Small Muni Issuers See A Potential 620% Windfall For Their Taxpayers

Currently pending before the Senate, the Financial Data Transparency Act (S. 4295 – “FDTA”) is legislation taking financial reporting by companies and municipalities to the next level. It ushers in the implementation of machine-readable, digitized financial reporting, wholly based on existing information that is already collected and required, and making it available to anyone for free.

For the municipal bond market, where disclosure has always been and remains a struggle, this legislation is potentially transformative. It creates access to and transparency in government financial reporting that, while the standard for public companies, is unprecedented in the public sector.

A Boon For Small Municipalities

It is also potentially a boon for small municipal bond issuers. The Financial Data Transparency Act has the potential to generate a 620% return on investment for small municipal bond issuers. Hard to believe? Read on.

The municipal bond market, with over 50,000 municipal entities, is the capital source for municipalities, nonprofits, and public authorities. Year to date, over 7,600 issuers have sold nearly $323 billion in bonds to borrow funds for projects such as hospitals, schools, town halls, and other public purposes.

Year in and year out, the largest number of borrowers are smaller or infrequent debt issuers. So far in 2022, half the market was in issuers with bond financings under $10 million. Bring that issuer number up to bond issues under $50 million, and 83% of the market issuance was from those smaller or infrequent borrowers.

Translating that into dollars from issuers, there were $76.6 billion of bonds sold by these issuers this year so far.