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Archive for April 14th, 2008|Daily archive page

Solid waste agency has recovered $930,000 on its troubled $6-million investment; hopes for more

In Cedar Rapids/Linn County Solid Waste Agency, City Hall on April 14, 2008 at 9:36 pm

On paper anyway, the Cedar Rapids /Linn County Solid Waste Agency is recording a loss of $2,535,000 on its books for the current fiscal year ending June 30 as a result of its troubled $6-million short-term investment in something called Rhinebridge LLC.

The $2,535,000 figure represents half of what the agency is still owed on its $6 million investment.

The city of Cedar Rapids has handled the solid waste agency’s investments, and on Monday, Sue Vavroch, the city of Cedar Rapids’ treasury operations manager, noted that the city, and hence the agency, has recovered $930,000 of the $6-million Rhinebridge LLC investment.

Still outstanding is $5,070,000.

Karmin McShane, the agency’s exeuctive director, estimates that the agency has lost $125,000 more on the investment in interest income it would have realized if the $6 million had been paid in October and reinvested.

Vavroch repeated Monday that a receiver’s auction of the remaining assets of Rhinebridge LLC is now scheduled for early May, though this date has been postponed before, she said.

Rhinebridge LLC is an investment option referred to as commercial paper, and more precisely, a “structured investment vehicle.”

The city invested agency funds in the commercial paper in late July expecting a payment of $6 million on Oct. 24. Rhinebridge LLC didn’t have the money to pay.

Vavroch has noted that the state of Iowa allows cities to invest in commercial paper, and the city of Des Moines is among other cities that have made such investments, city officials there have said.

Even so, Vavroch has noted, too, that the city of Cedar Rapids had not invested in commercial paper until about 18 months ago.

At a meeting of the solid waste agency’s finance committee on Monday, Tim Lukan, the agency’s accounting manager, said the agency would write off half of what it is owed by Rhinebridge LLC this fiscal year as a conservative accounting move.

The hope, he said, was that the agency won’t lose that much.

For now, too, the agency, because of the recorded Rhinebridge LLC loss, has entered a zero in the reserve account it had been building to open the Phase 2 cell at the Site 2 landfill at County Home Road and Highway 13. The agency is just completing construction of the Phase 1 cell there and is expecting to build the Phase 2 cell in fiscal year 2010.

Steve Tucker, the county’s finance director and agency finance committee member, suggested it was now possible that the agency would have to sell bonds to finance the building of the Phase 2 cell rather than using reserves that now might not be available.

The agency’s McShane said it was too early to speculate about that.

Dawn Jindrich, the county’s budget director who also is on the agency finance committee, said her assumption has been that the agency would not have had to go into debt for the landfill construction before problems with Rhinebridge LLC surfaced.

In addition to Rhinebridge LLC, the city of Cedar Rapids also has $2 million of its own money tied up in a defaulted commercial paper investment. That one is called Golden Key Ltd.