SEC filing contrasts "world class' billing

By MATTHEW SPINA
News Staff Reporter
4/9/2006
Original Article

The Seneca Gaming Corp. confirms in documents filed with the Securities and Exchange Commission that its emerging Buffalo casino will cater primarily to Buffalo and its suburbs, raising worries that it will drain assets already here without pulling significant outside dollars into the local economy.

The disclosure kicked up these events Saturday:

After conferring with Mayor Byron W. Brown, City Hall's development commissioner called the news "very troubling" and said it "speaks strongly" against the city providing $6 million in water, sewer and road improvements the Senecas want for the casino.

County Executive Joel A. Giambra urged the County Legislature to join him in filing a "friend of the court" brief on behalf of the forces trying to block the casino in state and federal courts.

An Assembly Democrat said he would write to the U.S. Department of the Interior to say the public rhetoric from the Seneca Gaming Corp. had not jibed with their less-visible filings with government regulators.

A Seneca corporation spokesman responded that the Buffalo casino, to be built near the Cobblestone District, will significantly benefit Buffalo.

"We believe that Seneca Buffalo Creek Casino will provide tangible economic benefits to the community, most notably in the share of slot revenues," responded Seneca Gaming spokesman Phil Pantano. "It is a $125 million investment in an area that hasn't seen that kind of investment in some time, if ever."

Meanwhile, he said the casino could retake some of the $60 million to $80 million a year that leaves the Buffalo area to be wagered at the Fort Erie race track.

"We would certainly like to capture as much of that as possible and support local jobs," Pantano said.

The Seneca Buffalo Creek Casino's 1,900 to 2,200 slot machines, 30 to 50 gaming tables, plus its restaurants and stores are expected to "cater primarily to the local market," the corporation said in a February filing with the SEC, explaining that Buffalo Creek would "complement" Seneca Nation's casino to the north, Seneca Niagara, and its casino to the south, Seneca Allegany.

That disclosure, not the first of its kind from Seneca Gaming, provides fodder for Buffalo's anti-casino forces. While the corporation's SEC filings have been frank, its officials have publicly spoken in grander terms, saying they want to build a "signature destination" and a "world-class" facility in Buffalo.

"The public pronouncements in the press releases differ greatly from the written pronouncements in the official Securities and Exchange documents," Giambra said. "It appears that we might have a situation of fraud here."

He has said the casino ought to be a resort-style, tourist destination, not a downtown development, and he wants lawmakers to join him in filing an amicus curiae brief on behalf of anti-casino forces, or join their lawsuits.

Legislature Chairwoman Lynn M. Marinelli, D-Town of Tonawanda, without knowing the wishes of the full Legislature on Saturday, said a court brief could be signed by those legislators who agree with the statement, regardless of whether they form a Legislature majority.

Assemblyman Sam Hoyt, longtime critic of a Buffalo casino, plans to write the Interior Department about the inconsistency. "The official documents submitted to regulators say one thing," the Buffalo Democrat said. "The public rhetoric and the sales pitch to people who have a decision-making role in granting them a license, were something entirely different.

"I have said for years this is going to be just picking our own pockets. I am anti-casino, not for religious or moral reasons but for economic reasons."

The Senecas' recent disclosure raised serious issues within the city, which would gain a share of casino revenue and a projected 1,000 permanent casino jobs, not to mention construction jobs. "The primary economic justification for a casino in Buffalo has been that more tourist dollars will come to and stay here than will leave the host community," said Richard M. Tobe, the city's commissioner of development, permits and inspections.

He said information in the SEC document "raises the strong possibility that the Buffalo Creek Casino will have negative impacts on our local economy" and "speaks strongly against the city providing any support for the infrastructure improvements requested by the Seneca Nation around the Buffalo Creek Casino site."

Seneca Nation President Barry E. Snyder Sr. in March requested that the city provide $6 million in road, sewer, water and traffic signal improvements. Pantano did not respond specifically to Tobe's statement Saturday.

e-mail: mspina@buffnews.com

From addiction to big-money embezzlement, authorities express concerns over increase in casino-related problems

By PHIL FAIRBANKS
Buffalo News Staff Reporter
4/17/2006
Original Article

Carl Bucki sees the impact of casino gambling in the record number of cases that cross his bench as federal Bankruptcy Court judge.

Frank Clark sees it in the big-money embezzlement cases his county prosecutors take to trial.

And Renee Wert sees it in her addiction counseling caseload that has more than doubled since casinos first arrived on the local scene.

The Seneca Niagara Casino's economic impact is not just jobs, taxes and development. It also includes crime, bankruptcy and job loss.

These are the hidden costs of gambling.

"He doesn't see half of it," Wert said of Clark. "People are stealing from their families, and it's going unreported. They're taking money from their kids' college funds. I've seen cases of parents breaking into their kids' piggy banks so they can gamble."

Wert, as head of gambling treatment services at Jewish Family Service, is on the front lines. Her caseload jumped 147 percent in five years, and she estimates seven out of every 10 people she treats have filed for bankruptcy.

That's just one of the costs to the community. No one disputes the notion that Seneca Niagara and other gambling venues create problem gamblers. The question is, how many and what do they cost the local community?

Even the nation's top researchers, from Harvard to the University of Illinois, disagree over the extent to which casino gambling adds to a community's ills and at what cost.

"There's no pee test for gambling," said Mark Farrell, the town judge in charge of Amherst's Gambling Court. "It's like trying to get your hands around a cloud."

But talk to the judges, prosecutors and counselors who see the effects firsthand, and you hear horror stories of people who got addicted and fell into debt.

Or people so desperate for cash, they stole from their family or employer.

They also will tell you that bankruptcy, more than anything else, may be the single most common consequence of being a "problem or pathological" gambler.

Wert's program counseled 245 people last year, up from 99 in 2000, and she estimates 70 percent for bankruptcy. Some twice.

That's hardly a surprise to Bucki, one of two U.S. Bankruptcy Court judges in Western New York. He's convinced casinos are a big part of the problem.

"There's no question in my mind," Bucki said. "After handling thousands of bankruptcy cases, I'm convinced casino gambling is a significant factor in the tremendous increase we've seen in bankruptcy cases."

There were more than 14,000 bankruptcy filings in Western New York last year, nearly four times the number in 1993.

"I know, for a fact," he said, "that this problem goes largely unreported."

Even in his own court.

Bankruptcy filers are required to fill out a questionnaire, a "Statement of Financial Affairs," that asks if gambling is one of the reasons they're in debt.

Most people, because of shame and embarrassment, answer "no" even when gambling is a factor, Bucki said.

More often than not, he added, the gambler blames his debt on credit card abuse. What he won't tell you is that his paycheck went into the slots. And that's when he turned to credit cards.

Bucki isn't the only law enforcement official who sees a link between increased crime and casinos.

Bigger caseloads

County prosectors used to prosecute big-money embezzlement cases, those involving more than $100,000, about three or four times a year. His staff now sees four times that number, Clark said.

"Over the past five or six years, I've seen a dramatic increase in embezzlement-type crime, and gambling has played a role," the district attorney said.

Assistant District Attorney John Doscher is the prosecutor in those cases, and he estimates the number of casino-related cases doubled in five years.

Not so long ago, the big embezzlement cases centered on people who lived the high life, Doscher said. Now, it's losses at the casino.

"We're getting more cases and bigger cases," he said. "It used to be rare to see anything over $50,000. It's no longer something that makes your eyes pop out. Now, it just doesn't catch your attention."

Bigger caseloads are also the trend in Amherst Town Court, home to the only Gambling Court in the nation.

That's where Farrell, every two weeks or so, hears the stories of gamblers who stepped over the line. Most have misdemeanor or felony convictions involving large sums of money and have been diagnosed as problem or pathological gamblers.

Denial and secrecy

During one two-hour court session in March, more than a dozen people appeared before Farrell.

Some were like Walter, a small-business owner. He estimated he lost more than $40,000 gambling at the casinos.

"Folks have no clue what overcame you," Farrell told the man, "and how pervasive a gambling addiction can be."

"I always gambled," answered Walter, now in his 40s. "As a young man, that was the cool thing to do."

One by one, the recovering addicts marched before Farrell and told story after story of self-destructive behavior that led to crime.

"I've gambled every day of my life since I was 19," said a man identified only as Anthony, a young husband and father arrested for writing a bad check. "It quickly became a downward spiral and very destructive."

For many of the people, Farrell is the only thing standing between them and jail time. And yet, the judge still finds himself confronting denial and secrecy.

"People are more willing to admit they're drug users than gamblers," Farrell said.

One of the problems in tracking the link between gambling and crime is a reluctance to go to the police, especially when the victims and thieves are family members.

"What you get is a lot of denial," said Anne Constantino, president of Horizons Health Services, one of two local treatment agencies.

The typical case isn't the gambler who gets arrested, it's the gambler who gets away with his crime, says Wert, from Jewish Family Service.

She still talks about the young man who stole his mother's Social Security number, used it to acquire credit cards and left her with $30,000 in gambling losses.

"Mom couldn't bring herself to prosecute," Wert said.

Heated debate

The hidden costs of casino gambling are being debated across the country, wherever there's a casino, and nowhere is the discussion more passionate than at the nation's top colleges and universities.

In one corner, researchers suggest gambling creates a host of economic problems, from suicide, divorce and domestic violence, to bankruptcy, crime and low employee productivity.

One expert, Earl Grinols, an economics professor at Baylor University, told Congress in 2003 that for every $1 in benefits, gambling costs society $3.

On the other side of the debate are experts who claim the "invisible" nature of problem gambling makes it difficult to quantify, both in terms of people and money.

In 1999, the National Gambling Impact Study commissioned by Congress referred to both schools of thought in calling for a moratorium on casino development.

The study estimated the number of problem and pathological gamblers in the United States had reached 3 million, with 15 million more people at risk. It also put the cost to society at about $5 billion a year.

One thing is certain, Wert said. The problem is getting worse, not better, in large part because of casinos here and elsewhere.

"When I started here in 1994, we had a lot of sports, horse racing and lottery gamblers," she said. "Now, it's almost exclusively casino and lottery gamblers."

e-mail: pfairbanks@buffnews.com

- Three years after it opened, the Seneca-Niagara Casino hasn't sparked the new development state and local leaders promised
First of two parts -

By PHIL FAIRBANKS
News Staff Reporter
4/16/2006
Original Article

When casino gambling arrived in Western New York, state and local leaders promised new hotels, restaurants, shopping centers and thousands of non-casino jobs.

It's a promise never kept.

The Seneca Gaming Corp., after three years of operation, rakes in nearly $500 million a year, two-thirds from its Niagara Falls casino, and turns a weekly operating profit of $2.7 million.

But outside the casino walls, the economics are murky, with a mix of good - more than 3,000 people are employed at Seneca Niagara Casino - and bad - the glaring lack of development and job growth around the complex.

Niagara Falls' experiment with casino gambling - and the model it provides Buffalo - resembles Atlantic City more than Las Vegas.

A Buffalo News analysis of government records and casino documents, as well as interviews with 35 developers, local officials and business owners, found:

• Most of the $306 million spent at the Seneca Niagara casino comes from local wallets - an estimated $177 million last year.

• The promise of spin-off development, new hotels, restaurants and stores, remains unfulfilled. One reason is competition from the Senecas. They took in $58 million in food, beverage and entertainment sales at their two casinos last year.

• Sales and bed tax revenues collected by the City of Niagara Falls have remained flat in the three years since the casino opened. Property tax collections are up, but largely because of annual increases in the tax rate.

• Property values around the casino have increased but not because of new development. The increases are driven by speculators.

Seneca Niagara, of course, is more than a casino. It's also 26 acres of shops and restaurants.

And since late December, it is home to one of the city's newest landmarks - a world-class, 26-story hotel that single-handledly altered the image of Niagara Falls and created a new tourism market - the well-heeled gambler.

Still, the casino created cash for the city and state, and jobs:

• More than 3,050 people work at the casino complex, earning an average of $28,000 a year with $8,400 in fringe benefits.

• The casino, through its spending and its employees' spending, may be responsible for another 1,000 local jobs, notably vendors serving the casino. • The city received $9.8 million in slot machine revenue from the Senecas in 2003 and is waiting for another $24 million from the past two years. The state, by comparison, took in $100 million over the same three-year period.

Spending siphoned off

One thing is certain. The casino's impact is huge.

In 2005, Seneca Gaming - with its casino in Niagara Falls and a smaller one in Salamanca - tallied $498 million in revenue. That's nearly double the annual revenues of large local employers such as Wilson Greatbatch and Computer Task Group.

The company also made money. Its two casinos reported an operating profit last year of $144 million, or $2.7 million a week.

Not all casino money comes from the local economy, but most of it does. That's the rub.

A 2005 study by the state estimated the local share of the Seneca Niagara's annual revenues at about 58 percent. The authors of the study, the Center for Governmental Research in Rochester, think the same trend continues. If it does, that would put the two-county spending at Seneca Niagara at about $177 million.

Some is money that would have otherwise gone to casinos in Ontario. But most - about $101 million using the Rochester study's formula - is money previously spent in other ways, including other forms of entertainment, culture and recreation.

Yes, there are now world-class dining and accommodations in Niagara Falls. But it's all within the tax-free Seneca territory.

The casino is now a casino resort. In addition to the 614-room hotel, there are six restaurants, a 443-seat theater and retail shops. As a rule, its 6 million visitors a year stay within the resort.

"As far as we can tell, they drive to the casino and then drive back," said Kent Gardner, director of the Rochester study.

Retail operations at the two Seneca casinos rang up $58 million in sales last year, all tax free.

"It's the intent of the casino to hold onto its visitors, and this casino does a good job of that," Gardner said. "When people get hungry, they don't want them hitting the streets."

So what about the new hotels, restaurants and shopping centers Gov. George Pataki and others promised when he signed the law authorizing casino gambling?

"Thousands of additional jobs will be created outside of the casino walls as investors build new hotels, restaurants, shopping centers and businesses," Charles Gargano, Pataki's top economic development aide, predicted then.

An overstated promise?

Or a benefit still to come?

Four years after Gargano made that pledge, there are no new hotels and no major restaurants. And certainly no new shopping centers.

To help spur development, Pataki formed the USA Niagara Development Corp. and offered another promise, a pledge to turn downtown Niagara Falls into Times Square.

"We're still at the beginning of the beginning," said Christopher Schoepflin, president of USA Niagara. "The true impact of the casino is still in its infancy."

So far, development around the casino consists of an $18 million conference center, a $22 million upgrade in an existing hotel, a $7 million renovation of the historic United Office Building and a largely cosmetic makeover of downtown's Third Street.

There are plans for more. But right now, they're just plans.

Niagara Falls Redevelopment, a private partnership buying property east of the casino, unveiled an $800 million redevelopment strategy last year but has yet to build anything downtown.

"We view the casino as a positive," company Vice President Roger Trevino said. "It gives us a 24-hour-a-day, 365-day-a-year economy, which was not present before."

Trevino thinks the casino eventually will create niche markets that will lead to private development outside the casino resort.

The question remains, when?

Eating our own

In tourism circles, people talk about "cannibalism." The theory is that a community has only so much money to spend, so a new attraction might eat away at an existing one.

And that's the fear with Seneca Niagara and, even more so, with a new casino in downtown Buffalo.

Will a Buffalo casino take away from Chippewa Street or Elmwood and Hertel avenues?

Will it eat away at the Buffalo Sabres or Shea's Performing Arts Center?

"I don't see it complementing downtown, I see it competing," said local developer Paul Ciminelli. "Economically, it's a bad deal."

Tourism officials say there's no concrete evidence of "cannibalism" in the Falls, but restaurant owners disagree.

By now, many in the Falls know the story of Macri's Palace, the Pine Avenue institution that shut its doors last June and moved to Wheatfield. Owner Gary Macri was public in his criticism of the casino's competitive advantages, most notably free drinks and tax-free food, and a policy that allows smoking. "There seems to be an unlevel playing field," said Dominic Colucci, owner of the Como Restaurant, another Falls institution. "It's been very detrimental to the smaller restaurants and bars around town. People only have so much money to spend."

The other 800-pound gorilla is the Seneca Niagara Hotel, the city's first world-class luxury inn. It contains a spa, salon and enough meeting space to accommodate banquets, trade shows and conventions of up to 2,200. And believe it or not, competitor David Fleck wishes there were five Seneca hotels.

Fleck owns the Howard Johnson Hotel on Main Street and, while disappointed with the lack of new restaurants downtown, he's ecstatic about the growth in his own business, especially during the slow winter months.

"There's enough for everyone," said Fleck. At the Falls' larger attractions, venues like Maid of the Mist and Cave of the Winds, the Seneca Niagara casino is welcome, but viewed with skepticism.

Sure, ticket sales at the Maid of the Mist jumped 6 percent last year, but no one at the company sees a link to Seneca Niagara.

"There's been no spike at all in our business because of the casino," said Tim Ruddy, vice president of marketing. "But it's one more element, and the more reasons you give people to come here, the better."

One of the tradeoffs a city hopes for when it hosts casino gambling is more tax revenue.

The hope is that it may come in the form of higher property tax collections because of nearby development and growth. Or maybe increased sales or bed tax revenue because of more people spending money on hotels, restaurants and stores.

None of that happened in the Falls.

No new development

In 2000, three years before the casino opened, the city collected $22.2 million in property taxes, $12.5 million in sales taxes and $1.3 million in bed taxes.

Six years later, three years after the casino opened, the city's tax collections are virtually flat.

Sales tax and bed tax collections still hover at about $12.3 million and $1.2 million a year.

The city also raised tax rates each year, which helps account for a $4 million increase in property tax collections.

The reason, of course, is the lack of a new tax base, although speculation has fueled an increase in some values downtown.

In short, no new development, no new tax revenue.

"We all thought there would be more interaction with the casino," Mayor Vince Anello said. "I have to say, the spin-off impact hasn't been great."

Should the city and state have known better?

The state's own consultant issued a separate study on the idea of a casino in Rochester and warned of the perils associated with casinos that have their own restaurants and hotels.

"We've seen only a minor impact on tourism," said David Rosenwasser, president of the Niagara Tourism & Convention Corp. "Long term, I think the casino will help. Short term, people took some hits."

The one benefit casino supporters can legitimately crow about is jobs. Seneca Niagara is flush with opportunities.

At last count, 3,052 people worked at the casino. The Senecas' payroll is upwards of $85 million, and a full-time employee earns an average of $28,000 a year with $8,400 in benefits.

"They're probably the second-largest employer in Niagara County," said Schoepflin, of USA Niagara. On top of that, the casino and its employees spend money that creates even more local jobs. Again, a state consultant estimates that number at about 1,000, many of them with the 600 vendors and companies that do business with the casino.

"Our employees live in every area of the region and feed money back into the local economy," Seneca President Barry E. Snyder Sr. said in a statement last week.

The question is: How many of those 3,000 jobs are new jobs, given the large amount of local money spent at Seneca Niagara?

Even casino supporters concede that some replaced jobs that disappeared when local residents started spending at Seneca Niagara instead of the local bar or restaurant.

In a study for the state, a consultant estimated 600 of the casino's 2,100 jobs replaced lost jobs.

If that trend is true today, 2,200 of the casino's jobs are newly created jobs. Critics think the number is much lower.

The other boon to the city is the growth in its share of the casino's slot machine take.

In 2003, the city's share was $9.8 million. In 2005, it's expected to be $13 million.

Not a bad sum, unless you compare it to what the state gets. In just three years, Albany took in three times as much as the city, or about $100 million.

One thing is certain. Seneca Niagara generates a lot of cash. As Snyder said last week, the casino is one of the region's leading "economic engines."

The question remains, where will it take us?

e-mail: pfairbanks@buffnews.com