Municipal Capital Finance
       
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Lease Structures
Eligibility
Benefits
Types of Equipment
Municipal Leasing
   
 
 

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.

What is the value of municipal leasing?

Speed - Immediate acquisition of the equipment you need.

Ownership - Equity builds with each payment - there are no residuals.

Low Cost - Low tax-exempt interest rates, no up-front costs of issuance.

Hedge - Purchase equipment at today's prices and pay with tomorrow's dollars.

100% Financing - Fixed rate and term with no issuance costs and no down payment.

Flexibility - Manageable cash flow with flexible payments that suit your unique budget requirements.

Convenience - No Expensive and time-consuming voter referendum - your lease is paid from current appropriations so it isn't considered long- term debt.

Municipal lease-purchase agreements are basically structured as installment sales contracts which are payable from current appropriations. Municipal leases are not considered to be long term debt. Lease terms can vary from one to fifteen years and payments may be made monthly, quarterly, semi annually or annually, in advance or in arrears.