Highland Public - Other Municipalities

Benefits of Leasing for Municipalities

Municipal Financing helps fund major expansion

Municipal Financing conserves working capital

Municipal Financing helps avoid obsolescence

Municipal Financing ties monthly payments directly to tax income vs. expenses

Municipal Financing makes more equipment available

Municipal Financing offers fixed rate financing

Municipal Financing is a hedge against inflation

Other benefits include the following:

Bond Election Not Required: In most cases, a bond election is not required. Because of the annual appropriation feature, tax-exempt municipal financing is not counted against the municipality's debt limit nor is it subject to normal debt incurrence procedures. Municipal Financing eliminates the expense of bond issues.
Annual Funding Out Clause: A Municipal financing obligation includes a Non- Appropriation of Funds clause; language that most State's laws require.
Flexible Terms: Municipal Financing terms generally are matched to the useful life of the equipment to be financed. Monthly payments provide for easy budgeting and, in most cases, no down payment or advance payments are required. Prepaid arrangements can be made. Payments can be billed either in Advance or Arrears; Quarterly, Semiannually, or Annually.
Builds Equity: Unlike rentals, Municipal Financing permits the municipality to build equity with each payment. At the end of the term, the municipality owns the equipment.
Avoids Inflation Delay Costs: A Municipal Financing obligation permits acquisition of needed equipment today, before prices rise further. There is no need to build up capital improvement funds until an outright purchase is possible, all the while watching inflation stay one or two steps ahead of purchasing power.
Does Not Affect Constitutional Debt Limitation: Unlike other ways of obtaining funds (Bond issue or Bank lending), Municipal Financing does not affect Constitutional debt limitation. Debt to fund balance ratios are very important in keeping a good rating as well as staying within statutory requirements.
Quick Response: Funds for equipment purchases can usually be available in a matter of hours after the municipality has completed the documentation. This is particularly important in times of emergency when bond proceeds might not be available for weeks or even months.