|
A tax-exempt lease or lease-purchase agreement (also called a municipal lease) is an installment purchase, conditional sale or lease with an option to purchase for nominal value. It allows a public entity to purchase equipment and related services by making lease payments over the useful life of the asset. This is a lease-to-own financing solution with no residual and no end-of-lease buyout. Title passes at delivery and acceptance not at the end of the lease (in most cases). Thus, maintenance and insurance are the responsibility of the government entity.
The payments under a lease program are subject to annual budgetary appropriation and are included as an expense in the operating budget and not considered debt.
Municipal leasing is often the lowest-cost financing option, especially when compared to commercial leases. The interest income component of the lease payments is exempt from Federal, and in some cases, state income taxes to the funding source, which allows us to offer reduced interest rates to our municipal customers.
|
