Global Capital Services is committed to assisting government agencies interested in financing the acquisition of needed equipment or real property improvements. We work with government customers anywhere in the country.
Feel free to contact us with any questions you may have.
Areas of Expertise
- Municipal Finance
- Federal Leasing
- 501(c)(3) Non-profit Transactions
- Native American Leasing
- Real Property Financing & Operating Leases
Municipal Lease/Purchase financing is designed to compliment, rather than replace bond financing. As governmental units have become cognizant of the advantages of Municipal Lease/Purchase Agreements over bonds, they have increased their utilization of this unique financing vehicle to satisfy many of their equipment and facility financing needs. The advantages of Municipal Lease/Purchase Agreements are as follows:
A) No Cash Down Payment - These financings may provide for 100% of the equipment purchase price or facility construction cost plus related expenses. The governmental lessee only makes periodic lease payments. Substantial down payments may reduce interest rates charged.
B) Tax-Exempt Interest - Properly structured, these transactions result in each payment representing some principal and some interest. The Internal Revenue Service has determined that interest paid in this manner is exempt from federal income tax. The interest may also be exempt from state and local income tax. Charter schools do not directly qualify for tax exempt financing.
C) No Public Debt Created - Since the lease payments due in the transaction are subject to annual appropriation, the obligation created by the lease is not subject to constitutional or statutory debt limitations in most states. Since public debt is not created, voter approval for a Municipal Lease/Purchase transaction is not usually required.
D) Matching Cost with Revenue - Payment obligations correspond more closely to the useful life of the asset(s) financed by the lessee. A full cash purchase charges one year's operating budget with the cost of an asset, which will be in use for several years. Lease/Purchase transactions can and should be designed to match the finance terms with the expected useful life of the asset, thereby spreading the cost over the budgets for all the years benefiting from the use of the asset. Amortization can be designed on a monthly, quarterly, semi-annual, or annual basis or even on a SKIP payment basis.
E) Flexibility - Shorter lead time to arrange a financing, as the procedural aspects of traditional bond financing may be complicated by rigid constitutional requirements which serve capital project financing control, but are inflexible for asset acquisitions and future refinancing.