How Are MuniLease Agreements Structured?  
Why Choose MuniLease over Traditional Bond Financing? 
What Is the Role of Municipal Capital Markets Group? 
What Are the Advantages of MuniLease Purchase financing? 
The Challenge of the 1990's  


How Are MuniLease Agreements Structured? (return to top of page) 

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 without penalty.

Why Choose MuniLease over Traditional Bond Financing? (return to top of page) 

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 allows a lease purchase not to be treated as debt.
  • Costs are competitive with more traditional debt financing.
  • MuniLease financing is also considerably 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? (return to top of page) 

There are a number of advantages to municipal Lease Purchase financing recognized by government managers at all levels.

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 are the benefits passed along to the issuer when the interest portion of the Lease Purchase is exempt from federal 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 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 transaction costs are reduced. Many of the costs typically associated with bond financing are reduced or eliminated.

Product Specification and Vendor Guarantees: The municipality selects the desired design team, contractor and/or equipment, specifies features and tailors 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 Markets Group? (return to top of page) 

Municipal Capital Markets Group, 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 Agent 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.

The Challenge of the 1990's (return to top of page) 

Today's Municipal Financing managers are faced with a diverse array of challenges. Across the nation, public officials at the local, county and state levels of government are searching for new resources to expand tight operating budgets to meet the immediate and long-term needs of our communities.

Reductions in federal and state aid are creating a new reality for towns, cities, counties, school districts, hospitals, and many other public authorities. The environment calls for tough decisions, greater self-reliance, and innovative approaches. The demand for alternative financing methods is growing along with the need for equipment and facilities.

Lease Purchase financing is one of the most successful methods developed in recent years to address immediate needs for capital improvements and acquisitions to provide for essential services while improving the management of cash flow. The tax-exempt feature of Lease Purchase financing has proven to be attractive to both borrowers and investors.

Municipal Capital Markets Group, Inc. is a registered broker dealer, regulated by the Securities and Exchange Commission and Municipal Securities Rulemaking Board and National Association of Secuities Dealers. Our finance professionals pioneered lease-financing programs to meet the diverse requirements of borrowers at all levels. Our exclusive MuniLeaseÒ programs allow state and local governments to acquire essential equipment and facilities in a timely and economical fashion. They are specifically designed to address the cash flow restrictions of municipalities. The extensive experience of our professionals in having structured over $400 million in tax-exempt leases ensures quality service and market sophistication for our leasing clients.

Tax exempt leasing is one of the fastest growing areas of municipal finance. While lease purchasing arrangements have been made by state and local governments for many years, recent budget, tax and economic changes have led to their widespread growth. The MuniLease programs that we offer are constructed to meet the specific requirements of state and local law, and to respond to current demands within the fiscal constraints of the budget process.

The MuniLease structure offers many advantages including flexibility and the establishment of an equity interest with every payment. It allows for the financing of equipment and facilities without creating long-term debt. It is designed to cover a term that closely matches the useful life of the building or equipment, and provides for ownership at the end of the repayment term.

Municipal Capital Markets will tailor a MuniLease program to meet the varied needs and special requirements of your community. We invite you to talk to us and our clients to learn more about how we can serve your needs.

 


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