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Solid waste agency huddles; talks possible litigation to retrieve troubled $6-million investment

In Cedar Rapids/Linn County Solid Waste Agency, City Hall on March 19, 2008 at 5:50 pm

The check isn’t in the mail.

Three weeks ago, there was optimism from the finance committee of the Cedar Rapids/Linn County Solid Waste Agency that the agency would recoup all of its $6 million from a short-term, “commercial paper” investment in a financial entity, Rhinebridge LLC.

Rhinebridge LLC, which had invested in mortgages and other investments, defaulted in October, unable to pay its investors.

On Tuesday, the agency’s finance committee met in closed session to discuss “potential litigation that deals with the whole Rhinebridge situation,” Steve Tucker, Linn County finance director and chairman of the agency committee, said after the meeting. Tucker characterized the meeting as an update. No decisions were made, he said.

At its meeting Feb. 25, the agency’s finance committee, at the request of the city of Cedar Rapids, discussed the prospect of adopting a more formal policy to direct how agency investments are handled.

Tucker said the agency’s finance committee and board of directors have depended on the city of Cedar Rapids, which handles the agency’s finances, to make decisions regarding the investment of the agency’s funds.

One option now is for the agency board to formally adopt an investment policy that mirrors that of the city of Cedar Rapids. The city’s policy, not unlike those of some other jurisdictions, permits investments in commercial paper, which is known in the financial world as a “structured investment vehicle.” State law lists commercial paper among allowed investment options for Iowa cities.

Even so, some on the agency’s board have noted that any agency policy could exclude investments in commercial paper in the future.

At the finance committee meeting Feb. 25, Sue Vavroch, the city of Cedar Rapids’ treasury operations manager, reported that the agency’s investment in Rhinebridge LLC is positioned in a “secured credit group” that has “most senior” standing among investors trying to get what is left of Rhinebridge LLC’s assets.

“There’s a possibility it (the agency) won’t lose anything,” Vavroch said.

She has noted that the city made the Rhinebridge LLC investment through a Wells Fargo brokerage.

The city of Cedar Rapids also has its own $2 million investment in commercial paper through Wells Fargo tied to another troubled entity, Golden Key Ltd. Golden Key Ltd. also has defaulted and was unable to pay on Dec. 5 what it owed the city.

The $6 million solid waste agency investment in Rhinebridge LLC represents about one-quarter of the agency’s cash and investments, the agency’s finance committee said in February.

Linn County’s Tucker has said Linn County does not invest in commercial paper, though it could. Finance directors in Dubuque and Iowa City also have said they do not.

Allen McKinley, finance director for the city of Des Moines, said in February that the city of Des Moines had 4 percent of its $186-million investment portfolio invested in commercial paper, none of which is in default. However, he said he suspected the city would stop investing in commercial paper for a time once its current investments mature this spring.

The Cedar Rapids/Linn County Solid Waste Agency, formerly known as Bluestem, is a multi-jurisdictional entity with a board comprised of six city of Cedar Rapids representatives, two Linn County ones and one from the city of Marion.

Tom Podzimek, Cedar Rapids City Council member, is the board chairman.

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  1. Looks like the Taxpayers are going to lose millions!

  2. Always the optimist. It’s a representative form of government, not a mobocracy. I hope someone understands that sooner rather than later.

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