By Dave Jordan, NEWS 9
GUTHRIE, Okla. -- The city of Guthrie is bracing for an $800,000 budget shortfall, stemming from investments it made through a local bank.
Bank of Oklahoma used Lehman Brothers to invest money for the city of Guthrie. The investment giant went bankrupt last month and now Guthrie is feeling the effects.
It's the perfect example of how Wall Street affects Main Street. Guthrie's City Hall, a 14-year old structure, was funded by revenues the city earned through interest payouts on a securities investment.
"The economy changed in a way not many people expected, and we're facing a lot of things many others are, and that is a loss of interest, income," Guthrie City Manager Melody Kellogg said.
In 1994, Guthrie gave $5.4 million to Bank of Oklahoma to invest. The bank, through Lehman Brothers, invested that money in government-backed securities that paid $400,000 a month, based on a 7.42 rate of return.
But Bank of Oklahoma did not back the investment with equal financial assets throughout the agreement. That, coupled with Lehman's bankruptcy in September, caused Guthrie to lose its interest payout.
"They stopped making any interest payments. We still have debt service that we were counting on that interest for," Kellogg said.
The city manager said she spoke with Bank of Oklahoma and they hope the problem will be resolved by the middle of next week.
"We'll have to figure out how we're going to make up the difference for that and how we're going to reinvest that 5.45 million that was our original principal investment," Kellogg said.