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Metro Loses Bet On Gas Prices

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Posted at 6:49 PM, Jan 29, 2015
and last updated 2015-09-07 14:22:15-04

NASHVILLE, Tenn. - While your family may be enjoying the record low gas prices, that's not the case with Metro Government.

A NewsChannel 5 investigation reveals a bank, not taxpayers, is profiting from low gas prices.

Metro officials made a big bet last year by locking in rates for fuel.

But with gas prices plummeting, the question is did Metro get out-negotiated?

It's easy to find gas well under $2.00 a gallon in Nashville.

But last year Metro bet gas prices would stay high and agreed to pay $2.68 a gallon for the next two years.

If prices go up, a bank pays Metro the difference, but when prices drop Metro is on the hook.

"If you could undo it, you'd love to undo it, but you know, you can't always be on the winning side," said Finance Director Rich Riebeling, who helped negotiate the deal with Fifth Third Bank.

We reviewed receipts from the last year.

Last January Metro paid the bank $32,000.

Then for several months the bank paid Metro, $5,000 in February, $19,000 in March, $36,000 in April, $20,000 in May, nearly $40,000 in June and $15,000 in July.

But things begin to turn in August when Metro owed nearly $2,000. Metro paid $66,000 in September, $183,000 in October and nearly $270 in November.

In December, Metro owed the bank more than $500,000.

NewsChannel 5 Investigates asked why a check for $500,000. Riebeling responded, "Because fuel prices dropped precipitously. I mean dropped to the bottom."

He continued, "We collectively took all of our information and thought it was the right thing to do, but clearly with dropping fuel prices, it wasn't the right time to do that."

Councilman Josh Stites did not want to "Monday morning quarterback" the agreement, but questioned whether Metro has the expertise to enter into these types of contracts.

"We entered into the hedging world trying to be the smartest guys in the room, and it's going to end up costing taxpayers a lot of money," Stites said.

"I don't know if we got taken for a ride. I know Fifth Third Bank is probably happy they entered into this relationship with us," Stites said.

NewsChannel 5 Investigates ask Riebeling, "Is this something Metro should be doing? Do we have the expertise?"
Riebeling responded, "The short answer is yes, I think it is, and I think we have the expertise internally."

He added Metro will use an outside financial adviser for to negotiate any future contract like this.

Back in 2009, Metro asked the Tennessee General Assembly to pass a law allowing Metro to enter into these types of contracts.

It came after a sharp rise in gas prices made it tough to budget for fuel.

Shortly after that Metro sent out press releases touting big savings because of the program.

Riebeling said, "It would be my preference to never send out a press release on anything like that."

There are no press releases now indicating Metro is writing half million dollar checks because of its latest contract.

Councilman Stites concluded, "We've tried to get really fancy instead of just spending less than we're bringing in, and I think that's what most taxpayers across Nashville would like to see us do."