What is a
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
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: