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ORACLE EQUIPMENT LEASING Co.
Municipal
equipment leasing for state, county and city governments as well as
charter schools and equipment vendors will find rates and superior
service at Oracle
Equipment Leasing Company as their Municipal Financing source. Municipal leasing and municipal finance offers municipalities a method of equipment finance and equipment leasing that is less expensive than bond debt and much quicker. For Fire Trucks, Fire Engines , Pumper's, Fire stations and Fire station additions. Also police cars, ambulances and emergency vehicles, 911 Systems and computer systems. Visit our Municipal Financing Center
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 | Health Care (Hospitals, Clinics, Nursing Homes, Life Care
Centers)
| Education (Colleges and Universities, Preparatory Schools)
| Museums
| Research Centers | |
What are some of the benefits of tax-exempt leasing?
The benefits of a tax-exempt lease include:
| Preservation of capital dollars for other projects for which
leasing is not an option
| Preservation debt limitations does not create long-term debt on
the entity's books
| Enables improvement of cash flow
| Incorporates flexible structuring to meet budget needs
| Low rates resulting from tax-exempt basis
| Offers an alternative financing option without voter approval
| Provides project financing (including soft costs)
| Spreads out the cost of an asset over the useful life of that
asset or project. | |
What can be financed on a tax-exempt basis?
Tax-exempt financing is typically utilized for equipment acquisitions.
It may also be used for other capital expenditures, e.g., purchasing
property, implementing of a specific project, or expanding existing
facilities. Both personal property and real property can be leased.
This includes personal property such as:
| Telecommunications Systems
| Computers
| Vehicles
| Energy Management Systems
| Recreational Equipment
| Emergency Services Equipment
| Medical Equipment
| Software
| Modular Buildings | |
and real property such as:
| Schools
| Courthouses
| Correctional Facilities
| Central Offices
| Recreational Facilities
| Environmental Facilities. | |
Equipment may include:
| Hardware
| Installation
| Training
| Infrastructure wiring
| Maintenance
| Video & multimedia equipment
| Software applications | |
How are tax-exempt leases structured?
Tax-exempt leases are structured as a series of one-year renewable
obligations that are subject to the governmental entities ability to
appropriate funds for the continuation of lease payments. Payments
constitute a current expense of the lessee and, in the event that
sufficient funds are not available for payment, the agreement is
terminated and the equipment is delivered to the lessor.
What is a non-appropriation clause?
A non-appropriation clause enables the lessee to terminate the lease
agreement at the end of the current appropriation period without
further obligation or penalty. This may be done only in cases where
the lessee was unable to obtain funding for future payment obligations
on the lease. Typically, the clause will contain a 'best efforts'
requirement whereby the lessee must use its best efforts to obtain the
necessary appropriation for the lease payments. The non-appropriation
clause enables the lessee to account for the lease obligation as a
current expense instead of debt.
What is a non-substitution clause?
A non-substitution clause maintains that if a lease is terminated for
non-appropriation, the lessee may not replace the leased equipment
with equipment that performs the same or similar functions.
Who owns the equipment under a tax-exempt lease?
Title may either be retained by the lessor until all payments have
been received or may be granted to the lessee at lease inception. In
this case, the obligation is secured by a 'perfected' first security
lien on the equipment. In most cases it is preferable to pass title up
front to avoid any potential tax issues.
Who is responsible for maintenance, insurance, property tax and
other operating expenses?
A tax-exempt lease is a 'net lease,' which means that the lessee is
responsible for these types of expenses. However, the lessee may
contract with the equipment supplier to provide maintenance and other
services. These costs may be included in the financing.
What is the maximum finance term?
The term of the lease may not exceed 120% of the average reasonable
expected economic useful life of the property or project being
financed.
How is tax-exempt lease financing arranged?
Tax-exempt financing is typically arranged by means of a formal bid
process.
What factors should be considered in deciding when to use a
tax-exempt lease?
For any asset acquisition decision, the principal financial objective
is to obtain the use of the asset for the lowest possible total cost,
as measured over the period the asset is to be used. Other factors
affecting the selection of a financing option which should be
considered by a governmental entity include:
| Availability of cash at the time of procurement;
| Competing demands on capital resources;
| Essentiality of the asset to the basic functions of the entity;
| Useful life of the asset;
| Desirability of matching costs and benefits over time
| Ability to improve bargaining positions with vendors; and
| Political attitudes toward debt financing. | 13. What are Qualified Zone Academy Bonds General obligation bonds in the form of Qualified Zone Academy Bonds (QZABs). The QZABs are non-interest bearing bonds evidenced by a lease entered into between the District and its Treasurer, acting as nominee-lessor, for the project that was funded by the QZABs. The lease requires the District to make a lease payment equal to the principal amount of the QZABs on the same date the principal is payable. The QZABs are general obligations of the District and are secured by the District’s pledge of its general state aid payments in the amount of 125 percent of the principal amount due. The District sets aside funds annually to provide for the payment of the principal on the due date. The QZABs are not subject to optional or mandatory redemption prior to maturity. |
For a variety of needs and circumstances, tax-exempt lease financing provides a governmental entity with an alternative to purchasing an asset with cash, acquiring its use for a period of time through a true lease or issuing bonds.
Call for complete Quote
Municipal Asset Management, Inc.
800-969-6685
or email our Municipal Leasing Specialist
Frank Heeg
Vice President
Municipal Asset Management, Inc.
Municipal
Asset Management, Inc. |