The deal - which was fast-tracked to a council vote, including bypassing the finance committee - was shot down in a 4-3 vote Wednesday, with those opposed stating they did not have enough time to digest the details of the plan. 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. It was hurried onto the agenda at the request of Mayor Bill Dunaway.
Almost ironically, a poll of council members in last Friday's Journal resulted in four members favoring the plan. But on Monday, Steve "Thunder" Tumlin, the leading mayoral candidate in November's city elections, raised questions about the plan in a letter to the editor in Monday's Journal, strongly suggesting the council get an opinion from the attorney general before a vote. Tumlin's letter seemed to mobilize public opinion, which raised even more questions about the plan, from its legality to the fuzzy details only recently disclosed.
Gaining public input is why Chalfant said he is organizing the citizens committee.
Meanwhile, Dunaway remains adamantly in favor of the plan and said he is going to bring it back before council "as soon as possible," which could be at a special called meeting or at its regular meeting on Oct. 14.
As of Thursday, Chalfant did not have many details worked out about the composition of the committee - including who and how many people would sit on it. He did say it could possibly be comprised of council member appointees and ethics leaders in the community. The committee would be free to give an opinion on any aspect of the deal, including the legality of it and if it is a good plan for the city, he said.
The financial deal in question, which is backed by the mayor, City Manager Bill Bruton, Councilman Philip Goldstein and the city's bond underwriter Gordon Mortin, of Morgan Keegan, would pay off the outstanding $30 million bond debt it 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, many agreed that a rushed decision wouldn't be prudent.
On Wednesday, the city brought in longtime Marietta resident Buddy Darden, who is a former six-term U.S. representative for Georgia's 7th District, and current senior counsel with Atlanta-based law firm McKenna Long & Aldridge, to talk of the legality of the deal.
"Darden was sent up here by Mortin and (bond attorney Earle) Taylor to salvage the deal and bring the bacon home," said an attendee at Wednesday's meeting, who is close to the situation.
But after the council voted 4-3 to kill the deal, Darden, for now, went home empty-handed.
However, Darden told the Journal Thursday he is not pushing either way for the deal.
On whether he believes the deal would be good for the city, Darden said, "That is a matter addressed to the city. I don't think it would be proper for me to comment on that"
"I got the impression that they wanted to look at it more," he said. "And who could criticize them for that. They're doing their job. Our job is to make sure we do a legal transaction."
And it is a legal transaction, he said.
"Intergovernmental agreements have been done many times in the state of Georgia," he said. "There's nothing unique with and intergovernmental agreement... The legal part of this is very well settled."
Nonetheless, council voted 7-0 Wednesday to ask for an opinion on the matter from the Georgia attorney general.
Questions of legality could stem from issues in the past. Tax-allocation district attorneys, for example, were proved wrong when the Georgia Supreme Court ruled that it was illegal to use school tax revenues to help underwrite redevelopment efforts.
Darden said he was hired by the city, but said he did not know when he was retained to serve as bond counsel and told the Journal to contact Joe Krolikowski, with McKenna Long & Aldridge, who said Darden has been involved "for at least a month," since McKenna Long & Aldridge took over as bond counsel in the matter on Aug. 1. Taylor and Krolikowski had been working on the bond issue with Atlanta-based law firm Kilpatrick Stockton. The bond sector of Kilpatrick Stockton moved over to McKenna after spending years as the DMDA's legal counsel.
As for why Taylor, who has been handling the bond deal, was not at Wednesday's meeting, Darden said, "I think he was at a meeting on another deal."
Essentially, the plan is to reduce monthly bond payments that were to be covered with income from Remington, the company managing the hotel. While those payments to the city are fixed, payments on the existing $30 million bond debt the city owes on the hotel are not. So last year, when interest rates spiked, the city faced an annual shortfall of $300,000. 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.
Although the Journal was originally told by Mortin that reserves were used to buy up the bonds, Lady said that is not the case.
To buy up the bonds, Lady wrote in an e-mail to the Journal, "the city sold investments that were with Wachovia/Wells Fargo and Georgia Fund 1 and purchased the bonds...Both the accounts are investment pools that are groups of bonds and government issued debt. The city does not have a specific security assigned to it."
Bruton, in an e-mail to the Journal, said the city's five main investments, as reported by the finance department, are "Wachovia Evergreen Investment Fund, Georgia Fund 1, Meag competitive trust fund, Hilton bonds and US Bank Investment Account."
The intent was to take the bonds off the market and wait for interest rates to drop. But since that hasn't happened, the city's bond underwriter urged the council to approve the latest proposal.
Perhaps the biggest question is why the city got into a variable rate on the existing bonds.
Councilwoman Holly Walquist asked that question Wednesday. Councilman Jim King asked what the purpose is in asking that question.
Councilman Chalfant replied to King, "She's trying to find out how we got here."
Councilman Philip Goldstein told the Journal Thursday that he needed to check with staff as to why the bonds are the way they are.
"Gordon is going to be the best provider of why variable rate was used," Goldstein said.
Gordon Mortin, who said he did not want to go into further detail on the record, said, "It was a lower rate to do a floating rate with a swap to a fixed rate, than a straight fixed."
That was true each time the city incurred additional bond indebtedness, he said.
"It was the most cost effective way to do it. Who could've forecast anywhere in there we would have the worst financial turmoil since the great depression. Despite the worst turmoil, the structure worked well enough where we don't have a crisis, we have a $300,000 a year problem, to which there is a solution. And that is what we're trying to do."
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Rather than form a Committee to evaluate the "dire circumstances," why not have a Town Hall meeting and get a true sense of Marietta Taxpayer feelings?