FORT WAYNE, Ind. (WANE) – Red River Waste Solution’s bankruptcy remains unresolved in court, but as this process continues, the City of Fort Wayne continues its efforts to secure a new waste collector.
City prosecutors briefed the city council at its meeting on Tuesday evening. The bidding guidelines were just released last Friday and four domestic vendors have already expressed interest in bidding. A pre-submission conference is scheduled for Friday, February 18. Then, a second public release is scheduled for February 21, and final offers are due March 2. The hope is that a new vendor will start collecting trash in Fort Wayne on July 1. .
Why isn’t trash picked up on days the city says it will after a “reset?” Watch the city’s response:
But it all hinges on Red River and the bankruptcy court allowing Red River’s contract with the city to end.
In bankruptcy court, Red River would have three options: reject the Fort Wayne contract and simply walk away, assume the contract if the company continues to operate out of bankruptcy, or go into liquidation mode and the contract would be assigned to another supplier, or a purchaser of the contract.
Red River is losing money on the Fort Wayne contract every month, which city prosecutors say would usually mean the debtor, Red River, would reject it.
For other creditors involved in the Red River bankruptcy, used garbage trucks in Fort Wayne are considered assets that could be sold to pay off other creditors. City of Fort Wayne attorneys estimate the sale of the trucks could generate $8 million to $9 million that could be used in bankruptcy settlements.
The city worked to prevent this from happening, as it would leave Fort Wayne without a garbage collector. City attorneys said Red River needs $2 million to continue operating in Fort Wayne through June 30. This will be paid in previously accrued fines owed to Fort Wayne worth $1.6 million. Instead of Argonaut, Red River’s insurance company, paying those fines to Fort Wayne, it will pay that money to Red River to keep it afloat. Fort Wayne will pay Red River an additional $300,000 through June, bringing the total to $2 million.
A bankruptcy court won’t let Red River lose any more money. To allow Red River to serve Fort Wayne through June 30, the bankruptcy court must see a contract that is at least financially neutral and does not cost other creditors more money, city attorneys said. That’s why they said there was no choice but to help provide the $2 million that Rouge River needs to stay operational.
City prosecutors said a transition agreement is largely negotiated and they hope to finalize it in the coming days. The sticking point is how Red River compensates the city for its efforts in collecting missed pickups from Red River. The current contract has a fine structure that far exceeds the cost to the city to collect duds. The transition agreement would require Red River to compensate the city for 80% of the actual cost to the city to collect missed pickups.
As attorneys try to put a plan in place, Red River continues to miss pickups, even as the city tries to complete service.
Councilwoman Sharon Tucker asked Tuesday night if the city could just let people know when they Actually need to take their trash out, instead of saying they’re back on schedule and the trash can sit still for days.
“We have a flawed vendor that is in over its head and losing money,” Fort Wayne City Attorney Tim Haffner said at the council meeting. “They are understaffed. We asked them to reset. They have. We would desperately like to let people know what day they will be collected. We contacted Waste Management, GFL, Republic and said could you please help us because they said they would if they could and they said they couldn’t . We receive incomplete and inaccurate information from Red River daily and this changes daily.
The attorneys added that Nashville, which also has a Red River garbage collection contract, is now trying to negotiate a transition contract similar to Fort Wayne’s. The Nashville and Fort Wayne contracts represent 40% of Red River’s total revenue, city prosecutors said.