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Municipal Leasing
FAQ's

What is a tax exempt municipal lease?

A tax-exempt municipal lease is a special kind of I.R.S. sanctioned financial instrument that allows us to lend to qualifying government entities (see below), to acquire essential-use hardware, software, vehicles & equipment at VERY LOW interest rates, under extremely attractive terms using very streamlined documentation.  Some of the most notable benefits are:

► MUCH LOWER INTEREST RATES than conventional loans or commercial leases.

► Lease-to-own. There is no residual, there is no buyout. Your agency owns the equipment from the day you receive it.

► EASIER  & FASTER.  1 Page Application, 2 Day Approval (to $100K). 2 Page Application, 3-4 Day Approval (to $20MM).

► Non-appropriation language included, automatically. (wherever required by law)

► No "opinion of counsel" required under $100,000, No referendums, No public hearings

► No underwriting costs

► ALL lease interest rates are fixed up front and do not float

Who qualifies for a "municipal" lease? (which types of entities)

Virtually any State, County, City & Municipal governments and their agencies qualify under IRS Section 103 (as amended), including Law Enforcement, Public Safety, Fire, Rescue, EMS, Water, Port & Parking Authorities, School Districts, Community Colleges, State Universities, State, County & Municipal Hospitals and a variety of "special districts" and authorities qualify.  ►The IRS "quick test" is that a "qualifying entity" must have one or more of the following legal authorities:  1) the power to police, and/or 2) the power to levy and collect taxes, and/or the power of eminent domain--if your entity has one or more of these 3 powers, your good to go with municipal financing.

My agency is part of our county government, can we use a "municipal lease?"

Yes indeed!  Municipal is an "umbrella term" and for the purpose of government leasing,  covers all of the agency types listed above.

What kind of equipment can be leased under a municipal lease?

Just about any type of essential use equipment, vehicles, land or buildings:

What is the difference between a tax-exempt municipal lease and a commercial lease?

Our municipal leases are special financial tools that provide the benefit of exempting financial institutions and investors from certain federal income tax, allowing us to pass along rates that are generally far below conventional bank financing or commercial lease rates.  Also unlike commercial leases, the equipment is being sold directly to the tax-exempt entity (not to the leasing company).  This means the government "owns" the equipment -- ownership (title) passes the day the vehicles/equipment is delivered and accepted by your agency. Note: In almost all states First Capital will only take a security interest to protect its financial interest in the event of a future non-appropriation or default)  ► Most commercial leases are structured as rental agreements with either nominal or fair market value purchase options.

Why not just borrow the money, or use a bond?

There are laws in all 50 states that generally make it impossible for state, county & municipal governments to borrow (i.e. incur new debt) requiring payments that extend over multi-year fiscal (budget) periods.  The primary issue being that until those future budgets are formally approved and voted into law, the current governing body has no legal authority to bind the future government entity into make a future payment.  The only exceptions are bonds (general obligations that are backed by "the full faith and credit" of the municipal borrower and that create debt), which are the primary vehicles used to lock government entities into a stream of future payments.  "General Obligation" bonds are contractual commitments to make repayments.  A government bond issuer is guaranteeing to make funds available for repayment including raising taxes as necessary, if sufficient monies are not available in the general fund.  "Revenue" bond repayments are tied directly to specific streams of tax revenue.  Bond issues are very complicated legal documents (read: expensive, time consuming) and because they can have a direct impact on every taxpayer and generally require voter approval.  Hence bonds are generally only used for the very largest projects: infrastructure like sewers, roads, the largest building projects, etc.  ►Because our municipal leases automatically include non-appropriation (or "funding out") language wherever required by law, they will be readily approved by legal counsel.  Non-appropriation language effectively relieves the government entity of the obligation to pay in the event funds are not appropriated in any subsequent budget period, for any legal reason.  Every governing body must re-affirm their willingness and ability to pay a municipal lease, every year.  Most government entities would not be allowed to sign any municipal lease without non-appropriation language included.  Most governments treat their municipal lease obligations as current expenses and DO NOT characterize them as long term debt obligations on their balance sheets

Who owns the equipment & vehicles?

Your government does!  Title passes at the inception of the lease (not the end).  ►The equipment is "sold to" the government entity directly, not to First Capital. Vehicles (for example) will be registered in and titled in your government's name by you, as soon as you take delivery from your dealer.  After the last lease payment you can sell them, trade  them or continue using them forever at no additional charge from us.

My fiscal year starts July 1st (or Sept 1 or January 1...) Do I have to wait until then to get my equipment?

No.  You can sign the municipal lease today, you can take delivery from your vendor tomorrow and we can pay your vendor in full within 3-5 business days from tomorrow and your first lease payment out of pocket to us can be any day you select within the next 12 months!  ►When you pay us, is NOT directly related to when we pay your vendor!

Can we pay the lease off early -- is there buyout option?

First Capital's municipal leases can be prepaid at any time.  A complete lease amortization table is automatically included with every lease showing the interest, principal and payoff amount for each period of the lease. Future payoff amounts are guaranteed up front.  (A payoff schedule can be prepared in advance for your review)

Are we exempt from state sales tax with a "tax exempt municipal lease?"

Sadly no.  ► The "tax exempt" in "tax exempt municipal leasing" has nothing to do with your local sales, use or other taxes.  The "tax exempt" convention comes from the fact that under certain I.R.S. provisions enacted many years ago, the financial institution may be exempt from certain of its federal income taxes when lending to qualifying government entities like yours. This is one of the reasons why our interest rates for municipal entities are as so much lower than commercial rates.

Can I use a municipal lease for used equipment?

Absolutely! (with the exception of computers and copiers).  The term we can offer may be reduced in accordance with age of the used equipment at start and the end of the lease.

Are Volunteer Fire Departments eligible for tax-exempt municipal leasing?

Yes, but only for fire trucks and fire houses.  95% of the proceeds of a tax-exempt lease for a volunteer departments i.e. a 501c3, must be used for the "acquisition, construction, reconstruction, or improvement of a firehouse (including the land) OR for the acquisition of a fire truck. (A fire truck is a vehicle used to "put out fires) The rules are fairly specific.  A computer, rescue, ambulance or a Chief's vehicle--for a volunteer department would not qualify for the same municipal interest rates under IRS guidelines.  ► A volunteer fire department would be eligible, subject to credit approval, for our non-tax exempt rates which are slightly higher than municipal government rates, but notably lower than commercial rates.  A volunteer department (501c3) lease contract would not include non-appropriation language.

Who is responsible for maintenance and insurance?

The government entity is responsible.  Because the municipal entity owns the equipment from the date of delivery/installation, the responsibility for maintenance and insurance is the government entity's--exactly as if they had paid cash.

ADDITIONAL MUNiCIPAL LEASING FaQ's & Concise Answers HERE!

(https://www.Municipal-Leasing.com)

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