Lease Purchase Agreement Government

September 25th, 2021| Posted by admin
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Credit-purchase-financing will become an increasingly important element in the financial management strategies of local governments. At the national level, the annual volume of leasing purchase obligations increased from $700 million in 1980 to $8 billion in 2000. With its development, the leasing market has also evolved to meet a large number of financing needs and institutional constraints. In order to help public servants and employees understand the status of leasing financing, these are some of the fundamental questions that are most frequently raised in this regard. This memorandum provides a brief explanation and overview of tax-exempt leasing purchase financing and certificates of participation (“COPs”) in Georgia. Districts, cities and school districts (referred to as “local governments” in this table) are entitled under Georgian law to obtain a tax-exempt purchase credit, as described below. In this way, local governments can acquire real estate, buildings, vehicles and equipment without creating a traditional form of debt such as general bonds or performance bonds, and no electoral referendum or judicial validation of the loan is necessary. Simplified procedures make leasing financing particularly suitable for short-term or more modest financing of key public bodies, such as. B organizations to be paid through a special distribution and use tax (“SPLOST”) of the county, or other cases where bond financing is not attractive. COPs may be eligible for significant funding. There are relatively few cases where all four options – cash payment, real leasing, leasing purchase financing and bond issuance – are available and appropriate. Each is particularly suitable for different types of assets.

Cash is suitable for inexpensive, short-lived items, or assets that serve non-essential functions of the state. True leasing is useful for assets that are technologically obsolete in a short period of time (one to three years), that perform a time-limited function, or that require regular maintenance or maintenance. Historically, leasing purchase financing is best used for assets with a lifespan of three to seven years, which serve a critical government function and bear upfront costs that would consume a disproportionate amount of available money. Bond issuance is generally reserved for the most expensive investments, typically assets with a lifespan of at least ten years and which can be mortgaged to pay debt service. Once it has been decided that buy-lease financing is the cheapest or most appropriate way to acquire one or more investments, it is necessary to implement a financing strategy to make the most effective use of this financial instrument. . . .

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