Equipment need-Budget constraints.
September 20, 2016
Do these statements sound familiar at all?
- “We need the equipment now, but we just don’t have the budget this year.”
- “We will need to phase the project. We’ll do a portion of it this year and finish the rest next year.”
- ” We need to get voter approval for additional funding”
Utilizing a Tax-Exempt Municipal purchase program, your department does not have to wait for next year’s budget to purchase the equipment now or finish the entire project this year. With this program there is no need for voter approval due to the non-appropriation clause. This is like an annual out clause when funds are not appropriated for the year. Only the annual payments need to fit into the budget, not the entire cost of the equipment or project. This savings on capital can increase the purchase power by 3 times or more!
Let’s take a look at an example:
City ABC has 3 plow trucks all of which are over 15 years old. The trucks now have become unreliable with skyrocketing repair and maintenance costs. They need to have at least one truck that they can rely on when the snow season hits but the budget they have left will not pay for one new truck.
- Equipment needed: XYZ Plow Truck $100,000/ea
- Current funds left in the yearly budget: $67,000
Tax Exempt Municipal Finance
The annual payments for one XYZ plow truck came to $16,500. This payment amount is close to the truck repair costs the city incurred the previous year. With the $67k the city has left in the budget, they decide to acquire 3 new XYZ plow trucks.
- No long term debt created
- Local residents are not subject to a potential tax increase
- Trucks arrive on time for the snow season.
- Three new plow trucks are clearing and making the city streets safe