NCJ Number
111109
Date Published
1987
Length
8 pages
Annotation
Lease-purchase arrangements (LPA's) in certain circumstances can provide a useful alternative to traditional methods of financing prison construction.
Abstract
LPA's provide a method of buying real property through installment payments. It is based on a legal arrangement in which the unit of government becomes a tenant in a facility that is nominally owned by another entity, and the government unit does not receive title until all payments are made. Income paid to investors under LPA's is tax exempt in much the same way as an obligation bond. Although LPA's offer greater flexibility in financing, they offer less safety than general obligation bonds, are usually at a higher interest rate, may place a budget strain on the government entity, and still require that a source of funding be found. A vital advantage of LPA's is that they permit funds to be raised more quickly than with conventional methods, permitting faster construction and savings on bid and interest rates associated with the time saving. Another alternative, but one carrying considerable risk, is the use of variable-rate issues and floating-rate securities. Such alternatives provide a means for financing construction, but avoid confronting the political problems of convincing politicians and the public of the need for such constructions and the necessary funding.