Hochul's Stadium Swindle

The New York governor’s billion-dollar subsidy deal for a new Buffalo Bills stadium could reward her husband—and is the latest example of the state squeezing the Seneca Nation.

Hochul's Stadium Swindle
New York Gov. Kathy Hochul debates in the race for governor at TV studios, June 16, 2022 in New York City.

New York Gov. Kathy Hochul (D) recently orchestrated one of the biggest taxpayer stadium subsidy deals of all time—using tribal funds to finance the pact, which could ultimately benefit her husband’s employer.

The arrangement doesn’t merely illustrate Hochul’s penchant for prioritizing business interests over marginalized New Yorkers. It is also the latest iteration of New York siphoning revenues from the Seneca Nation and trampling the tribe’s exclusive gaming rights.

In the New York state budget passed in April, Hochul earmarked more than a billion dollars in public funding to build a new stadium for her home city football team, the Buffalo Bills. The deal, struck between Hochul and the billionaire Pegula family that owns the team, will be the second-largest taxpayer contribution to a sports stadium in history. Of the project’s $1.4 billion in projected construction costs, New York’s government is putting up $850 million, or 60 percent of the total. Hundreds of millions of dollars more were inked for upkeep of the stadium throughout its 30-year lease, bringing the public’s total projected expense to be more than $1.1 billion.

Hochul’s household could benefit handsomely from the deal. Her husband, William Hochul, is general counsel and senior vice president at Delaware North, the Buffalo-based hospitality giant that has operated concessions at the Bills stadium for the past 30 years. While the new stadium does not yet have a hospitality vendor attached, Delaware North’s longtime management position puts it on the inside track to score the contract.

During the last primary debate for governor, conservative Democratic Rep. Tom Suozzi and progressive New York City Public Advocate Jumaane Williams repeatedly slammed Hochul over the high price tag for the Bills stadium deal—and the potential profits for her husband’s company. 

What has received less attention is that the arrangement came at a steep cost to the Seneca Nation, a democratic government of 8,000 citizens and several territories located in Western New York. To get the stadium deal done, the Hochul administration forced the Seneca Nation to make a payment of nearly $565 million to the state by freezing the tribe’s bank accounts. The tribe had been holding the money in escrow, arising from a years-long legal dispute with the state over revenue sharing from tribal casinos, and its members decried what they called the state’s “overreaching” actions in freezing their finances. 

“In one breath, New York’s hostile and shameless greed was laid bare for the world to see,” said Seneca Nation President Matthew Pagels in a statement.

Rise of the Racino

The Seneca Nation’s three casinos in Western New York were established by a 2002 gaming compact, signed with then-Gov. George Pataki (R), that was intended to make up lost tax revenue from the financial and social upheaval caused by the 9/11 terrorist attacks. 

Tribal casinos are required to have gaming compacts with states according to the 1998 Indian Gaming Regulatory Act, which also created the federal National Indian Gaming Commission. Under the compact, the Seneca Nation is supposed to send 25 percent of the revenue from its casino slot machines to the state, after payouts but before deducting operating expenses. 

In exchange, the Senecas were granted an exclusive right in Western New York, the area of the state west of State Route 14, to host “Class III” gaming, which encompasses Vegas-style slot machines and table games like blackjack and craps. 

But since then, the state has continually expanded in-person and digital gaming, diminishing the value of the Seneca Nation’s exclusivity rights—while still demanding a hefty cut of the tribe’s gaming revenue.

In January 2004, for example, the first of what were called “racinos” were allowed to open across the state. These racetracks host video lottery terminals—technically, “Class II” machines—that offer a similar playing experience to traditional slots, alongside harness racing betting and casino-like hospitality offerings. 

Three racinos were located inside the Senecas’ exclusivity zone, including Finger Lakes Gaming & Racetrack, owned and operated by Delaware North, and Hamburg Gaming, which is managed by Delaware North.

Then, in 2013, New York voters approved a constitutional amendment that allowed for seven new casinos, which the legislature directed to open upstate and away from New York City. A dispute with the Seneca Nation over the encroachment of commercial casinos—one of which, del Lago Resort & Casino, opened just nine miles outside the tribe’s exclusivity zone—was settled that year with $209 million in gaming earnings retained by the Seneca Nation. 

The Seneca Nation’s gaming income was further squeezed as New York has thrown open its doors to app-based gaming. Last year, then-Gov. Andrew Cuomo (D) signed a bill legalizing online sports betting, as neighboring states had already approved. Since the apps went live in January, sports betting has resulted in $6 billion worth of wagers, bringing in nearly $217 million in tax revenue. The Gaming Commission has also approved digital lottery tickets on mobile devices, which launched this past January using a third-party app. 

In January 2022, the Seneca Nation agreed to drop a five-year battle over the legality of the revenue sharing and resume making payments to the state government, having put the funds in escrow while seeking federal review of the compact terms. The tribe had been sending an average of $117.5 million annually to the state, which was distributed to municipalities. 

The breakthrough agreement, however, was not favored by some tribal members, and was paused by a Seneca Nation Council resolution in February. On March 18, the Seneca Nation received a letter from the National Indian Gaming Commission closing its months-long investigation into the dispute without taking a position on the legality of the revenue sharing.

On March 24, the Hochul administration filed court motions and issued a subpoena asking KeyBank to freeze the Seneca Nation’s bank accounts in order to force the tribe’s hand. The Seneca Nation’s President Pegels said in a statement, “The accounts were unjustly targeted and frozen in an act of blatant aggression by New York State late last week, despite the State’s knowledge that the Nation’s secured account held more than sufficient funds to satisfy any Compact-related matters.”

Days later, on March 28, the Seneca Nation agreed to release the $565 million to the state—much of which Hochul immediately declared would be used to pay for part of the stadium deal, telling the Buffalo News she had “started playing hardball.” The Seneca Nation’s Pegels said, “Governor Hochul couldn’t contain her excitement to boast about using her Seneca ransom money for a new stadium.” 

That so-called “ransom money” had far-reaching consequences—especially since the state claimed that the escrow account used by the Seneca Nation commingled funding in such a way that the freeze impacted community members’ bank accounts more widely. The Seneca Nation sent out a call to the public to not deposit any checks they had received from the tribe—but tribal leaders say that some checks still bounced due to the bank freeze, disrupting payments for basic services.

“When you shut down that account, you shut down the entire nation, you shut down services to the people here, everything from clinics to the education and senior living spaces,” said John Kane, host of the radio show Let’s Talk Native and an activist who lives in the Seneca Nation’s Cattaraugus territory, in a phone interview.

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In April, Seneca Nation members and allies rallied in Buffalo’s Niagara Square to protest what the Mothers of the Seneca Nation had called the governor’s “strong-arm coercive tactics.”

“The governor took this money that is supposed to go to things like education—it’s not her own private cash to give to the billionaire Pegulas,” Kane said. 

In response to a question about the use of state law to freeze the tribe’s bank accounts, a spokesperson for the governor said, “Governor Hochul has worked to resolve this issue amicably since the beginning of her administration and receive the funds the state and local governments are owed. The courts have consistently ruled in the state’s favor, and the state has negotiated in good faith and met every hurdle. Time and again, the Nation failed to fulfill their court-ordered obligations. After the Nation once again failed to make payments under the terms of an amicable agreement, the state had to take action to enforce the judgment, and we are pleased to have finally secured these long-overdue funds for Western New York communities.” 

‘A Billionaire Giveaway

Hochul trumpeted the Bills stadium public-private partnership as the biggest-ever construction project in Western New York, with a promise of 10,000 jobs, though economists argue that many of the construction jobs will be short-term and that research has found that sports stadiums “have no consistent, positive impact on jobs, income, and tax revenues.” 

The state’s contribution of $600 million will be joined by $250 million from Erie County, and the National Football League (NFL) chipped in $550 million. The state also committed $280 million over the 30-year term for maintenance and upkeep costs, bringing its total contribution above $1.1 billion dollars.

The open-air stadium is to be built directly across the street from the current facility in Orchard Park, a suburban area outside of Buffalo—a break with stadium trends across the country, which have planned for multi-use venues, ancillary real estate development, and nearby attractions like park space.

Of the NFL’s share of the stadium cost, $350 million comes from the Bills’ owners, Terry and Kim Pegula, who are domiciled in Boca Raton, Florida, and whose net worth is estimated at $5.8 billion. The Pegulas’ fortune was amassed primarily through a fracking venture acquired by Royal Dutch Shell. A past profile of the team owner said, “Pegula makes no apologies for fracking. Finding natural gas and drilling for it has been his passion since getting out of college in 1973, just months before the Middle East oil crisis that sent gas prices soaring.” 

In 2017, members of the Seneca Nation testified in a Pennsylvania Department of Environmental Protection meeting in opposition to a Pegula-tied fracking project’s proposal to discharge wastewater in the Allegheny River, upstream from Seneca territory.

Forbes last year calculated the Bills franchise as being worth $2.3 billion, up from the $1.4 billion for which the Pegulas bought it in 2014. As the spectacle of NFL football remains irresistibly popular with TV viewers, the Pegulas will earn $3.5 billion from the team over the next 11 years just through a new NFL media deal. 

The owners had reportedly threatened to move the team unless the state underwrote a new stadium, though Hochul’s negotiations over the deal were held entirely behind closed doors.

In an April letter signed by 20 state Democrats representing New York City, lawmakers slammed the handout of public funds as “a billionaire giveaway” and a “negotiated in secret” process. The letter cited the consensus among researchers that such stadium subsidies are ineffective as economic development. 

Calling the stadium plan “one giant scam,” Assemblyman Ron Kim (D) said in a press briefing that, “The lack of transparency is astounding, especially because the new administration took power on promises of being transparent, open, and collaborative.” In the discussion, state Sen. Liz Krueger (D), chair of the Senate Budget Committee, said that she had not seen the detailed term sheet for the deal. 

Hochul’s press release claimed that the $27 million annually generated in state, county, and city tax revenue by the Bills would roughly double to a cumulative $1.6 billion over the 30-year stadium lease period. The figures came from a January 2021 study commissioned by the Bills’ owners. 

The analysis has been challenged by the fiscally conservative watchdog Citizens Budget Commission, on the grounds that the cumulative revenue projection assumes that all stadium-generated revenue would drop to zero if the team moved to another city, instead of being used for other revenue-generating recreational purchases.

‘The Mask Is Off’

Delaware North, which hired Hochul’s husband in 2016, spent more than $840,000 on lobbying the state government from 2019 to 2021, according to a review of state lobbying records. 

Last year, Delaware North lobbied the Cuomo and Hochul administrations on the “Seneca Nation Compact.” It also engaged in talks last year with Hochul’s office while she was lieutenant governor “regarding ongoing issues with sports betting,” among other gambling topics in state government. 

State records show that over the past few years the company has retained prominent Albany lobbying firms Bolton-St. Johns and Dickinson & Avella. Delaware North also holds tens of millions of dollars in long-term contracts for concessions at state parks and on the New York State Thruway. After coming into office to succeed scandal-plagued Cuomo and under pressure from state good government groups, Hochul created and signed a recusal policy stating that she and other covered public officials would “recuse [themselves] from any and all matters relating to Delaware North.” 

State ethics watchdogs at the good government nonprofit Reinvent Albany said that for Hochul’s recusal policy to be credible, it would need an independent authority to verify how it is being observed, not simply monitored by the governor’s own counsel. 

Despite the policy, Hochul arranged the stadium deal that could end up benefiting Delaware North — even though the company paid her husband, a former United States attorney for the Western District of New York, more than a half million dollars last year in a household income of more than $900,000.

A spokesperson for the governor said in a statement, “Governor Hochul is committed to the strictest ethical standards and restoring trust in government. Delaware North is not a party to the negotiations and any future decisions about vendors at the new stadium would be made by the Bills alone.”  

Delaware North did not respond to a request for comment.

Even if Hochul had stepped aside, her second-in-command, the powerful Secretary to the Governor Karen Persichilli Keogh, would have run into the same issue. Keogh’s husband Michael is a partner at Bolton-St. Johns, which previously lobbied for Delaware North in a contract that the firm said ended early last year. Micheal Keogh previously lobbied for other gaming industry clients like Caesars Entertainment.

The Bills stadium subsidy deal—soon to be eclipsed by the Tennessee Titans as the largest in the nation—may not be the political asset Hochul had expected. A recent Siena College poll found that 63 percent of New York State voters disapprove of the public subsidy. 

In the Democratic primary, Hochul faces the conservative Suozzi, who called for state hearings into what he panned as a taxpayer rip-off, and the progressive Williams, who torched the deal in an April 1 op-ed. “A billion dollars of state investment in Buffalo could help fundamentally transform education, health care, or housing,” Williams wrote. 

Charles Khan, organizing director at the Strong Economy For All coalition of labor and community groups, said in an interview, “Historically, we know that these deals usually end up being more expensive and almost never bring the transformational economic impact that they’re touted to bring.

“The governor could have included it in the budget that was public,” Khan said, “but instead she tucked it away and debuted it three days before the budget was due.

“If anything in the budget proves Hochul is not a shift from the politics of Cuomo and politics of the past, it’s this Bills stadium deal,” Khan said. “Gov. Hochul said she was going to be transparent, follow data, and follow the will of the public… the mask is off.”

Tom Speaker, policy analyst at good government group Reinvent Albany, which campaigns for greater transparency in state subsidy information and an end to unproductive corporate giveaways, said, “A billion dollars that could have gone to clean water or infrastructure is instead going to a couple of billionaires, it’s really disappointing. There are plenty of cases of team owners building their own stadiums, so this was a completely unnecessary way to use a billion dollars.

“Our view is that the process should have been much more transparent—there are plenty of teams that had a much more public process for building a new stadium,” Speaker said. For example, the San Diego Chargers stadium planning “had 10 hearings and 30-something public meetings that really allowed for people in the area to weigh in, that was almost totally absent here, held almost entirely behind closed doors.”

Reinvent Albany classified $10 billion in Hochul’s original executive budget as “slush funds,” meaning they were not subject to review from the state comptroller to ensure there wasn’t any corruption or wasteful spending—of which, Speaker said, $8 billion did make it into the budget. 

One example is a last-minute pot of $350 million earmarked for projects in Long Island, set to be spent through ​​Empire State Development by Long Island officials, including a Republican. Eyeing a campaign message focusing on issues of crime, Hochul has been seeking support from the area’s lawmakers for criminal justice reform rollbacks that are widely opposed by progressives. 

The Hochul administration’s first go-around with state budget negotiations were widely criticized by state lawmakers for delays and intransigence that pushed the budget a week late. The Hochul budget’s spending fell short of Democratic lawmakers’ goals in areas from ensuring health care coverage for low- and middle-income New Yorkers to raising the minimum wage for home health care workers up to $22.50 an hour. In a blistering address laying out the reasons for his ‘nay’ vote, state Sen. Jabari Brisport of Brooklyn called the budget a “moral travesty” in shortchanging much-needed public programs while steering money to the stadium. 

Very much in the tradition of her predecessor, Hochul has been fundraising heavily among Albany lobbying firms, reportedly asking the firms to raise $250,000 for each private fundraising event that she attends in person. Bolton-St. Johns and Dickinson & Avella have reportedly thrown fundraisers for Hochul’s campaign. Hochul’s record-setting $31.6 million raised as of May has come pouring in from well-connected donors, ranging from real estate giants to construction companies.

A few Hochul campaign donors in the sports and gaming industries have included the following: Timothy J. Leiweke, CEO of stadium consulting firm Oak View Group, giving $50,000; the PAC of Genting, the company that runs a Queens casino Resorts World, giving $47,100; and the PAC of International Game Technology, a slot machine maker, giving $25,000. Albany law firm Featherstonhaugh, Wiley & Clyne, which lobbies for the Saratoga Casino Hotel, has contributed a total of $50,000 to Hochul since Cuomo resigned.

The state’s current gaming compact with the Seneca Nation expires in December 2023. In the meantime, the Seneca Nation’s gaming exclusivity zone will likely be further squeezed by competition. In April, state officials approved three new casinos in New York City next year. State lawmakers are also likely to eventually approve online casino gaming like slot machines and poker, and regulators could approve an official app for the state lottery. 

Hochul could oversee negotiations with the Seneca Nation over the new gaming compact, if she is elected. The State Gaming Commission’s seven members are appointed by the governor, with one recommended by each of the state Assembly and Senate. 

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