Viewpoint: New players in municipal leasing marketplace
After a two-year downturn, municipal leasing is picking up steam as a viable and available financing alternative for the acquisition of municipal equipment, projects and facilities. Municipal leasing is a catch-all term used to describe installment financing for governmental entities, the interest on which is usually tax-exempt to the lender/lessor. The terms of the contracts look and act very much like car or house loans. However, because the periodic payments are usually subject to annual appropriation by the obligor, they give the “appearance” that the asset is being “leased” from year to year.
According to the “2009 Survey of Industry Activity” from the Mount Royal, N.J.-based Association for Governmental Leasing and Finance (AGLF), however, the actual incidence of non-appropriation in 2009 was approximately 0.03 percent. As a result, many lending institutions are willing to treat the contracts as a safe and secure way to meet local government financing needs for the acquisition of essential assets.
With the crash of the financial markets in 2008, the municipal leasing market took a big hit. Several very large institutions and a number of smaller ones simply exited the business. Others severely curtailed their activities in the market.
Read the entire column from American City & County, our sister publication.
Until December 2008, Robert Neptune served as founder and president of De Lage Landen Public Finance (a part of De Lage Landen Financial Services/Rabobank). Before joining De Lage Landen, Mr. Neptune established and managed public finance units at ORIX Financial services, Transamerica Financial Corporation, Heller Financial Corporation, Chrysler Capital Corporation and B.C. Christopher Securities Co. He can be reached at 816-520-2158 or [email protected].