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What is a Municipal Lease?
Municipal Lease Purchase agreements are basically structured as an installment
sales contract. Lease terms can vary from two (2) to seven (7) years. The municipality
typically owns the equipment for $1.00 at the end of the lease. Payments may be
made monthly, quarterly, semi-annually or annually. The lessor or investor in a
Municipal Lease purchase is tax exempt on the income received from this type of
financing. The lessor or investor passes this tax saving on to the lessee in the
form of lower interest rates.
Section 103 of the Internal Revenue Code of 1986 specifies that any state, territory,
or possession of the United States, or their political subdivisions, can qualify
to take advantage of tax exempt financing. This includes:
- State governments & agencies
- County governments & agencies
- City government & agencies
- Other public entities funded by state or local taxes
Why Lease Purchase?
The typical method of funding municipal capital purchases is bonds. To
establish the real cost to the taxpayer, it is necessary to add the issuance costs
and underwriting discounts to the bonding rate. In short, issuing a bond can be
very expensive. The municipality may take a loan from the bank, however this purchase
is subject to capital budget approval & must be shown as debt.
Lease purchases are recognized as current obligations. The lease purchase is subject
to annual appropriations & the municipality may cancel if funding is not appropriated
for the lease. Lessors protect themselves from this cancellation buy only leasing
"essential use" equipment.
What can be leased?
The list is almost endless! Almost any type of capital equipment essential
to the functions of a governmental entity may be acquired through this program.
The list of qualified equipment includes:
- Telephone systems
- Vehicles
- Office Equipment
- Fire & Safety Equipment
- Medical Equipment
- Printing Equipment
Call your Susquehanna Commercial Finance representative today to learn more
about Municipal Leasing. You can reach us at 1-877-969-7252. |
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Copyright © 2007 Susquehanna Commercial Finance, Inc. | Call today to
speak with one of our leasing professionals at (800) 786-0004. |
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