For people on the outside of the finance world, the municipal funding process might not be second nature. One of the big questions our team gets is “why” – as in, why choose a municipal lease for your project in the first place?
A municipal lease is a very low cost method of financing used by governments to acquire essential-use equipment, such as vehicles, hardware, software, heavy machinery, and maintenance facilities.
6 Reasons to Choose Municipal Financing
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.
Other Frequently Asked Questions
Who is eligible for Municipal financing?
A Municipal Lease is 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.
What types of equipment/assets can be financed?
- 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
What is a non-appropriation clause and why is it important?
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 organization is interested in municipal financing options or want to learn more, please call us at 320-763-7600.
We are always here to answer any questions you have. When you are ready to move forward, we can prepare documents the same day for review.