FORT WAYNE, Ind. (WANE) — The pain of having Red River as Fort Wayne’s trash and recycling vendor officially came to an end Thursday. The pain hasn’t just come from the company’s performance. It has been a financial pain for city administration as well.
WANE 15 checked the city’s check register Thursday and found checks made to Red River that added up to nearly five million dollars.
$4,664,253.28 alone since March of this year.
That prompted the 15 Finds Out team to ask why so much money was going to Red River.
A transition agreement with the company only called for $1.9 million in payments to Red River to stay in Fort Wayne through the first half of 2022. As part of that agreement, Red River would “reject” it’s previous contract with Fort Wayne in bankruptcy court.
That transition agreement can be viewed below:
The terms of the agreement show that $1.6 million would be paid by Red River’s insurance company to Fort Wayne and in turn Fort Wayne would pay Red River $1.9 million.
That meant the city only had to pay $300,000 to keep Red River in town until its self-imposed deadline to have a new vendor.
Spokesman for Mayor Tom Henry, John Perlich, recently told WANE 15 that the city had fined Red River $604,508 from January to May of this year.
So again, how is so much money being paid to Red River?
“The $1.9M doesn’t factor in regular monthly invoices. Of that $1.9M, $300,000 represents City dollars. The rest is from the surety bond. The other payments you see represent monthly payments,” Perlich told WANE 15.
The question then became: why is the city still making monthly payments – on top of the transition agreement money – if Red River rejected its previous contract?
City attorney Tim Haffner told WANE 15 there was also a Mutual Release and Settlement Agreement with Red River that required the city continue to make monthly payments from the pay structure set forth in Red River’s original contract with Fort Wayne.
“Some would say ‘are you paying them twice?’ Unfortunately, the people we had to satisfy weren’t just Red River, but the bankruptcy estate – which means the creditors, the banks and others. Their view was ‘Well, we’re using their equipment for another six months, what’s in it for them?’ meaning the other creditors,” Haffner said to WANE 15 in a phone conversation.
Haffner said the city viewed it as a situation where they were restricted on what they could do because of Red River’s ability to present a plan of reorganization to the court under federal bankruptcy laws.
He told WANE 15 the city saw a scenario where it could keep Red River long enough to find a new collector while keeping the current pay structure they had with Red River and only having to pay an additional $300,000.
The monthly payments would satisfy the banks and creditors, and the transition money would go to Red River.
“Our number one priority, obviously, was getting garbage picked up,” Haffner said. “Number two priority was some degree of reliability, and number three, minimizing the amount of payments the city would have to make out of pocket beyond its current payments. That turned out to be the net $300,000.”
According to Haffner, Fort Wayne will have to cut one more check to Red River in July when the city makes a payment for the month of June. That should be the last time money is sent to Red River, Haffner said.
The full 70-page Mutual Release and Settlement Agreement can be viewed below: