Subject: File No. 4-610
From: John Lemmon

July 18, 2011

Ladies and Gentlemen:

Your press release dated 07/15/11 states the municipal securities market hearings examine issues that affect investors in municipal securities markets.  While commendable to keep investor confidence in muni markets, I believe it is a serious missed opportunity in the Jefferson Co hearings not to be more concerned about the de facto  guarantors - citizen ratepayers and taxpayers, who will be the primary repayment source for investors.

Only  three public hearings on the sewer debt issues have been held over two years ago and one of those was a sham discussion that hardly anyone attended.  There have been no other public discussions or debates on the sewer crisis that I am aware of.
Thus, I believe the SEC may have overlooked a critical and huge third party in municipal markets - the ultimate and seriously uninformed guarantors, e.g.  the citizen ratepayers and taxpayers.  It is not clear what the topic, "Distressed Communities" refers to.  Maybe that includes the roles and risks of average ratepayers and citizens
Unfortunately, probably most elected municipal officials are also insufficiently educated or trained in municipal finance to be engaging in municipal finance transactions or understand the risks and consequences or explain those matters to citizens.  In short, local governments’ elected officials often are not qualified investors.

Upon election, could it be advisable or at least helpful if perhaps a third of any city or county incumbents be required to take a mini muni finance course and exam, something like a Series 7?

Should the SEC consider developing some type of public education requirement for local governments to educate local citizens about the risks of receiving municipal market financing if the average potential liability of the adult public exceeded some dollar amount?  Should municipalities with liability for market debt be required to report annually to their citizens with audited or other summary financial statements on the health and risks of that debt?

Could the SEC require that if the debt seriously deteriorated or was to be significantly increased that local governments would be required to hold public discussions and debates in such municipalities?  In that regard some kind of provisions should exist to protect the interests of all citizens by their having as equally responsible roles and rights in the discussion and debate planning and formats as the most wealthy and powerful in the community. (As an example, consider the vague story in the News about this hearing vs your press release.)

Further if a serious default occurred, could the SEC require within the original terms and conditions that a municipality would have to commission an unbiased comparative analysis of likely outcomes of the possible debt resolution options including Ch 9 Bankruptcy?

As for, “Our hearing in Jefferson County will allow us to gather real-world insights that are critical to our examination of these timely and important issues,”  the Jeffco sewer debt issue affects far more than several hundred or thousand investor bondholders and the Jeffco Commissioners.  There are probably over 130,000 middle income and possibly 20,000 affluent residences of ratepayers on Jeffco sewers that are on the hook for increasing sewer rates every year for 10 or more years above normal rate increases.  That does not include perhaps 50,000 low income households primarily in Birmingham (Bham) that will likely be exempt from sewer rate increases.

Are you aware of the Bham News story by Mary Orndorff,  on the Jeffco hearing? 

Unfortunately, it leaves a lot to the imagination on what and how the meeting will function.
For your information from my perspective, the main point of contention presently in the sewer fiasco, is whether the Jeffco Commission is able to get agreements from the creditors to accept a $1.9 billion settlement offer on the $3.2 billion debt or whether Jeffco sewer files Ch 9 Bankruptcy within a month.  Several years ago, Dr. Bronner, Director of Alabama Retirement Systems, Montgomery   was willing to offer $1.4 bil for the sewer system ( I believe, if it went into BK, but I’m not sure).   Many citizens now believe that the $1.9 bil settlement offer propose by Jeffco Comm is excessive and many citizens support the $1.4+ bil amount  for an offer in settlement.

I believe it is truthful to say a substantial majority of Jeffco citizens support filing Ch 9, but the bondholders, big business borrowers and the Bham News all strongly favor a settlement over  BK.  Also one assumes that the majority of local bondholders are generally affluent.

Some citizens have for years called for an unbiased comparative analysis of likely impacts of various settlement offers vs likely outcomes in a Ch 9 BK including all projected costs.  There has never been a published study.
May I suggest you try to get Dr. Bronner to be some part of the meeting, if one of the existing speakers is unable to attend?

Finally, a big Thank You to the SEC for your suits or enforcement actions against JP Morgan Chase and others in their illegal and fraudently actiions regarding the Jeffco sewer financing.

John Lemmon