How Are MuniLease® Agreements Structured?
MuniLease Agreements are structured as a series of one-year renewable obligations. These obligations are subject to the municipality's ability to appropriate funds for the continuation of lease payments. The annual payment constitutes a current expense of the user and, in the event that sufficient funds are not available for payment, the agreement may be terminated at the beginning of the fiscal year without penalty.
Why Choose MuniLease over Traditional Bond Financing? Both Methods of financing provide a municipality with the opportunity to own and use an asset immediately while payments are distributed over the asset's useful life. When properly structured, the interest portion of both bonds and MuniLease payments are also considered tax-exempt income to the investor. However:
• The requirement for annual appropriations of lease payments allow a lease purchase not to be treated as debt.
• Costs are competitive with more traditional debt financing.
• MuniLease financing is also considered less complex, and can be completed in a much shorter time frame.
• MuniLease financing allows the municipality an alternative source of capital, thereby expanding access to the capital markets.
What Are the Advantages of MuniLease Purchase financing?
There are a number of advantages to Lease Purchase financing:
100% Financing: Financing may be provided for 100% of the cost of the asset. This can include reasonable costs for freight and installation. No down payment is required. Issueres or "Lessees", are effectively cash buyers, and all vendors are promptly paid.
Lease to Own: Each payment creates equity (ownership) in the asset. There is no additional cost, residual value, or balloon payment due at the end of the lease term.
Competitive Interest Rates: Lower interest rates is the benefit passed along to the issuer when the interest portion of the lease agreement is exempt from federal income taxes. The low-cost financing plan protects against future rate increases by providing fixed installments for the term of the lease.
Practical Terms: The financing term is matched to the useful life of the asset. No large capital outlay is required, and current taxpayers pay for the facility, equipment, and improvements only as they are used.
Simple Approval Process: When compared with the process involved in a bond referendum, lease financing is far more simple and flexible. Time and transactional costs are reduced. Many of the costs typically associated with bond financing are reduced or eliminated.
Product Specification and Vendor Guarantees: You select the desired design team, contractor and/or equipment, specific features and the design to meet current needs. All warranties and guaranties are directly available to the Lessee.
Delivery for Immediate Use: The financing can be accomplished in a short period of time, providing the opportunity for ownership at the current acquisition price, and for the immediate use of the required asset.
What Is the Role of Municipal Capital Market Group?
Municipal Capital Market Groups, Inc. offers an experienced team of skilled professionals dedicated to structuring tax-exempt lease transactions. We have consolidated our resources and expertise into a formal program designed to offer clients flexibility, service, and the skill of our seasoned leasing staff. We also offer the complement of a full-service public finance department.
We will act as Underwriter for larger publicly offered transactions or as Placement Agents and/or Lessor for private placement financing. Our extensive access to institutional and retail investors across the United States enables us to complete leasing transactions at competitive rates.