Municipal Finance: Structuring Tax-Exempt Finance Models for Local Governments
Lease-Purchase Agreements, Conditional Sales Contracts, and Certificates of Participation
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Government
- event Date
Tuesday, January 14, 2025
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
This CLE course will discuss strategies for successfully structuring and documenting municipal lease-purchase and certificate of participation (COP) transactions. The panel will explore the structure of lease-purchase and COP financings, the state and federal law issues relating to tax-exempt lease-purchase financing, common pitfalls to avoid when working with this financing model, and key terms to include to limit risk and optimize the utility of this strategy for local governments.
One of Mr. Callender’s primary areas of focus is in the structuring of water and sewer revenue debt financing. He has served as bond counsel, underwriter’s counsel and disclosure counsel for a variety of water and/or sewer entities throughout the country. In addition, Mr. Callender has experience serving as bond counsel and underwriter’s counsel for various state revolving funds including serving as bond counsel to the Ohio Water Development Authority for more than US$3 billion of bond, floating rate note and commercial paper issues. He is also an active member of and frequent speaker for the Council of Infrastructure Financing Authorities.
Ms. Binkley focuses her practice on serving as bond counsel, underwriter’s counsel and purchaser’s counsel on general obligation financings, tax increment financings, utility revenue financings and special obligation financings. Her client base includes the State of Ohio, counties, municipalities, townships, port authorities, school districts, state universities, trustees, letter of credit banks, investment banking firms and financial institutions. Ms. Binkley has also served as bond counsel on 501(c)(3) and health care conduit financings. She has been recognized as a 2025 Best Lawyers in America for Public Finance Law and an Ohio Super Lawyer Rising Star from 2012-2017. Ms. Binkley is a member of the Ohio Government Finance Officers Association, for which she served as a trustee for two terms and currently serves on the education committee. She also serves on the board of Women in Public Finance – Ohio Chapter. Ms. Binkley is also a member of the National Association of Bond Lawyers. She also frequently presents at public finance conferences including the Ohio Government Finance Officers Association and the Ohio Treasurer of State’s Center for Public Investment Management.
State law authorizes local governments to secure financing through a number of different methods. Lease-purchase, conditional sales contracts, and COPs are a few examples of the financing tools authorized in many jurisdictions. Lease financing can be used to finance real property, vehicles, and equipment without traditional bond financing methods and voter referendum.
In a typical lease-purchase agreement, a third party acquires the real or personal property and makes it available to the municipality in return for monthly, quarterly, or annual payments subject to market conditions and terms negotiated between the local government and lender. COPs are fractionalized interests in lease-purchase contracts sold as securities resembling bonds. They transform a lease or conditional sales contract into a marketable security and require an underwriter or placement agent, as well as all the necessary disclosures to investors and the Securities and Exchange Commission. Lease-purchase contracts can be issued on a tax-exempt basis if federal tax requirements are satisfied.
Tax-exempt financing offers local governments a flexible and powerful tool to fund the acquisition of real property and equipment or to finance improvements to existing buildings and property. Despite its many advantages, municipal lawyers must appreciate the risks, understand how these financing models fit into their clients' overall fiscal strategy, and learn how to best leverage the engagement of other practitioners like bond and real estate counsel to take full advantage of its benefits.
Listen as our panel of municipal finance attorneys provides critical insight on structuring tax-exempt lease financing agreements.
- Tax-exempt lease financing overview
- Parties and common uses
- State law considerations
- Federal tax considerations
- Methods of tax-exempt lease financing
- Lease-purchase
- Certificates of participation
- Lease revenue bonds
- Common drafting issues
- Key terms
- Non-appropriation
- Limiting risk (indemnification, nonsubstitution, essentiality, etc.)
The panel will review these and other considerations:
- What local government officials and municipal attorneys should know about lease-purchase financing
- What is the effect of a non-appropriation?
