MARIETTA - At the request of the City Council, the Downtown Marietta Development Authority voted Tuesday to issue up to $35.5 million in new bonds in a proposal that will restructure the debt on the city-owned Hilton Atlanta/Marietta Hotel & Conference Center.

DMDA member Dave Reardon made the motion, seconded by member Johnny Fulmer, with a vote of 6-0 in favor.

On Friday, the City Council voted 5-2, with Grif Chalfant and Van Pearlberg opposing, to approve the financing deal, which authorizes staff to retire the $29.3 million in variable rate bonds left over from an original $37 million bond debt on the Hilton and have the DMDA issue an expected $31 million in new tax exempt fixed rate bonds. The new bonds are expected to have a face value of $31 million, with the market expected to pay a premium on them, for a total cost of about $33 million - provided the rates remain the same as last month, said Sam Lady, the city's chief financial officer.

Since 1996, the city has had variable rate bonds that funded construction of the 200-room hotel and conference center, which the city leased to Dallas-based Remington Hospitality until 2028.

Until recently, the variable rate bonds have stayed within the anticipated range. But with the current economic downturn, the variable rate bond market increased, which caused the city's bond payments to rise above Remington's fixed lease payments to the city. To prevent the city from taking a loss, but without the knowledge of some council members, last fall Lady brought the bonds back into the city using unrestricted cash that was invested in CDs.

Some Mariettans, such as mayoral candidate Steve Tumlin, believe using the DMDA to issue the bonds is a way to circumvent the public, which should have the right to a referendum on the decision.

But DMDA Chairman Tom Browning said, "We have historically had many of these bonds come through us. For 30 odd years we've been doing bonds, so I don't know if it's to circumvent the public."

Browning said the DMDA's charter created by the Legislature gives it the authority to make such bond deals.

"For example, the (Marietta) school board - a couple years ago - they found themselves in a shortfall. They came to us and asked for an intergovernmental agreement to do a bond for them. And what it did, as this does, it saves the taxpayers money. So we saved the school board money," Browning said.

Browning said if a referendum were called by the time the public got around to voting on the proposal, taxpayers would have paid a penalty by having to pay more money, "because what they may have had to do is go to another lending source and pay a substantially higher rate."

Tumlin concedes that using the DMDA to issue bonds for the Hilton may meet the letter of the law, but he doesn't believe it meets to spirit of the law because it prevents the public from having a say on a taxpayer-owned hotel that has had some $37 million in bond debt over the years.