Financing
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What is a municipal lease?
A municipal lease-purchase agreement simply allows a municipality to use its annual tax revenue stream to make payments for any type of essential use equipment or facilities needed by the municipality. Cities and counties need police and fire equipment to safeguard their citizens. School districts need buses and other transport equipment to move students from their homes to the classroom and back again. Each of these equipment needs, and many others, can be financed through municipal lease purchase agreements.
Why lease the equipment?
Leasing also represents a way for municipalities to conserve their cash while acquiring the equipment and facilities necessary for government to function. Generally speaking, there are laws in all 50 states which restrict the ability of municipalities to borrow money. There are, however, very few restrictions on the ability of municipalities to enter into leases. Leases represent a year-to-year commitment on the part of a municipality to make lease payments, not a commitment to pay debt service. In other words, leases are not considered debt and, therefore, are not subject to the limitations placed on debt by state and local laws.
Is leasing easy?
Lease-purchasing equipment is easy for municipalities. The documentation is simple and easy to understand. We can generally complete an agreement within two weeks once we obtain approval to proceed from the municipality involved. Credit approval from our end is also easy because we generally require only three years of audited financial statements for review.
What about residuals?
A municipal lease-purchase agreement is structured as a financing mechanism. There is no residual equipment value to refinance at the end of the lease term. Title to any equipment financed with a lease-purchase agreement equipment will remain with the municipality for the duration of the agreement and will be fully paid for and will belong to the municipality at the end of the lease term with no restrictions.
For additional information please call 574.936.9683
or email us: financing@northern-equipment.com |
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