By David Dresser and Suzanne Sinclair
David Dresser is the former Supervisor of the Town of Ovid and former chair of the Indian Affairs Committee of the Seneca County Board of Supervisors.He may be reached at email@example.com. Suzanne Sinclair is the Seneca County Manager. She may be reached at firstname.lastname@example.org
New York State and Seneca County governments have spent a lot of time and money on legal actions involving the Cayuga Indian Nation (the “Cayugas”). Lakeside Trading was raided, accused of holding an excess of untaxed cigarettes, and legal action ensued. The Cayuga Indian Nation made an application for “land in trust.” There was a public hearing in which many citizens participated, and the issue is still active. Seneca County has stated its intention to foreclose on Cayuga properties where taxes are three years outstanding. These legal actions use the time of Seneca County staff, Board members, outside legal firms, and they use Seneca County citizens’ tax dollars. Why? What is the purpose?
Sales and Excise Taxes
Lakeside Trading is the most visible piece of the puzzle to people in Seneca County. There are two Lakeside Trading stores, both owned by the Cayugas. One is in Seneca Falls and one is in Union Springs, in Cayuga County. Both of these stores sell large amounts of untaxed cigarettes, gasoline, and other goods. New York State, since the time of Governor Pataki, had a policy of “forbearance,” meaning the state simply did not enforce the applicable laws with the Cayugas and other tribes, despite the fact that the U.S. Supreme Court had repeatedly upheld the right of states to tax sales to non-members of Native American tribes.
As a result, property taxes for every citizen in Seneca County, from Lodi and Covert to Junius and Tyre, are higher than they need to be. Outside of tax dollars passed through to counties from the state and federal governments, the two principal sources of revenue for counties are sales tax and property tax. If mandated services cannot be sufficiently funded by sales tax, then property tax must be used. It is the tax of last resort in Seneca County. When sales tax revenue that should have come to the county is lost by this non-enforcement, then property tax levies must fill the gap. New York State itself loses its share of the sales tax and the excise taxes owed on cigarettes and gasoline.
How much? We do not have access to LakeSide Trading’s sales figures, so it is hard to estimate accurately. The number of cars going in and out indicates this number is probably large, and there is circumstantial evidence. When Lakeside Trading was barred from selling cigarettes for about three months, cigarette sales at other convenience stores and sales tax collections skyrocketed.
Why were the Cayugas barred from selling cigarettes for a few months? Frustrated by the failure of the State to enforce its sales tax laws (Sections 284e and 471e), and realizing that uncollected sales taxes inevitably raise
property taxes, Seneca and Cayuga counties decided to enforce the laws themselves. In November 2008, they conducted a coordinated raid of the two LakeSide Trading stores, confiscating 17,600 cartons of unstamped cigarettes. State Supreme Court Judge Kenneth Fisher defended the action on grounds that the stores were not on a “qualified reservation.” “Qualified reservation” is a term in New York tax law. It does not indicate a physical reservation, only that the tax environment is like a reservation. His decision was overturned, however, by a 4-1 ruling of an Appellate Court, which maintained that the stores were located on a “qualified reservation,” a position affirmed by a 4-3 decision of the New York Court of Appeals in May 2010.
How much are we losing in sales taxes? In April, 2009, four months after the LakeSide raid and in a depressed economy, sales tax collections for Seneca County jumped over half a million dollars over the previous April to $2.37 million dollars. In April 2008, collections were $1.69 million, and in April 2007 they were $1.75 million. Again in July 2009, sales tax collections jumped, this time by one hundred percent. The collections were $2.61 million, compared to $1.31 in 2008 and $1.49 in 2007. Those two months alone produced almost $2,000,000 extra in sales tax revenue, or about 21 percent of the 2009 property tax levy in Seneca County. Was it all generated from cigarette sales? Again, because the sales numbers are not available to the state or Seneca County, it is impossible to say. However, coincidentally, the two LakeSide Trading stores were barred from selling cigarettes during that time. The courts allowed them to resume cigarette sales at the beginning of July 2009. Sales tax collections in April 2010 were $1.68 million, and in July 2010 collections were $1.89 million.
The issue of cigarette tax collection moved to the federal courts as Governor Paterson discontinued the State’s longstanding forbearance policy. Immediately the Cayugas, Senecas, Mohawks, and Oneidas filed lawsuits in federal courts to prevent the State from collecting this revenue. The lawsuits were consolidated and the issue is now before the Second Circuit Court of Appeals.
“Land in Trust”
“Land in Trust” means land that is held in trust by the United States government for the use of an Indian tribe. Technically, the tribe does not own the land in trust, the U.S. government does, but the practical effect is the same as ownership. Land in trust is not a reservation. A reservation has defined boundaries in the same way that a city has defined boundaries, and virtually everything within those boundaries is the responsibility of the governing body, such as the city council or tribal government. This means the roads, sewers, and other infrastructure on a reservation are owned and maintained by the tribe.
“Land in Trust” often consists of individual parcels of land, not an area of land surrounded by boundaries. If you buy a house on a lot, you would expect the relevant municipality to levy property taxes and maintain the roads. A parcel of land taken into trust does not include the infrastructure. Its maintenance remains the responsibility of the municipal entity, whether it is a village, town, county, or state. When land is taken into trust, however, it is no longer subject to property taxes, and therefore makes no monetary contribution to the municipality, yet the municipality is required to pay for the maintenance of the infrastructure.
Because land in trust is not subject to property taxes, there is no guaranteed financial support for school taxes. The cost of running the schools would fall onto the remaining non-trust property owners in the school district. In other counties, tribes have agreed to financially support schools, however, they are not required to. They can decide to withdraw from such an agreement, unless they have agreed to waive sovereign immunity. Schools with more than ten Indian children enrolled do receive some impact aid from the federal government.
In addition, land in trust is not subject to any local ordinances such as land use regulations, public health inspections, or gambling restrictions. If landowners in the land in trust area had concerns about the land use or customers had concerns about a food-handling business, local municipal entities would have no authority or jurisdiction to address those concerns. This should not be construed as an assertion that there would necessarily be land use or health issues, it is only to point out the loss of local jurisdiction. The Cayugas have stated publicly that if they receive land in trust, they will re-open their gaming enterprises.
Sales tax collection is related to land-into-trust because the enormous profits reaped from the sale of untaxed gasoline and cigarettes are used by the Cayugas to buy land in the Counties, often for sums far above the assessed value. By March 2011, the CIN had paid $8,850,100 for 1,119 Seneca County acres assessed for $5,760,200. These would come off the tax rolls and be removed from local jurisdiction if placed in trust.
In order to have land taken into trust, a tribe must apply to the Bureau of Indian Affairs (BIA) and the Secretary of the Interior. Not every tribe is entitled to land in trust under current law, and it is Seneca County’s position that the Cayugas are not entitled to it. The situation today is that we are expecting a Record of Decision (ROD) from the Secretary of the Interior to take 129 acres in trust for the Cayugas. The Counties are prepared to appeal to the federal district court for a stay on the resumption of gaming in the counties, while litigation is commenced to challenge the trust decision on various grounds. If the Cayugas get just 129 acres in trust, they can legally reopen their bingo parlors and have another source of revenue with which to buy more land to put in trust.
Property Taxes and Foreclosure
When a property owner fails to pay taxes due on their property for more than three years, the county is entitled to foreclose on the property. Seneca County assumes ownership and sells the property. Reservation land is exempt from this process. When a tribe purchases property in a fee purchase, it does not automatically become exempt from property taxes. Any land that the tribe wishes the U.S. government to take into trust for them is supposed to have all taxes paid up to date. Once the land is taken into trust, it becomes exempt from property taxes.
Madison and Oneida counties have attempted to foreclose on tax delinquent properties owned in fee by the Oneida Indian Nation (the “Oneidas.”) Attorneys for these counties filed a lawsuit with the Federal District Court for Northern New York, which ruled in favor of the Oneidas. On appeal, the Second Circuit Court concurred. The Second Circuit Court acknowledged that the property was subject to property taxes, but concluded that the law provided no remedy for non-payment in the case of ownership by the Oneida tribe, based on their “sovereign immunity.”
Finally the appeal went to the Supreme Court, asking its opinion regarding foreclosure for unpaid property taxes and the existence of a former reservation. The second question is particularly important to Cayuga and Seneca counties because it asked whether the Oneida reservation had been diminished or disestablished.
The Supreme Court agreed to hear the appeal, but before it could do so the Oneidas issued a waiver of sovereign immunity specific to property taxes, making the first question moot. Ducking both issues, the high court vacated the Second Circuit’s decision and remanded the case to the Second Circuit for reconsideration. Oral arguments were heard March 15, 2011, and a decision is expected in a matter of months.
Meanwhile, in a parallel case, Seneca County’s right to foreclose on tax-delinquent properties is being argued in the Federal District Court for Western New York. Oral arguments will be heard May 5, 2011.
These three issues, sales tax collection, the land into trust application, and the foreclosure actions, are the main issues facing Seneca County today. These had their beginnings in history, and what follows is a sequential narrative of that history.
Treaties and Acts
In 1789 and 1790, when New York was still a colony, it paid the CIN for all its land except 64,015 acres around the north end of Cayuga Lake, which were reserved for the Tribe’s use. In 1790 and 1793 the Indian Trade and Intercourse Acts were passed, establishing Congress as the ultimate authority in Indian affairs. The 1974 Treaty of Canandaigua, often mentioned by New York tribes, “acknowledged” the reservations of the Cayugas and Oneidas, but these were state, not federal, reservations. In 1795 and 1807, having largely abandoned their reserved land, the Cayugas sold their use rights to the State of New York. Federal representatives witnessed these transactions, but Congress never formally ratified them.
The Dawes Act of 1887 encouraged tribes having federal reservations to allot and deed parcels of land to their members, but due to death, bankruptcy, and outright sale much land was lost to western tribes over time. In 1934, in an attempt to restore land lost by allotment, Congress passed the Indian Reorganization Act (IRA), to buy back land and put it in trust for the tribes. Two million dollars annually were authorized for this purpose. It is significant to note that no land was lost by New York tribes due to allotment.
It is in the Indian Reorganization Act debate that the term, “checkerboarding,” was coined. The allotment of land left gaps in the federal reservations, and the IRA was intended to re-create the coherency of the original reservations, even if it could not re-create the original reservation itself.
The Land Claim
In 1980 the CIN decided to submit a land claim for the 64,015 acres once reserved for it by the State, on grounds that the 1795 and 1807 transactions had never been ratified by Congress. Various efforts to resolve the land claim failed, including retroactive ratification of the two treaties and designation of portions of the Finger Lakes National Forest or the Seneca Army Depot as new territory for the Cayugas. In 2003, the CIN bought two gas stations and convenience stores, one each in Seneca and Cayuga counties, and proceeded to sell gasoline and cigarettes without collecting state sales or excise taxes. In July 2004 the Nation opened electronic bingo parlors in each county, which generated enormous profits until September 2005, when Seneca County passed a local law prohibiting illegal games of chance and the Nation decided to “temporarily” close the parlors.
Governor Pataki attempted to negotiate a settlement of the land claim, and in November 2004 he and Cayuga representative Clint Halftown signed a memorandum of understanding providing the CIN 10,000 sovereign acres in Cayuga and Seneca counties and a casino in the Catskills, with the Counties guaranteed $3 million a year from the State and price parity on gas and cigarette sales. Having never been consulted, the counties went ballistic. Seneca County fired off a four-page letter to the Governor rejecting the proposal, insisting on being held harmless, and explaining why price parity would not work. Cayuga County supported the settlement if it could be assured it would be reimbursed for lost sales taxes.
In March 2005, the U.S. Supreme Court ruled 8-1 that the City of Sherrill was owed property taxes by the Oneida Indian Nation on parcels the OIN owned in fee status; by extension, Madison and Oneida counties were also due back taxes from the OIN. At the end of the majority opinion, however, Justice Ginsberg wrote: “Section 465 provides the proper avenue for the OIN to reestablish sovereign authority over territory last held by the Oneidas 200 years ago.” Within a matter of weeks both the Oneidas and the Cayugas filed applications with the Bureau of Indian Affairs (BIA) for land to be taken in trust: 17,370 acres for the Oneidas and 129 acres for the Cayugas. In June 2005, based on the Sherrill decision, the Second Circuit Court of Appeals dismissed the Cayuga Nation’s land claim.
The BIA notified the Counties and the State of the Cayugas’ trust applications in December 2005 and scheduled a scoping session for March 6, 2006 at the Chiropractic College in Seneca Falls. Some 500 people attended, almost all in vehement opposition to land being taken in trust for the Cayugas. In September 2006, in an effort to promote a negotiated settlement, Senator Schumer arranged for representatives of Madison, Oneida, Cayuga, and Seneca counties to meet in Washington with Associate Deputy Secretary of the Interior James Cason. At the meeting with Cayuga and Seneca counties Cason commented, “Well, after all, the Cayugas are a landless tribe.” This made quite clear his department’s position, and the outcome of the meeting was that attorneys for the Nation and the Counties would attempt to reach a settlement that would hold the Counties harmless.
In May 2007 attorneys Brian Laudadio and Dan French presented a settlement proposal granting the Cayugas 3,333 sovereign acres in no more than three clusters in Seneca County and 6,666 sovereign acres in no more than three clusters in Cayuga County. The Counties would be guaranteed more than twice as much as their tax losses annually from proceeds of a Class III Casino in the Catskills, and no gaming would be conducted in the Counties without their consent.
Public opposition to sovereign land for the Cayugas was expressed at a meeting at the Seneca Falls Community Center in June. In July the Cayugas offered an amended proposal, permitting the Counties’ litigation to proceed, and, if unsuccessful, guaranteeing the Counties all the terms in the original proposal except the limitation on Class II gaming. On August 14, 2007 both counties unanimously rejected the original settlement, but supported a Class III casino in the Catskills for the Cayugas if they would withdraw their trust applications and agree to no others. At this point negotiations for a settlement broke down.
In January 2008 Interior Secretary Kempthorne sent letters to eleven tribes with applications for casinos more than 25 miles distant from their reservations, explaining that they were too far away to be approved. In February 2008 the Secretary announced his decision to place 13,086 acres in trust for the Oneidas . These were largely checker-boarded over Oneida and Madison counties in disregard for the Supreme Court’s concern, expressed in Sherrill, about “disruptive practical consequences.” The counties and the State immediately appealed to the federal district court, and that litigation is still pending, with a stay temporarily preventing land from actually being deeded to the federal government.
In February of 2009, the U.S. Supreme Court ruled in Carcieri v. Salazar that the Secretary did not have the authority to grant the Narragansett Tribe land in trust in Rhode Island, because it was not a federally recognized tribe under federal jurisdiction in 1934 when the IRA was passed. This raised the question of whether the Oneidas and the Cayugas were eligible for land in trust. Tribes across the country began putting pressure on the Secretary and Congress to bring about a “Carcieri fix.” Bills are now pending in both the House (HR 1231) and the Senate (S.676) to bring about a “Carcieri fix.”
The BIA issued a Draft Environmental Impact Statement (DEIS) and held a public hearing June 17, 2008, at the Chiropractic College. Some 1,000 people attended and most of the 77 who spoke were strongly opposed to placing land in trust for the Cayugas. The DEIS received harsh criticism from elected officials and the public as being incomplete, inaccurate, inconsistent, misleading and biased, but in October 2010 the BIA issued an equally flawed FEIS, finding no significant impacts to the preferred alternative that would place 129 acres in trust in the Counties, 15 of them in Seneca County.
Based upon previous U. S. Supreme Court rulings it is expected that the court will rule in favor of the State, allowing taxes to be collected on reservation sales of cigarettes to non-Indians. It is also expected that the issue of foreclosure on tax delinquent properties will ultimately be decided in favor of the Counties, although the Cayugas may issue a limited waiver of sovereign immunity so that the case does not get to the U.S. Supreme Court.
It is less likely, though, that the land-into-trust issue will be decided in favor of the Counties, especially if a “Carcieri fix” is passed by Congress. Seneca County feels the term “Carcieri fix” is inappropriate as it implies that something is broken. It is Seneca County’s position that land in trust actions were designed to help tribes in western states recover the land lost under allotment. The Cayugas were not one of those tribes and never lost land through allotment.
As in all its dealings with the Cayugas, the Board of Supervisors will continue to seek a resolution that holds harmless the citizens of Seneca County.