Are you a public administrator of a state government or municipality looking into tax-exempt leasing? If yes, Grant Capital Management is here to inform you about the details of tax-exempt leasing and how your organization can benefit from using a tax-exempt lease to finance equipment.
What is Tax-Exempt Leasing?
Tax-exempt leasing is a Simple Lease-Purchase Contract that allows state governments, municipalities and other qualifying entities acquire essential use equipment and pay for it in installments over time. Lessors are favorably inclined to do public sector financings because they produce a more profitable portfolio vs. commercial transactions. This happens because state governments and municipalities typically:
v Have sound credit ratings.
v Pay their bills on time over the life of the contract.
v Are stable investments.
Under a tax-exempt lease:
-The Lessee (the “borrower”) is a state or local government, transit / port / housing authorities or other political subdivisions, which may need to purchase essential-use equipment to effectively operate the municipality.
-The Lessor (the “lender”) provides capital to purchase equipment which is then leased back to the municipality.
-The Lessee builds equity in the property by making periodic lease payments over an established time-period.
-The Lessee gets ownership at end of the term.
-The interest portion of the lease payment is exempt from federal income tax – therefore it produces payments lower than a taxable lease.
-A non-appropriation clause stating that the agreement is subject to appropriation each year is standard practice. This provision allows states or municipalities to terminate the lease agreement at the end of any appropriation period without further obligation or payment of any penalty.
-The interest rate associated with a tax-exempt lease includes all fees.
When deciding to use a tax-exempt lease, you should consider the following factors:
- The availability of cash at the time of procurement.
- Competing demands on capital resources.
- Ability to increase your operating budget to accommodate debt service.
- Essentiality of the asset to the basic functions of the entity.
- The useful life of the asset.
- The lowest possible total cost, as measured over the period the asset is used.
Using a lease-purchase financing, increases public administrators’ purchasing power by allowing them to use both the capital and operating sides of the budget.
Lease-purchase financing used in conjunction with capital financing gives public administrators the ability to provide the necessary municipal services to citizens when they need them . . . instead of waiting for the next capital budget approval.
Grant Capital Management is available to help you make the right tax exempt leasing choice.
We have helped: state, county and city governments, school districts, water and sewer authorities, public colleges and universities and public hospitals throughout the United States finance their projects.
Grant Capital’s relationships with various investors in the marketplace, allow us to provide customized financing solutions at competitive market rates for our customers’ projects.
Our dedicated public sector experts are focused solely on the unique challenges of government clients and guide customers through the process of using a tax-exempt lease vehicle to finance their capital projects. Our specialists support government agencies in securing tax-exempt financing for almost any type of essential capital equipment or real property.
Take advantage of our track record and experience.
Grant Capital Management is a leading provider of tax-exempt lease-financing to the public sector. We finance almost any type of essential-use capital equipment, real property or Energy Performance Contract. Since 2000, we have funded over $3.7 billion in lease financings. Grant Capital designs master leases, taxable and tax-exempt lease-purchase agreements and operating leases from $500,000 to $60 million and beyond with terms in excess of 20 years to meet our clients’ specific requirements.
If you need lease-financing services to finance a project, contact Grant Capital Management at 410. 715.9135 or click here today!