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HomeBusinessLocal Governments, Many on Wall Street Line Up Against Muni-Data Bill

Local Governments, Many on Wall Street Line Up Against Muni-Data Bill

A pitched battle over data is under way in the $4 trillion market that finances roads and sewers. At issue is a little noticed measure in proposed federal legislation that would mandate how state and local governments across the country present their financial results to investors.

The municipal-bond market in some ways remains stuck in the last century. Municipalities file reports erratically according to different standards, and the files aren’t machine-readable by investors attempting to study city or state finances before they buy or sell. That marks a contrast to corporate disclosures, where standardized data can be extracted by computers.


Is requiring muni bond issuers to file their financial statements in machine readable format the best way to help investors? Why or why not? Join the conversation below.

Lawmakers sponsoring the measure—and companies that sell financial reporting software—say it will aid investors and the public by improving transparency. But Congress’s proposed fix hasn’t gotten much of a welcome in the muni market. Bankers, investors and local officials all warn of problems from increased costs to accounting headaches if Congress passes the measure.

Even some of the supposed beneficiaries are voicing concerns, with several major investment firms warning that small borrowers might abandon the market altogether, pursuing private loans from banks or money managers. That would give muni investors a narrower array of bonds to choose from in the public markets.

“For the market, as a whole, the risks outweigh the benefits here,” said

Adam Stern,

co-head of research at Breckinridge Capital Advisors. “There are probably better ways to nudge issuers to improve transparency.”

The broker trade group Bond Dealers of America has deemed the legislation “a solution in search of a problem.” A national group of municipal analysts called on Congress to hold off on the measure, which allows four years for rule-writing and compliance, and develop “an appropriate timeline and plan for implementation.” The machine-readability requirements for corporations, which took effect in 2009, gave smaller companies an additional four years to comply. 

The legislation passed the House of Representatives in July after being tacked on to the defense spending bill. Similar language is now under consideration in the Senate. Versions have been introduced in Congress since at least 2015 but haven’t advanced.

Senate sponsors Democrat

Mark Warner

of Virginia and Republican

Mike Crapo

of Idaho in a joint statement called the measure another step toward their longtime goal of “mak[ing] government data more transparent and accessible to members of the public.” 

Sens. Mark Warner (D., Va.) and Mike Crapo (R., Idaho) in Washington, D.C., in 2018.


Pete Marovich/Getty Images

The legislation has found support among some investors and analysts. Lack of transparency and accessibility have spawned longstanding gripes in the market, though those have tended to focus on the amount of time that it takes borrowers to file audited financial reports.


head of municipal strategy

Vikram Rai

said in a report that increased transparency will reduce borrowing costs in the long run, and suggested governments issue bonds to pay for any software upgrades.

Good Jobs First, a nonprofit group that tracks government incentives to companies, said the legislation takes “significant and necessary steps towards greater transparency by transforming government data into searchable, accessible, and downloadable formats.”

Companies that sell software to local governments also support the bill. One,


has employed a former adviser to Sen. Warner as a lobbyist for the past three years. Staffers for Sens. Warner and Crapo said their support for the legislation is based solely on the benefit to transparency. 

Groups representing cities, hospitals, school systems and more than a dozen other borrowers signed onto a letter expressing concern about the measure, saying it would cost a combined $1.5 billion in software, consultant services and staff time. Staffers for Sens. Warner and Crapo said they haven’t seen a full breakdown of those costs. 

In Florida, a 2018 attempt to make local governments file their financial reports in machine-readable format was rolled back by lawmakers after local officials expressed concerns about cost and labor. The revised law allows the state financial services department to translate local reports into the data-friendly format after they are filed.

In addition to prompting concerns about having to buy new software, the federal proposal has left finance officials around the country worried they will be forced to change their accounting methods to conform to a common standard. 

Unlike corporations, municipal borrowers don’t all report their finances the same way. Perhaps 80% of local governments follow standards set by the Governmental Accounting Standards Board, according to an estimate by Merritt Research Services President

Richard Ciccarone.

Cities in New Jersey, some small towns around the country and nongovernment issuers, such as hospitals, charter schools and museums, use other accounting methods.

If financial statements were machine-readable, those discrepancies would still complicate efforts to analyze data extracted from them because they would make apples-to-apples comparisons across borrowers difficult, analysts said. So even though the legislation doesn’t require accounting changes, many following the law assume regulators left to work out the details would require all municipal borrowers to report their finances the same way.

Mr. Ciccarone’s firm undertakes its own standardization process with the information on existing PDFs to maintain its 37-year-old database of municipal financial data for clients. A uniform accounting process could benefit investors, he said, but “it is a daunting task.”

Write to Heather Gillers at

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