FORT WAYNE, Ind. (WANE) — With the uncertain future of Red River Waste Solutions, Fort Wayne city officials are “preparing for the worst” and creating a contingency plan if the trash collection business fails.
Wednesday night the city’s Solid Waste Advisory Board met to discuss the future of Red River as the company undergoes Chapter 11 bankruptcy.
“It’s easy to pick on Red River and say these guys are bad and they should have never been in the business, but there are a lot of things that happened that impacts every other industry that deals with trucking and truck drivers,” Fort Wayne Public Works Director Shan Gunawardena said. “Red River had some past performance issues. They also had issues where they probably underbid the contract and they weren’t able to make it profitable, and because of that they had a hard time.”
The company filed bankruptcy back in October four years into its 7-year contract with the City of Fort Wayne. Since collection started Red River has been littered with thousands of complaints about missed trash pick up.
In the past few weeks, City Council filed a subpoena to get Red River officials to come to a meeting and answer their questions. Tuesday night Councilman Russ Jehl told the City Council that they received a response, but officials backed out of a briefing after city attorneys sent Red River a letter about the performance bond.
Red River’s contract with the City of Fort Wayne states that the company must pay a performance bond which is due on Jan. 1, 2022. The bond is about $800,000. However, city attorneys say Red River will be unable to pay that bond and told the Solid Waste Advisory Board that they needed to come up with a plan sooner rather than later.
The attorney told the board that according to court documents, Red River told the court that Fort Wayne is a “losing contract” and that Red River is “losing more money than they are making.” Out of 13 contracts Red River has across the U.S., Fort Wayne is one of two cities that require the company to pay a performance bond.
If Red River does not pay the performance bond, the city attorney says that would allow Fort Wayne to declare a default on the contract and would eventually lead to the termination with Red River. However, the company could also reject the contract, meaning they would stop serving Fort Wayne.
To prepare, the board voted to “accelerate the search” for Red River’s replacement by looking into emergency contracts with three companies currently operating in Fort Wayne. Those companies are Waste Management, Republic, and GFL Environmental.
“We don’t think any of the three contractors can handle it on their own,” Gunawardena said. “We are still hopeful that through the bankruptcy process the contract will get resigned to another contractor.”
However, if the contract doesn’t get re-signed, discussion amongst the board was to hire an emergency contractor and use city trucks to help cut down on any delays or missed trash. But if an emergency contract was needed, city attorneys say the board would still need to bid the project like any other government contract as stated by Indiana law. This means it could take weeks to get a new company in, which is another reason the board wants to be prepared.
If another contractor were to take over the routes, Red River employees would be offered jobs with the new company before they bring in more employees. During the meeting, city officials told the board that 32 trucks would be needed in order to complete the trash collection successfully and all three companies would not be able to bring that many trucks immediately.
A second recommendation that was also voted on Wednesday night was for the city to look into starting their own trash collection service. If the board finds that adding a trash collection sector would be more efficient, the city could create a new sector. However, it was noted by several members of the board that in order to have adequate staffing, employees would need to be paid well over the industry standards.
If Red River were to pay the performance bond, the contract would stay in place. But the board wants to be prepared for every scenario.
According to court records obtained by WANE 15, Red River will be in court Monday, December 20 for an expedited hearing. During that hearing, the judge will hear the companies emergency motion to compel the assumption or rejection of the Fort Wayne bonded contract.
The board’s next meeting is on January 5, which comes after the performance bond is due. During this meeting, members could discuss whether to give a recommendation to the city attorneys to file a default on Red River and put into motion one or more plans discussed at Wednesday night’s meeting.