Municipal bond issuers are worried about what the recently passed Financial Data Transparency Act is going to cost them to implement, they said at a recent industry gathering.
“We are concerned about having to purchase new equipment or new software packages,” said Barry Fick, executive director of the Minnesota Higher Education Facilities Authority. “You get locked into a particular vendor, which may not be what you want to be. It’s a great unknown.”
The comments came during the Government Finance Officers Association’s winter meeting in Washington, which wrapped up Tuesday.
Congress passed the FDTA in December as part of a defense act, turning standardized disclosure into law. How the disclosure gets made is now crashing into market realities as issuers look at changing out their enterprise resource programs, the pricey software platforms used to crunch the numbers that go into the disclosures.
“We have an ERP system, and we have to integrate various outside applications through data files,” said Noel Graczyk, the administrative services director for Chaska, Minnesota. “To do that, we have to license that through the vendor. We have a meter interface system that cost $25,000 to design and then an annual license fee. We now have to update that, at this point, that cost might be as much as like $35,000 for this to go forward. There’s always these reoccurring costs to upgrade our ERP system.”
The issuers say they want more transparency in the market, which is the stated goal of the legislation. They also believe the data being requested may already exist albeit in a different format.
GFOA and its members maintain that the wide variety of municipal bond issuer sizes and configurations will complicate a standardized system of disclosure. The SEC is in charge of writing the new law’s fine print while working against a two-year deadline to develop a data standard.
“From what I have seen there will be an extension of these timeframes, because eighteen months to put the taxonomy together, six months to get public comment, that’s way too short,” said Fick. “We’re talking about a complete revamp of how we manipulate the data and how we provide it.”
XBRL US, a non-profit organization that specializes in preparing taxonomies for several government agencies including the FDIC, FERC and the SEC, participated in the meeting via a presentation designed to de-mystify the FDTA implementation process. They see it as a simple file conversion that transforms data into extensible business reporting language, or XBRL, a format based on extensible markup language. They say XML is a widely used root file format that’s readable by humans and machines.
“Obviously, you’re going to need some software to do it,” said Campbell Pryde, the organization’s president and CEO. “There’s going to be some software costs. One of the things that we’re trying to do is to make sure is we can get that cost as low as possible. We want to try and get into worst case scenario is, ‘Hey, here’s my paper financials, take that and put it into an XBRL format.’ And we know that the cost of that can be as low as $500.”
The GFOA remains frustrated with the current lack of direction in the approved legislation. “There’s nothing in this bill that says you have to use Excel, or you have to use XBRL,” said Emily Brock, federal liaison for the Government Finance Officers Association. “Nowhere in the world does it say what types of data aggregator that you have to use.”