NIAGARA FALLS — The city of Niagara Falls is beginning to feel the financial pinch of a lingering dispute between the Seneca Nation of Indians and the state of New York.

The delay in the delivery of casino revenue to the city has not only put a crimp in local spending plans, but it is starting to become a point of concern for the annual operating budget as well.

City Comptroller Maria Brown reported to lawmakers earlier this week that nearly all of the $7 million in casino revenue the city has on hand has been earmarked to various projects.

Potentially more troublesome is the fact that with no new gaming revenue coming in, the city is beginning to accrue a rather large hole in revenue for general fund items supported with casino money, including an annual allotment of debt service payments.

“The city can only front those kinds of dollars for so long,” Brown said.

The last casino cash payment delivered to the city by the state came in the form of a $9 million payment for funds owed for the second half of 2008, Brown said. The city is still owed payments for both 2009 and 2010, but casino revenue has stopped flowing in light of an ongoing payment dispute between the state and the Senecas. Last year, former Gov. David Paterson threatened to terminate the state’s gaming compact with the Nation in light of the Senecas decision to withhold the payment of overdue slot machine revenues due to concerns over operations of state-sponsored gaming “racinos” in the tribe’s Western New York exclusivity territory. Officials representing current Gov. Andrew Cuomo and new Seneca Nation of Indians President Robert Odawi Porter met last month to discuss various issues, including the casino revenue dispute. The Nation has called on the state to withdraw its request for arbitration on the matter to allow for discussion between the two sides.

 Mayor Paul Dyster told city lawmakers Cuomo has assigned a new special counsel to aid in negotiations with the Senecas and his administration is in contact with the  governor’s staffers as those talks continue.

“There are things that we are doing to try to cooperate with them to make sure these revenues get paid as soon as possible,” Dyster said.

 Lack of available casino revenue was one reason cited by city lawmakers when they voted to table a request for $225,000 in gaming money to support plans for a proposed holiday market on Old Falls Street. Brown has previously warned that the city’s casino cash reserves are nearly exhausted. Without new revenue coming in, she said it would be necessary to either stop spending on new projects or pull dollars earmarked for pending projects like the development of the culinary arts center at the old Rainbow Centre Mall to be used elsewhere.

 Brown said she’s more concerned about the potential impact on the city’s general budget moving forward.

 The 2010 budget included $4.6 million in casino funds to offset various costs, including $3.3 million in debt service and $242,000 for public safety. Another $1.05 million was put into the budget to offset the amount of property tax revenue the city would have collected if the Seneca Nation of Indians’ downtown property was on the tax rolls. Brown said the city’s 2011 spending plan counts on $4.9 million in casino revenue for similar items. In both cases, the budgets reflect dollars the city is owed, but does not yet have. Brown said the city can use revenue anticipation notes to show that it has the money coming, but she indicated that it is not a preferred option.  

“My biggest fear isn’t so much that the ZOOM team would go away or that you wouldn’t be able to do the train station project right away,” she said. “My biggest fear is what’s being used in the budget for debt service and loss of taxed land. What bothers me more than anything is that amount.”

 Brown said the situation is essentially costing the city money as well, noting that while the funds aren’t in its coffers, it is not able to collect interest on it. She said she’s not sure if the city would be made whole for the interest it has already lost and that the compact isn’t clear when it comes to such issues. She said it also provides no mechanism by which the city can force payment on its own. As a  result, the city must rely on the state and the Senecas to resolve their differences.

Dyster said both parties are working on it and the city remains involved in the process.

“At this point, failure to resolve this dispute hurts everyone,” Dyster said. “It hurts the Seneca Nation of Indians. It hurts New York state. It hurts Niagara Falls. When you look at it from the perspective of New York state, it has budgeted revenue from the Seneca Niagara Casino. They make a lot of money from that casino. They are not being paid. That’s creating a hole in their budget as it is creating problems for us.”

Contact Mark Scheer at 282-2311, ext. 2250.