Tight operating and capital budgets – this is what, faced by most of the public sector organizations. The only escaper which can be viewed as the source of funds and the one that offers some improvements is the utility budget. Most of the companies opt for the performance contracts that guarantee the performance of the equipment being installed. Typically, it is the cost of the needed equipment or project that is being paid from the savings from the project.
Municipal leasing is also known as a Tax-Exempt Lease/Purchase agreement or an installment purchase agreement that are used to acquire personal and real property. This is the most common financing alternative to bonds and loans. Payments are generally level and are tied to the useful life of the equipment In addition; a tax-exempt lease/purchase agreement does not constitute a long-term debt obligation because of the non-appropriation language included in the agreement. The agreement limits the payment obligation to the current operating budget period of the lessee. In case the future funds are not appropriated or submitted, the equipment is returned to the leasing company. All the lease manufacturer’s warranties are passed to the Lessee under this agreement only.
When signing a municipal lease, make sure that the agreement and all the exhibits are properly executed. However, there is a chance that a particular department or agency may be exceeding their authority when executing a document.
Municipal leasing agreements are used to finance everything from highway equipment, fire rescue, telecommunications systems, and emergency equipment to jail cells. They are ideal for every type of financing, major being the energy and water projects. The voter referendums can be easily avoided as the approval process for a lease is generally much easier, faster and ultimately less expensive than issuing a bond.
Leasing is a most viable and financially sound option for many municipalities to overcome their revenue shortfalls so as to provide quality public services.
Sanjana Sharma-:
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