ORANGE BEACH, Ala. — The Orange Beach City Council voted Tuesday to refinance several outstanding warrant issues despite confusing circumstances.

The resolution, which was discussed during the Feb. 23 work session, would lead the city to save $400,000 to $500,000 — a 3 percent savings.

Proposed underwriter Merchant Capital offered the city a plan that would potentially free up money budgeted for the debt service.

In a memorandum sent to finance director Clara Myers on Feb. 12, Merchant Capital representative Reid Cavnar explained the benefits of refinancing now while interest rates are low. Currently on the six bonds that equal $18,665,000, the city pays an average interest rate of 4.68 percent. Cavnar suggested the possibility of lowering the rate to 3.1 percent. Money would also be saved on fees by combining the six bond issues proposed to be refinanced into one, according to Cavnar.

The council received a memorandum on Feb .19 from Myers and City Administrator Ken Grimes explaining the possible refinance was timely with a limited window of opportunity.

However, at Tuesday’s meeting, the City Council failed to pass the refinancing resolution, after one nay vote from Mayor Tony Kennon.

“As of yesterday, the one week treasuries were at zero percent,” said finance committee member Al Bradley who opposed the council’s decision to pass on the refinance. “You’re looking at a bond issue that averages slightly over five years and your target rate is 3.1. The U.S. Treasury five year rate is 1.85. Rates are at the bottom.”

Bradley told the council if they missed this chance they could lose the opportunity to gain hundreds of thousands of dollars.

“I think this is a grave, grave error on your part if we don’t take advantage of taking existing debt, lowering our interest rate saving this city $500,000. It is beyond my comprehension that you would pass on this opportunity,” Bradley said.

What seems to be a lack of communication, appears to have led to the confusion. A meeting was held previously to discuss the proposal, and after being questioned by Councilman Brett Holk why Bradley wasn’t there, Bradley said he wasn’t notified. He also wasn’t present at the Feb. 23 work session.

“The only information I got started with an attachment to the (committee of the whole) last week,” Bradley said. “I spent a couple of hours going through (Cavnar’s) presentation and I thought ‘This is a great deal.’”

After being pressed from Holk why he didn’t e-mail his thoughts to the council, Bradley said to him, it was a no-brainer.

“I had no idea there was this much angst about it,” Kennon said. “There are some areas we don’t have expertise in.”

In a last ditch move the council worked through a resolution they were satisfied with and passed it. Merchant Capital will move forward as the underwriter, with Walston, Wells and Birchall as bond counsel. Merchant Capital has been authorized to sell bond issues all of which will be approved by Kennon.