represent their governments, and those two members will then choose a third arbitration member. There does not appear to be a timetable set for the process.