Municipal Network for Energy Efficiency

A lease is essentially an agreement to acquire equipment by paying for it over time. The payments include both principal and interest and are made over a fixed period of time. Payments are usually monthly, but can be structured for quarterly payments, or as otherwise agreed upon by all parties. For the most part, lenders will tailor terms according to the municipality's specifications. A municipality might consider leasing machinery for the following reasons:

• Cities face strict borrowing limits, particularly in EU-accession countries, and leasing may not count as debt - depending on the country.
• Leasing permits acquiring equipment when needed, without having to make a lump sum up-front payment. This spreads out the cost over time, making it easier on budgets.
• Leasing allows equity to be built up in the equipment over the term of the contract for future trade-in value.
• Leasing provides a real-time solution to worn out equipment, unanticipated capital equipment needs, and allows the satisfying of a higher level of general needs without having to sacrifice other essential services.
• In the case of the United States, leasing companies that receive interest on leases to municipal governments do not have to pay income tax on that interest. There are other tax benefits that might accrue to leasing companies in Eastern Europe which means savings can be passed onto the city governments in terms of lower interest rates. Municipal leases can therefore be priced at below market interest rates. A list of information resources below will help you determine if certain tax benefits apply in your country.
• Municipal lease payments may be paid from general operating revenues.

If you are a city manager and looking for companies that might provide lease financing, Leaseurope  is a great place to start. Leaseurope is also an association of leasing associations, and many countries in Eastern Europe and the Former Soviet Union have leasing trade organizations.

These groups would be able to tell you which of their members are willing to lease to municipal governments as well as provide information on the general climate for leasing in your country.