MARIETTA - In a victory for Councilman Grif Chalfant, the Marietta City Council directed city staff Wednesday to obtain independent legal and financial opinions on a complicated proposal Mayor Bill Dunaway is pushing to restructure the debt on the city's hotel and conference center.

The recommendation for the independent opinions was made by a blue ribbon committee of leading businessmen, which Chalfant formed to examine the bond proposal after council voted it down 4-3 at its Sept. 9 meeting.

The committee concluded that rather than rely solely on the city's bond advisor/underwriter Gordon Mortin, of Morgan Keegan, and bond counsel Earle Taylor, of McKenna, Long & Aldridge, as to whether the proposal was financially and legally sound, it should receive opinions from those who don't stand to gain if the council approves the proposal.

During the council's Finance/Investment Committee of the Whole Wednesday, Councilman Van Pearlberg made the motion seconded by Chalfant to obtain the independent opinions, with the council voting 3-2-1 in favor. Anthony Coleman abstained. Philip Goldstein and Annette Lewis were opposed and Jim King was absent.

City Manager Bill Bruton said he would likely have the opinions back to the council by the middle of next week, with each expected to cost about $15,000.

Chalfant said while that sounds costly, considering the proposal risks more than $30 million in taxpayer funds, it's worth it.

Bruton said financial consultant Diane McNabb had agreed to do the financial opinion. City attorney Doug Haynie said he had a couple firms in mind to perform the legal opinion, but wouldn't reveal them at the meeting.

McNabb, formally with A.G. Edwards, serves as a financial consultant for the Cobb School District as well.

"She would look at alternatives to see if this is the best option, and if not, she would submit what she feels is," Bruton said.

The refinancing proposal would restructure the debt on the city owned Hilton Marietta Hotel & Conference Center on Powder Springs Street by paying off the outstanding $29 million bond debt that is currently set at a variable interest rate and issue $33.4 million in new revenue bonds with a fixed rate. If the council elects to issue $33.4 million in new revenue bonds, it intends to use most of that funding to pay for construction projects for the city's Board of Lights and Water. The BLW, which already has funding for those projects, would in turn provide the city with its funding to cover the existing conference center bond debt. And lease payments from the firm that manages the conference center, Dallas-based Remington Hospitality, would go to pay down the new revenue bond debt.

The mayor, Goldstein and Lewis all opposed the committee's recommendation. Goldstein indicated the citizens committee didn't have all the facts, despite Bruton and Finance Director Sam Lady attending their meeting.

Goldstein moreover said he thought the citizens committee members "misunderstood" the proposal.

Goldstein said the council did not need to spend $30,000 on opinions that "really don't mean anything."

Dunaway said it comes down to whether the council believes Mortin and Taylor had given good advice. The odds that they were wrong, Dunaway said, were "practically zilch."

"I cannot see any advantage to spending $30,000," Dunaway said.

Dunaway said the city rightly deals with friends, such as Mortin and Taylor, and not enemies.

Mortin also vouched for Taylor, saying, "He is the best bond attorney in the state of Georgia."

And Mortin defended his proposal.

"It's perfectly legal. It's moral, it's ethical and it's a damn good business plan," Mortin said.

Dunaway asked Chalfant what he hoped to gain from the opinions, to which Chalfant responded, "Did you read the report (prepared by the blue ribbon committee)?"

Said Pearlberg: "Why ask to have a citizens advisory board if we're not going to follow their recommendation?"

Councilwoman Holly Walquist applauded the committee, saying she wished she had its report at the beginning.

"I see it as being transparent to the citizens," Pearlberg said.

"The citizens want to be able to digest this. The citizens want to be able to say this is the right thing the council did. And the way it was done before is it was basically being thrown at us very fast. The citizens didn't have an opportunity to basically have input in it. I think by at least doing what the citizens advisory board wants to and letting the citizens see what is being done and have the citizens reassured that this is the proper thing to do, I think it benefits everybody," Pearlberg said.

The citizens committee wrote in its report that because the "complex scenario has unknown, but potentially high risk that is beyond the scope and talents of the committee," the council should obtain independent legal and financial opinions from people other than Mortin and Taylor, who stand to receive a $350,000 fee.

The reason for the refinancing proposal comes from the crash of 2008, which caused a meltdown in the municipal bond market. This put the city in the position of paying a debt service on the conference center bonds that was higher than the fixed lease payments it received from Remington Hospitality. To "stop the bleeding," according to the report, last fall the city's staff bought back all but $300,000 of the $29 million bond debt using "unrestricted cash" that was invested in CDs, a decision the committee said saved the city $540,000.

The original bonds on the city's 200-room hotel, which total about $37 million, were issued on three occasions between 1996 and 2008.

The citizens committee was critical of the information initially provided to the council by city staff, noting "the documentation underlying and supporting the bond refinancing was at best sketchy and at worst inadequate."

This is what Pearlberg initially complained about when he said how the proposal was dropped in his lap for the first time on Sept. 3, and then he was expected to approve it Sept. 9 with a Labor Day holiday in between.

Yet Lewis disagreed with Pearlberg, saying the information was not "dumped" on the council at the last minute, but that staff had provided them such information far in advance.

"This came about because we had people not prepared to do what they were elected to do, which is make financial decisions," she said.

After the meeting, committee member Stephen Imler, a retired CPA, said he was glad the council decided to obtain outside opinions on the transaction.

"This is a complicated structure, there is much at stake in terms of dollars and risk," he said.

However, Imler said, "I am also troubled that the city is increasing its exposure to debt as a practical reality like a general obligation bond without a referendum. It appears to me this is a revenue bond in name only. Time constraints and urgency