The CaLease program has helped many local governments across California with their funding needs. The City of Lincoln took advantage of this program to lend the Lincoln aircraft account to Lincoln Regional Airport. The City of Chula Vista used the program for a major acquisition of the financial management system. Santa Clara County has long participated in the CaLease program and uses it 18 times to obtain funding for items ranging from automobiles to medical equipment for the county hospital. CaLease also helped the City of Elk Grove finance the construction of City Hall, and tulare County used the fleet purchase program. In the typical lease agreement, a third party acquires or puts the acquired property or makes it available to the municipal administration for monthly, quarterly, semi-annual or annual payments on capital and interest. The main amount of the lease is the acquisition and/or construction price of the property and interest is determined in agreement with the lender and according to market conditions. The duration of the agreement is set by the parties taking into account the life of the funded property. Prepayment is generally allowed, but may be limited. The contract may contain other negotiated agreements and restrictions. Financing for the purchase of leasing is often used to finance projects that must be paid for by a SPLOST. A SPLOST project can only be made available when there is effective funding and the gradual accumulation of VAT can lead to a longer delay before the project adopted for the project is actually available.
However, if the lease purchase is used to finance the project after the approval of the SPLOST referendum, the project can be implemented immediately and VAT revenues can be used for lease purchase payments. Lenders are in favour of such agreements because SPLOST revenues cannot be redirected to other projects. Purchase of lease against real leasing: in the case of a lease purchase transaction (also known as leasing or term lease), ownership of the equipment is granted to the state or local government when the lease is signed. In an actual lease transaction, the owner holds the title until the lease expires. The 7.5% test can be difficult to interpret. A local government should be advised by a lawyer if it does not clearly comply with the 7.5% test after determining «average annual payments» as both (i) the sum of average annual payments for each lease and (ii) the average of the annual consolidated payments for all these leases. If a funded project is partially, but not entirely, paid for by SPLOST, legal advice should be consulted for the application of the 7.5% test. A local government that reasonably estimates that it should not spend more than $10,000,000 in government bonds each calendar year can characterize lease sales contracts as «qualified tax-exempt obligations.» As a general rule, a bank or other financial institution with an exempt government bond is not entitled to a deduction for related accounting costs. The institution`s accounting costs are considered to be part of the cost of the commitment determined by the ratio of the institution`s borrowed funds to its own funds.