How does lease-purchase financing differ from bond financing?
A bond financing exercises a governmental entity’s authority to incur debt. Unlike a bond issuance, lease purchase financing is not considered debt (in most states) and voter approvals are not necessary to authorize the transaction. The underlying security for the two types of obligations is also different. With bond financing, the borrower pledges a designated revenue source, such as property taxes or user charges, and obligates itself to raise revenues to the extent necessary to pay debt service. Usually there is no such obligation supporting a lease-purchase agreement. The governmental entity agrees only to budget and appropriate payments from available revenues on an annual basis.
