Frequently Asked Questions
Making Sense of Municipal Financing
We understand that for people on the outside of the finance world, the municipal funding process might not be second nature. That is why we assembled a list of answers to commonly asked questions we receive from agencies.
Questions and Answers
Quick Delivery: Municipal financing allows a Government Agency to obtain needed equipment immediately without waiting for voter approval through a bond issue. This increases productivity and reduces time and expenses associated with any bond issuance.
Non-Appropriation: This clause is unique only to the municipal lease. If for any reason the government agency does not have funds appropriated for the annual payments, they can terminate the lease without penalty.
Soft Costs Included. 100% of equipment as well as site preparation, installation, training and maintenance can all be included in the lease. Because the acquisition costs are spread over multiple fiscal years, a municipal lease removes budgetary constraints and allows for 3 times more purchase power. More units can be purchased and/or accessory upgrades installed.
Ownership: The agency takes ownership of the equipment on day one. There is no buy-out or residual at the end of the term.
Flexible Payment Options: The payment is tailored to suit the needs of each Government Agency we work with. Annual, semi-annual, quarterly and monthly payment intervals are available with terms extending to 10 years if needed.
Nothing Down: For the majority of municipal financing plans there is no down payment or security deposit required. NCL can also offer a delayed payment offering so that the first payment is deferred up to one year from the date of purchase.
A Municipal Lease is only available to States and their county and city subdivisions. Departments or agencies such as state universities, fire and police departments, school districts, sanitation, hospitals, or special districts may also be eligible.
- Telephone and Communications Equipment
- Heavy Equipment
- Office Equipment
- Outdoor Turf
- Playground Structures
- Computers and Software
- Surveillance Equipment
- Vehicles and Accessories
- Heat/Air Conditioning Equipment
- All equipment or assets essential to the government function
Yes you can use Municipal financing! The term municipal lease is derived from the another financial instrument for government financing “the Municipal Bond” Both are very low cost methods of financing the acquisition of essential-use equipment, vehicles, hardware and software exclusively for state, county and municipal governments, special districts and authorities. “Municipal leasing” is an umbrella term applicable to all of the aforementioned entities. There are big differences between these however.
First and foremost Bonds are based on an unconditional pledge of the “full faith and credit” of the municipal entity, including a pledge to levy property taxes on every tax-payer in the jurisdiction. This is why most bonds require public consent in the form of complicated, time-consuming and expensive voter referendums.
A tax-exempt municipal lease however are subject to the annual appropriation of funds in all jurisdiction that require it. So if funds are not available to make the payments for any legal reason, in any budget year, the government entity would have the legal right to terminate the lease after the current budget period without legal penalty and to return the equipment/vehicles.
A non-appropriation clause enables the agency to terminate the finance agreement at the end of the current appropriation period without further obligation or penalty. This may be done only in cases where the agency was unable to obtain funding for future payment obligations. Essentially it’s an annual out clause.
The reason this is important is that the non-appropriation clause enables the agency to account for the asset obligation as a current expense instead of long term debt so no voter referendum is required for the funding.
If your agency or municipality is interested in municipal financing options or want to learn more, please call us at 866-763-7600. We are always here to answer any questions you have. When you are ready to move forward, we can prepare and forward documents the same day for review.