Municipal Leasing

Municipal Leasing


Why municipal agencies lease:

Emergencies - Municipal Agencies often have non-budgeted immediate needs and are without surplus funds to acquire property. Since Municipal Agencies cannot obligate funds beyond the end of the fiscal year without an election, leasing or renting the property is the only alternative. The Lease Agreement contains a non-appropriation clause that permits the municipality to enter into a lease without committing future funds.

Lengthy Budget Process - Unless capital expenditures are already in the budget, it could take months or years to acquire property that is needed today. However, lease payments are appropriated from the operating budget, rather than the capital budget, and can often be made from excess or emergency funds already available.

Voter Approval Not Required - A general election is usually required to commit a Municipality to long-term bond financing. On occasion, unpopular issues (i.e. the location of a jail facility) are turned down although they may be desperately needed. When necessary, lease financing provides an option to proceed without long-term obligation, and without voter approval.

Too Small for Bonds - Low interest bond financing is usually not available for small projects under $1 million. Government Leasing, LLC leases property with costs as low as $5,000.00 with no maximum dollar amount. Length of lease terms are generally two to five years or longer, depending upon the useful life of the property.

Bonds Cost More - After adding the soft costs of bonds, such as labor, advertising, printing, etc., lease financing is less expensive and much less time consuming.

$1 Buyout - In a Municipal Lease, the lessee intends to purchase and take title to the property. The financing is a full payout contract with a $1 buyout at the end of the lease term.