Buffalo Creek Casino: Next Bets
by Steve Siegel
What happens now for the anti-casino movement and the Senecas?
Even as the Seneca Nation of Indians nears completion of a permanent casino in downtown Buffalo, the anti-casino and the anti-gambling forces (not necessarily the same people) continue the legal fight to shut the casino down. Currently there are multiple appeals of three separate lower court decisions before the federal appellate court.
The only plausible scenario that might lead to the Seneca Nation of Indians (SNI) voluntarily shutting the casino down (or for US Marshals and New York State Police shutting it down if the SNI does not comply with the courts) would be if the plaintiffs win the appeal in the specific case where the sovereignty of the land under the casino is in question. Court decisions favorable in the other appeals, which do not deal with the issue of sovereign land, could possibly be ignored by the SNI and the casino would still continue to operate.
So the casino might be here to stay, and given that eventuality, perhaps an analysis is now in order as to how each party fared in this seven-year battle, as well as to offer speculation on what future actions from both sides might prove to be in the best interests of those impacted by the casino.
Though the formally organized anti-casino forces (whose opposition is based primarily on the problems created by the casino’s urban location, which tends to magnify its negative economic impacts on the City of Buffalo) and the anti-gambling forces (whose opposition is driven more by gambling as a source of “societal ills”) have not and should not stop their current anti-casino efforts, they should realize that they have pulled off a minor miracle of sorts—they have had a large impact on the Seneca Gaming Corporation’s (SGC) decision to shrink the casino down from a $330 million project to a $130 million project. By delaying the project during the period before the downsizing decision was made, these groups also saved the community millions of dollars in economic damages. Rarely do we ever see what started out as a rather quixotic, small group of local activists have such a major impact upon a sovereign nation’s rather misguided economic growth plans which were enabled and continually supported at the highest levels of both New York State and local governments and, at times, even the federal government.
The SGC’s stated reason for the downsizing was the anticipated negative impact on gaming of a “sluggish” economy, but the economy always runs in cycles and generally these inevitable down cycles are factored into the original plans—especially for projects priced out at $330 million. Therefore the inherent risks of this project, which were responsible for the need to limit financial exposure on the part of the SGC, most likely stemmed from other sources. In this case, the risk came from two sources, both put in place by the anti-casino forces:
• Legal threats: The decision to downsize came after the anti-casino forces won their first federal lawsuit in 2008. With the then real possibility of having the project shut down, it was expedient to reduce “sunk costs” and the resultant financial exposure. So more than likely the reevaluation of the casino plan began at that point.
• Economic analysis done utilizing the SGC’s own Securities and Exchange Commission (SEC) filings: These filings clearly showed that the original plan with multiple restaurants and a potential hotel, giving away huge amounts of free food, beverage, and lodging would have devastating consequences upon the thriving hospitality industry in Buffalo. The risk here was one of public perception: If locals could trace the demise of their favorite eating or drinking establishment, or worse their own jobs to the presence of the casino giving away large amounts of tax free food and beverage combined with the societal damage (think of all the media coverage of embezzlement linked to gambling) that any gambling venue knows will inevitably happen, a huge public relations headache would ensue. The “good neighbor image” that the SGC so dearly wished to project to the community, even if it appears fabricated through public relations activities and not supported by their subsequent actions, is crucial to the continued viability of any business that provides the customer with no value added such as casinos do. So if this scenario played itself out, the risk of the public turning against the product and spending their discretionary funds elsewhere was very real.
Though I am sure the SGC will stick to their story that the downsizing was totally a result of economic forces, the facts indicate that claim to be rather disingenuous.
Right from the start, it has been a long and rather bumpy ride for the Seneca Nation. Most of their grandiose claims, starting with the too-good- to-be-true (which were not true) artist’s renderings of the planned casino, to their claims that the casino would be an international destination that would create thousands of jobs (it did not), have fallen flat. Their claims for the economic impact of the casino on the local economy have systematically been refuted through researchers turning the numbers in the SGC’s own SEC filings back on them. The SGC have lent credibility to their opponents by being unable to refute the claims (there was actually no recourse on their part, short of denying the validity of the numbers in the SEC reports, which could become the basis for federal charges of knowingly filing a false report with the SEC). Their remedy to all this was to arrange to legally not have to file the SEC reports, which will now prevent the Western New York community from knowing the true negative impacts of the casino moving forward. This action, though perfectly legal, created even less transparency about what they were up to and the potential impacts of these actions on our already fragile economy.
To their credit and regardless of their motivation, they did downsize the project, which served to reduce some of the long term damage to the community. They did manage to reach their goal of getting a casino built, though it morphed from the original promise of a Las Vegas style destination into a local gambling joint with fewer slots than the state run “racino” in Hamburg offers.
Most importantly, they also managed to lose control of the message sent to the public through the mainstream media. Whereas many mainstream media reports from the period 2006-2011 often read like press releases from the SGC (many probably were), the media has become increasingly aware of the shortcomings of the project (in part, credit the activists and the alternative media for this), and the media became increasingly adroit at separating public relations claims from supportable claims. This has led to generally fair and accurate reporting, which, based upon the facts, was often critical of the SGC’s claims and actions. The exaggerated claims of job creation and increased tourism have ruined the SGC’s credibility with many and has made them vulnerable to being demonized by critics.
As is the case with any casino, eventually objective and rather disturbing information comes out. A steady stream of news stories has appeared in the Buffalo News--“Embezzling Grows from Addiction to Casinos,” “Mom Guilty of Gambling with Funds for ill Son,” “Man Gets 2-6 Years for Scamming Priest out of $500,000—Proceeds used for Gambling”—and these basic scenarios seems to repeat themselves month after month. No casino can run from the fact that they are promoting a business that, due to its addictive nature, leads some people into behaviors that almost always result in damage to not only the gambler but to others whose lives are closely intertwined with the gambler’s—family, employers, and ultimately society as a whole.
What’s next for the Seneca Nation
As the battle between the two sides escalated, both sides honed their messages to the community. The SGC wanted, at any cost, to get the casino built and the anti-casino/gambling groups were equally focused on stopping it. The SGC’s stated view from their website is that “We’re continually growing to give you even more incredible entertainment opportunities.” So in their view they are merely offering one more entertainment option to the community. But the reality is that the SGC knew full well that gambling is not some benign family activity. In actuality they are in a high-risk (to the customer) “win/lose” business where more customers lose than win because their slots are legally rigged to return approximately eight percent of all money wagered to the house. Therefore, over a long period of time, the average gambler playing slot machines will lose eight percent of his money and walk out of the casino with no actual product. Of course customers who engage in gambling probably know this and engage in the activity of their own free will, but perhaps, moving forward, the SGC might recognize the need to exercise a greater moral/ethical imperative toward their customers than many companies who provide a much greater level of value added in the way of goods and services than a casino can. Something as simple as posting a warning to customers: “These machines are recreational devices that are legally rigged to return 8% of all monies wagered to the casino.” If gambling is indeed such a wonderful “entertainment opportunity,” a posting such as this should have little impact on business.
The SGC has made some efforts at community relations. They announced a $1 million beautification initiative for the neighborhood surrounding the Buffalo Creek Casino. That sounds like a great deal of money, but the estimated yearly revenue flow to the SGC from the 800 slots is $56,000,000 a year, so $1 million is 1.8 percent, or 1.8 cents of every dollar lost by gamblers. Though generous by most standards and welcomed by the community, it is probably not much more than the casino’s yearly utility bills. To better put things in perspective, in a typical year the total amount of money gambled away (gross gambling revenues to the SGC) at the slot machines at all three area casinos is over $500,000,000. So collectively, customers leave the casinos with gross loses of over half a billion dollars. A million dollars is less than to .002 percent of $500 million.
To further put things in perspective, the median household income in the Census tract that the casino is located in is $11,767. If we assign one household to each housing unit in the Census tract, the total yearly household income for the entire census tract surrounding the casino is $6,801,326. Therefore in only 44 days the casino makes the same amount of revenue that the entire census track of 578 families earns in one year.
Given that the casino, due to its sovereign status, pays no property taxes, no state income tax, no county sales tax, and no licensing fees, and creates a myriad of social problems which those of us who do pay taxes must finance (think court system, cost of incarceration, costs of counseling addicts, etc.), perhaps the SGC, with the assistance of researchers from area colleges and universities and/or the Partnership for the Public Good, should quantify the societal costs and then distribute a fair and reasonable amount of their revenue flow to various stakeholders in the community. Of course the Seneca Nation could refuse, arguing “Why are we being singled out,” and they have every right to do so. They might point to state-run casinos and ask, “Why not demand the same from them?” Two reasons: No state-run casino exists in downtown Buffalo; and, even if one did, the state and county uses tax revenues to fund state social service agencies that then spend that money to address the resultant social issues tied to gambling.
So, given the nature of the SGC’s business, as well as the fact that they enjoy tax breaks that are unheard of among their neighbors, and are located in a very poor Census tract in Buffalo where their very presence is guaranteed to further reduce the average disposable income of people who are already struggling, might it simply be the moral and ethical thing to do? Many entities who are required to pay taxes still manage to contribute greatly to the neighborhoods that they are located in.
Food and Beverage Outlets
The SGC needs to refrain from any expansion of the food and beverage outlets in the casino. Currently the SGC’s three existing casinos give away the equivalent of one free meal every 15 seconds, 24 hours a day, 365 days a year through the redemption of “Player Points.” This comes to approximately $20-22 million in retail value of the free food and beverage given away in an average year. Why would anybody patronize another local restaurant or bar when they can get a meal or a drink for free at the casino? If anybody doubts the impact of subsidizing free food and beverage through gamblers’ losses, take a trip to the area in Niagara Falls surrounding that city’s casino and count the number of restaurants and bars still in operation.
The SGC has tacitly acknowledged their immense competitive advantage in this area by constructing the permanent Buffalo Creek casino with only one modestly sized restaurant in it. If they were, in the future, to expand the scope of their food and beverage outlets, while previously acknowledging its deleterious impact on other similar operations, it would be a very hypocritical action on their part.
Claims of Racism
“The uncomfortable question is, when do well-intentioned anti-casino activists unwittingly cross the line to racism? Is it when we lose the ability to see Indians as having the same rights to keep and interpret their own history as we do?”
That’s Michael Niman, in Artvoice (6/15/2006), implying that anti-casino activist Joel Rose might have crossed that line merely by working to stop a Seneca Nation of Indians owned casino from being built in downtown Buffalo.
“These damn dirty Indians will soon be just as prosperous as the rest of us—dating our daughters and trying to change our great way of life.
“Sorry, that last quote was mine. I thought I would just sum up how I view the main notion behind the other quotes!”
From the Native American Commitment to Wellness & Respect blog by David A. Patterson Silver Wolf, Washington University in St Louis, Brown School (February 27, 2011), implying that the quantitatively accurate conclusions reached by this author based upon his financial analysis of the SGC’s SEC filings were somehow invalid because they were supposedly motivated by a racial stereotyping of Native Americans. Also, in June 2012, then Seneca Nation President Robert Odawi Porter, on the Seneca Nation of Indians blog, wrote a response to an editorial I wrote for the Buffalo News (“Slot Machines are Programmed for Their Profits”), implying that the editorial was racially motivated even though it merely revealed to the public the gaming odds at the casino. This posting has since disappeared from the blog.
So it appears, in the logic of both Porter and Patterson Silver Wolf, that you can question the most compelling of empirical truths (such as 2+2 = 4) by simply making up spurious motivations for adding the numbers together in the first place. It would be more intellectually honest as well as a much more direct route to the truth to actually prove that the numbers that you disagree with are, in some way, inaccurate. Evidently in Porter’s and Patterson Silver Wolf’s worldview, accurate and unassailable economic data that might prove damaging to any Native American run business may be disregarded because alleged bad racial thoughts on the part of the researcher “soiled” it. Conversely, one must wonder that if they could prove inaccuracies in the work, would they label the research as being done by an “incompetent” or by an “incompetent racist.” I assume the former—the latter appears to be, from their perspectives, redundant.
Also, on numerous occasions, a local radio talk show host has taken to task practically every person involved in the anti-casino movement and regardless of what “gets,” as he puts it, “my tidy whities in a knot,” his circuitous logic eventually always leads him to the same tired conclusion: Every social, economic, or legal argument against the casino is obviously the work of a bunch of anti- Native American racists disguised as community activists. Given this logic, he must also endorse the bizarre argument that all those attending the Tea Party rallies in Niagara Square to protest wasteful government spending, including money spent on some social welfare programs, are really all racists hiding under the cover of being “citizen activists.”
Evidently nothing is ever what it seems—especially when those who oppose your project come to the table armed with accurate information. It seems that as the anti-casino arguments became more compelling and consequently gained more traction with the mainstream media, and just maybe became a threat to the temporary casino’s cash flow, the voices proclaiming racism became louder. Call me cynical, but when an entire group of people are branded in public as racists, it is reasonable to expect the accuser to provide clear proof. Failing to do so opens them to claims that perhaps they have an agenda, and you can oftentimes link those who indiscriminately play the race card to just such a personal agenda—perhaps a project “teetering-on-the-brink”—for which accusations of this sort are behaviors of desperation.
Until the SNI acknowledges that those who oppose this project and who come to the table with reams of economic research, social data, and valid legal arguments are not collectively racists, but actually well prepared and concerned citizens, their silence (and more so their accusations) will serve to implicitly support those who find it easier to attack the truly non-existent racial motivation of the messenger and not the validity of the message. It will also open them to the same claims that they make of their opposition.
What’s next for the anti-casino groups
Ultimately the success or failure of the casino is no different than any other business that depends upon capturing a large enough share of the Buffalo area’s discretionary spending. Unlike most businesses who compete with other similar businesses, the casino, by virtue of the Casino Compact and the recent agreement with New York State, is a virtual monopolist. This in itself is not a bad thing from the perspective of the opposition, because the efforts against gambling will only take place on one front. You know who the opposition is, where they operate, and who their markets are. The objective at this point should be to starve the casino by shutting off the supply lines. I am not referring to the rather radical notion raised by some that water and electricity and/or fire protection to the casinos be shut off until they pay off the $600 million owed the municipalities where the casinos were located (which they have recently agreed to do), but to reducing the flow of customers who frequent the casino.
Casinos depend on customer volume. That is why they are so large. Fortunately they are not only large but also lumbering, a slow-moving “fixed” target in that they offer only one profitable product—slot machines. The slot machines at the SGC’s three casinos have historically been programmed to keep approximately eight cents of each dollar wagered. If $1,000,000 is wagered, the casino “take” will be approximately $80,000, which won’t pay the casino’s bills. If $700 million is wagered—which is an estimate of how much money will be wagered at the expanded Buffalo Creek Casino in an average year—then your take is $56 million, enough to pay your bills and then some. If anti-casino efforts to inform the public could reduce the casino’s business by 10 percent, as well as lower the amount played per customer by another 10 percent, then assuming flat yearly growth to start with, the amount wagered would drop to approximately $567 million – a 19 percent reduction. Continuing these efforts for a few years and you will have taken away a big chunk of profit, perhaps enough to make the casino an unprofitable venture. This is a strategy similar to what opponents of tobacco have used over the years.
Because they are a one product business (slot machines), they have no capacity to quickly develop another profitable “gaming product line” in order to compensate for the poor performance of the current product line and can be figuratively backed into an economic corner by a well-financed and creative competitor. That is why they demanded in the Casino Compact that the state erect “Barriers to Entry” around their product and that they be guaranteed “exclusivity,” which really is a polite word for “monopolist.” They will never be compelled to figure out how to compete against other more well financed and creative casinos and will never have to change the odds of winning to allow the gambler to keep a bit more of their own money. In short, they are woefully ill-equipped to compete. Their unwillingness to pay the $600 million that they owed the state and the host communities was, in part, an effort to hold all the chips and force the state to guarantee that they wouldn’t ever have to compete. The state’s threat to build another casino across the street in Niagara Falls was devised because fair competition is the SGC’s worst nightmare scenario—and this threat would give the state the most negotiating leverage.
Evidently state supported monopolies are only bad when they don’t bring huge amounts of money into the state’s coffers.
Focus on the product: Opposition needs to totally focus upon attacking the product and then letting market forces take over. One way to do this is to point out that, in reality gambling is not only an inferior product, but more to the point: No product actually even exists. The average gambler leaves the casino with eight percent less money than they enter with. They walk out with absolutely no physical product and most leave with less money than they arrived with. This means that no orders are placed locally for a replacement product to be put back into inventory—which is one way jobs are created in any community. Indeed, none of the 800 slot machines are even made in the Buffalo area. By the SGC’s own admission less than eight percent of all jobs created have anything to do with slots.
Casino gambling is a rather easy target. No matter how upset a gambler might be that an opponent of gambling is talking smack about their favorite entertainment venue, they rarely conclude that the best way to show the anti-casino crowd how upset they are is by showing up more often at the casino and losing even more money. Doubtful that a “Friends of the Casino” group will file for tax-exempt status (how ironic that would be) and hold a benefit for the poor maligned casino. Little loyalty exists toward any casino because the customer has no emotional experience attributed to the casino, the emotional experience is with your money—as it comes and goes.
What the anti-casino crowd must not do is lose their focus and make the mistake of continually questioning the right of the casino to even exist. If the legal issues are resolved in favor of the defendants, to continue to attack their status could, on the surface, help bring some credibility to the spurious racist claims. It is as important to know when to accept the status quo as it is to know when to aggressively continue to advance the anti-casino movement. Information must be factual and the tone must not be shrill.
Where we are now
Here we are, more than 10 years after the misguided efforts of then Governor George Pataki and his merry band of political syncopates foisted this incredibly bad idea on Western New York and particularly Niagara Falls and Buffalo. Numerous destroyed lives, humiliating court appearances, suicides, broken marriages, embezzlements, overwhelmed social services agencies, unbalanced city budgets and their accompanying personnel layoffs, and the inevitable finger-pointing on both sides are just some of the results of either stupidity and/or greed of people whose self-interest exceeded the bounds of acting like someone who cares about the welfare of those they govern.
Perhaps, some day in the future, New York State government will more often place the interests of human beings ahead of the insatiable need for cash flow. Amongst other political positions that a candidate might hold, their views on gambling might provide a useful insight into what kind of a human being we might possibly be electing. After all, if casino gaming disappeared from the Buffalo area, would it truly have a negative impact on our quality of life?
Steve Siegel recently retired as a professor at Niagara University and has done a great deal of research into the potential economic impacts of the Buffalo Creek Casino upon the community.blog comments powered by Disqus
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