In a poll of council members in last Friday's Journal, the plan was favored by four members. Two others hadn't formed a concrete decision. But council members Holly Walquist and the Rev. Anthony Coleman, who originally favored the plan, had a change of heart Wednesday night.
The council says it now will ask for an opinion from the Georgia Attorney General on the restructuring plan and possibly put the deal back before council at a later date.
The deal would've paid off the outstanding $30 million bond debt Marietta owes on the city-owned hotel and replace that debt by issuing up to $35.5 million in new bonds through the Downtown Marietta Development Authority. The deal is said to save the city $300,000 annually, but after paying a $4 million prepayment penalty on the existing bond and a $350,000 fee for the bond underwriter and attorney, many agreed that a rushed decision wouldn't be prudent.
And rushed it was. In fact, council members were handed the plan just last Thursday - one day after qualifying ended for the Nov. 3 election, and just before the Labor Day weekend.
"We need time to absorb these numbers. We don't just need 15 minutes in a pre-council meeting," said Councilman Grif Chalfant, who was the most vocal proponent for delaying a vote. "I really can't believe we were asked to do this."
The numbers Chalfant referred to were handed to the council before its regular meeting and detailed different scenarios regarding issuing new bonds.
Chalfant said, we "get seven pages to look at now, before we had nothing. I don't understand this enough to make a $35 million decision."
Agreeing with Chalfant were Coleman, Walquist and Van Pearlberg, who voted down the proposal.
Former state representative Tumlin wrote a letter to the Journal over the weekend advising the council to slow down in making a decision. He also said voters should have the right to decide by referendum whether the city shoulders more debt or not on the city owned hotel. But in an e-mail to council, City attorney Doug Haynie wrote that a referendum cannot be placed on the Nov. 3 ballot because of election deadlines.
When asked if it was a strategic decision not to bring up the matter until after the deadline to put it before voters - even though the city identified the problem nearly a year ago - Mayor Bill Dunaway said, "I never dreamed that this would be an issue voters would want to vote on."
"It is the council and my responsibility to get informed and make the best decision. You can't take every issue to the public for a vote," he said.
Further, he said, "I would've loved to take this up several months ago." But, finance officials "hadn't got all the I's dotted and t's crossed; and this is a real situation where time is money."
Tumlin was also the one who urged officials to seek an advisory opinion from the Georgia attorney general, which the council voted unanimously Wednesday to do. However, bond counsel maintained Wednesday that there is no question the deal is legal.
Dunaway said he will bring the deal back before council members for consideration "as soon as possible." That could be at a special called meeting or at the council's next regular meeting Oct. 14.
During that time, it was suggested that council members ask finance officials everything they need to know to make an informed decision on the deal.
The 200-room hotel on Powder Springs Street opened in 1996 with an original bond debt of about $26 million. The facility, which now has a bond indebtedness of about $30 million, is technically owned by the Downtown Marietta Development Authority, which issued the bonds and leases it to the city. In 2004, after struggling with myriad problems - including paying $4.3 million in '03 to buy out the contract and cover the losses of embattled former operator Sentry Hospitality - the city leased the facility to Dallas-based Remington, which has the contract through 2028.
The bond debt, which also included a $7 million renovation to secure the affiliation with Hilton, rose to $36.1 million but is now down to $29.4 million, according to Gordon Mortin of Morgan Keegan, the city's bond advisor.
Mortin said the restructuring proposal was precipitated by the current banking crisis, which increased variable interest rates on the bonds. The existing contract calls for Remington to make fixed lease payments to the city, which the city in turn uses to pay off the bond debt. That arrangement with Remington worked fine until February when interest rates spiked. Remington's lease payments no longer covered the city's bond payments, resulting in an annual shortfall of $300,000, which had to come out of the city's general fund, Mortin said.
In response to the shortfall, the city's financial director, Sam Lady, without a City Council vote, according to city attorney Doug Haynie, began buying up the existing bonds in November, paying for them with the city's reserve - as well as the reserve of the city's Board of Lights and Water (BLW).
Mortin said the motive was to temporarily take the bonds off the market to circumvent the turmoil rocking the financial system, and then place them back on the market when Wall Street settled down. Since that hasn't happened, the city wants to pay off the bonds and issue new fixed rate bonds through the DMDA, he said.
Walquist, during the pre-council meeting, asked why the council at the time decided to go with a variable rate on the existing bonds. Councilman Jim King asked what the purpose is in asking that question.
Chalfant replied to King, "She's trying to find out how we got here."
Councilman Philip Goldstein said the bonds were fixed, but officials later decided to change to a variable rate.
Dunaway says every day the council delays issuing new bonds, there is a risk of interest rates rising.
"I don't think anyone thinks the interest rates will not go up," the mayor said.
He, Lady and the bond counsel assigned in the matter say the time is right now to issue the new bonds.
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