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There is a hybrid type of Revenue Bond/G.O. Bond which is <br />secured by tax revenues. In this case, it is the inten- <br />tion of the authority selling the bond that it will be <br />retired by its revenues, as is the case with a true reve- <br />nue bond. However, in the event that revenues are not <br />sufficient to meet all debt service payments, the bond <br />selling authority's tax base will make up the difference. <br />This type of bond has similar advantages of a revenue <br />bond, with the protection of a General Obligation Bond. <br />10.7 Alternative Financing Methods <br />Municipal Lease/Purchase <br />This method of financing is relatively new for funding <br />equipment and capital improvements for public entities. <br />This approach provides a mechanism for an independent <br />institution to obligate the debt necessary for construc- <br />tion or purchase, and then lease a facility or piece of <br />equipment back to a political sub -division. A major ad- <br />vantage of this approach is that it essentially funds <br />development of a facility through tax exempt generic bonds <br />issued through a lending institution rather than obliga- <br />ting a community to capital debt through their own bonds. <br />It also eliminates the need for a referendum as would be <br />required with the issuance of G.O. bonds. The community <br />then makes monthly, semi-annual or annual lease payments <br />through its operating budget for the term of the lease. <br />At the end of the lease term, the facility reverts to the <br />lessee's ownership. <br />The financing package is generally structured by a lending <br />institution at a current rate of 8.5 to 9.75 percent plus <br />underwriting fees (generally 2.5 to 4% of the issues). An <br />attractive aspect of this approach is that a financing <br />package can be put together in a relatively short period <br />of time providing the lessor (lending institution) and <br />lessee (community) can structure mutually satisfactory <br />terms. It, thus may be a viable method of financing a <br />portion of the local funding share of projects, albeit, <br />the interest rate is generally higher than with a <br />community's G.O. bonds. Land, however, must be owned in <br />fee title prior to making AIP funded improvements on it or <br />receiving reimbursement for acquisition costs from AIP <br />funds. Thus, the land acquisition program would <br />necessarily have to be funded through another means. <br />10-11 <br />