Special Benefits of Municipal Leasing
There are several (general) types of leasing used to finance the acquisition of hardware, software, equipment and vehicles. There are personal, commercial, operating, tax, finance and municipal. They are all different and target the specific needs of borrowers with different needs and legal requirements. The only type of lease specifically designed for governments are “municipal leases.”
Does My Agency Qualify for Municipal Leasing?
Municipal leasing is an “umbrella” term that includes state, county and local governments as well as towns, villages, counties, boroughs, public schools, public safety agencies & special districts. Collectively these are sometimes referred to as “political subdivisions.” The “municipal” designation is a bit of a misnomer as it generally applies to any of the entities. Municipal leases cannot be used by private or commercial entities.
Why Is It Called “Tax-Exempt” Municipal Leasing?
Very favorable tax rules were created by the IRS years ago to “incentivize” financial institutions to make very low interest funds available to municipal entities to acquire almost any kind of new or used, essential-use equipment, real estate, hardware, vehicles or software at the significantly lower interest rates and under significantly more favorable terms. (The “tax-exempt” part of municipal leasing is not related sales, use or other taxes. Read more about tax-exempt here.
Non-Appropriation Language…No Problem!
Our state, county & municipal leasing programs have non-appropriation of funds language built-in for any state or jurisdiction that requires it by law. In the event funds are not available for any legal reason, the equipment is returned to First Capital and the lease can be terminated. (Often the difference between incurring a “full faith and credit” debt and an incurring an annual expense.)
Municipal Leasing Interest Rates are Very, Very Low.
Here are some of the reasons; the interest income to the funding source (e.g. First Capital, its banks and investors) is generally exempt from certain federal income taxes and other special treatment–when lending to qualifying government entities. In short, our cost of funds starts lower and the government entity’s cost of borrowing is significantly lower too!
Municipal Leasing is Lease-To-Own
Municipal leases are “lease-to-own” by (legal) definition andwill not have so-called “residuals” or end-of-lease buyouts. Vehicles and equipment are “Sold To” the government entity (unlike a commercial lease, for example).
Title passes directly from the vendor to your government at delivery, not at lease end. With vehicles for example; your agency will register the vehicles and apply for titles in the agency’s name as soon as they are delivered. At that end of a municipal lease you can sell, trade, re-task or continue using the vehicles and equipment (literally) forever. If you don’t own the equipment, you didn’t get a municipal lease.
“Do More, With Less”
Yes, you can! Its all about maximizing the buying power of the budget dollars you have now, for what you need today and tomorrow. S-p-r-e-a-d the cost of expensive capital equipment over multiple budgets– instead of trying to shoehorn 100% every expense dollar into this year’s budget alone. Too many governments get caught in budget trap of only spending from the current budget. Municipal leases and their unique non-appropriation language allow you to sidestep those constraints. Most agencies don’t have enough spare cash to pay in advance for assets they will benefit them for years.
Multiply current appropriations by 4-5 times
Here’s how: Municipal leasing provides the financial leverage (buying power) that allows government agencies to multiply the purchasing power of the appropriations they do have, by a factor of 4-5 times! The total budget cash needed is only what is due in the current budget year, not the total cash-in-advance price. Municipal leasing allows the cost of new equipment to be matched against (timed) to tax revenue that will be received over multiple budget periods.
What You Need…When You Need It! There’s still is no free lunch…but there are some MUCH SMARTER WAYS to get what you need–a lot sooner, rather than later!
What an agency has appropriated this year and anticipates to be available in following years, can often allow them to purchase and put 4-5 times as much new equipment into service TODAY.
Some Cash Flow Math…
Will it be two new school buses or police cars acquired with cash this budget year…or a small fleet of 8-10 new vehicles, with the same out-of-pocket amount spread over the next 3-6 years?
It’s EASIER and FASTER too!
Unlike complex bond financing or conventional financing, municipal leasing is a very streamlined process that provides access to the most aggressive rates available. From as small as $35,000 to $20 million or more!
Get a written, no-obligation, Municipal Lease Quote™ on your government fleet vehicles–any time!
View all of our FAQ’s here!