GovLease.net - Online bidding for state, local, and federal government leases.

Question: What type of connection do I need to request lease bids from GovLease.Net?
Answer: If you have access to the Internet by any means, you may access GovLease.Net.

Question: What are the options at end of a lease?
Answer: On an acquiring lease with option to purchase agreements, the Lessee (Borrower) has the option to purchase the equipment at the end of the lease term for $1.00. On an Operating (rental) lease agreement the Lessee (Borrower) most often has the option to purchase the equipment at the end of the lease term for Fair Market Value (FMV).

Question: Who owns the equipment?
Answer: Title to the equipment is most often in the name of the Lessee (borrower). If the lessor (Lender) holds title several issues arise as to property tax, sales tax and other tax matters.

Question: When do lease payments begin?
Answer: Lease payment and lease terms are set out in the actual lease document. Payments are normally payable in arrears and interest should begin to accrue on the funding date. The successful bidder will furnish a final lease payment schedule.

Question: Can a lease be terminated early? (Question: May I terminate my lease early?)
Answer: The lease document will typically allow for early payoff. The option to purchase amount will be set out in an exhibit to the lease, titled "Schedule of Payments". Lessor (Lender) should be careful to enter a premium price, such as a 102, in the bid form field "Prepayment Option Rate" to assure that cost of issuance are recovered in the event the lease is paid off early

Agent (For The Borrower) Questions

Question: Who is considered an authorized person of the Lessee to execute the Authorization Agreement?
Answer: Typically the senior official of the governing board, such as Mayor, President of the School Board, Chairman of the County Commissioners or Chairman of the State Agency. Staff and management, such as City Managers, Superintendents and Agency heads are usually not authorized to commit the governing boards. An exception would be the Federal Government, which vests these powers in certain Agency Directors.

Question: Would my authorization to act as the Agent for my client be for one lease only?
Answer: This would be up to your client. However, we will not accept any Authorization Agreements that extend beyond the current fiscal year, ending June 30. The Authorization Agreement would need to be ratified by the governing board each year and resubmitted to GovLease.Net for approval.

Question: When would I be paid the referral fee?
Answer: As a part of the Agent Program, GovLease.Net will pay the authorized Agent a referral fee equal to fifteen (15%) of the fee earned by GovLease.Net. This fee will be paid within 5 days after the lease has been funded.

Question: Can we increase the principal amount of the lease after we have selected the low bidder?
Answer: In most circumstances this is allowable. It would be preferable to request bids for an amount not to exceed with a footnote if costs of some items are still being negotiated. It should be noted that you might be limited by the resolution approved by your governing body. It would be best to have request approval based on a slightly higher amount than you expect to need if some item's prices are still being resolved.

Question: How much do I have to pay upfront?
Answer: Typically, nothing. State and Local Governments and the Federal Government may finance 100% of the cost of the equipment, including software. Although the taxing power of the Lessee is not pledged, the credit history of State and Local Government in most cases, as well as the Federal Government is excellent.

Question: Since we are not pledging our taxing power to repay the Lessor (Lender), what will happen if we fail to appropriate for the annual lease payments in subsequent budget periods?
Answer: Non-Appropriation is one of the biggest risks the Lessor is taking. The Lessor (Lender) will file a UCC-1 to secure his position with the equipment being financed; however, failing to appropriate will damage the credit worthiness of the Lessee (Borrower). Credit Rating Agencies have taken a strong stance on this issue. Lessees who fail to appropriate for convenience or obsolescence risk a downgrade on their credit ratings. This could be very costly over the long run.

Lessee (Borrower) Questions

Question: Should we request a bid before we receive the equipment?
Answer: Yes, the equipment vendor has gone through a long process of bidding and approvals to be selected to supply the equipment. The Lessee (borrower) should be positioned to pay for that equipment when it is delivered and accepted by the lessee. Payment delays to vendors can damage vendor/client relationships.

Question: Can we increase the principal amount of the lease after we have selected the low bidder?
Answer: In most circumstances this is allowable. It would be preferable to request bids for an amount not to exceed with a footnote if cost of some items are still being negotiated. It should be noted that you might be limited by the resolution approved by you governing body. It would be best to have request approval based on a slightly higher amount than you expect to need if some items prices are still outstanding.

Question: How much do I have to pay upfront?
Answer: State and Local Government and Federal Government may finance 100% of the cost of the equipment, including software. Although the taxing power of the lessee is not pledged, the credit history of State and Local Government as well as Federal Government is excellent.

Question: We are not pledging our taxing power to repay the Lessor (Lender), what will happen if we fail to appropriate for the annual lease payment in following budget periods?
Answer: Non-Appropriation is one of the biggest risks the Lessor is taking. The Lessor (Lender) will file a UCC-1 to secure his position with the equipment being financed; however, failing to appropriate will damage the credit worthiness of the Lessee (Borrower). Rating Agencies have taken a strong stance on this issue. Lessees who fail to appropriate for convinces or obsoleteness risk a downgrade on their credit ratings. This could be very costly over the long run.

Lessor (Lender) Questions

Question: Should the Lessor pay for the equipment before the Lessee has received the equipment?
Answer: No, the Lessee must receive and accept the equipment from the vendor before any payment is made to the vendor. You should be positioned to pay for that equipment when it is delivered and accepted by the Lessee. Failure to promptly pay the vendor after Lessee's acceptance would result in Lessor being prohibited by GovLease.Net from entering further bids on GovLease.Net. Payment delays to vendors can damage vendor/Lessee relationships.

Question: What if I am low bidder and I change my mind or cannot fund the lease?
Answer: Failure of the Lessor (Lender) to fund the lease after the award of bid may result in the bidder, Lessor (Lender) being prohibited by GovLease.Net from bidding again on other leases. The Lessee (Borrower) will have the option of going to the next best bid or re-bidding the lease. The Lessor (Lender) may be held responsible for any losses incurred by the Lessee (Borrower) such as added equipment cost, penalties or increased interest rates.

Question: The Lessee (Borrower) is insisting that the Lessor pay the Lessee, who will in turn pay the vendor. Should this be allowed?
Answer: Government Accounting Principals so not allow for the deposit of cash received from a Lessor (Lender) directly in the Lessee's general fund or building fund. Government operations are funded from State, and Federal Government and tax collections. Payment should be made directly to the vendor. The vendor may request the Lessee (Borrower) sign a transfer called a "Right To Purchase Agreement".

Question: Can the Lessee (Borrower) increase the principal amount of the lease after Lessor has been selected as the low bidder?
Answer: In most circumstances this is allowable. It would be preferable if the Lessee (Borrower) would disclose the amount not to exceed with a footnote if costs of some items are still being negotiated. It should be noted that the Lessee (Borrower) might be limited by the resolution approved by their governing body.

Question: How much should I expect the Lessee (Borrower) to pay upfront?
Answer: Typically, nothing. State and Local Governments and Federal Government may finance 100% of the cost of the equipment, including software. Although the taxing power of the Lessee is not pledged, the credit history of State and Local Government, in most cases, as well as Federal Government is excellent.

Question: The Lessee is not pledging its taxing power to repay the lease, what will happen if they fail to appropriate for the annual lease payment in following budget periods?
Answer: Non-Appropriation is one of the biggest risks the Lessor (Lender) is taking. You will want to file a UCC-1 to secure your position with the equipment being financed however; failing to appropriate to make scheduled payments will damage the credit worthiness of the Lessee (Borrower). Credit Rating Agencies have taken a strong stance on this issue. Lessees who fail to appropriate for conveniences or obsolescence risk a downgrade on their credit ratings. This could be very costly over the long run.

Question: May I assign the lease after funding the lease and closing the transaction?
Answer: Most Lease Agreements contain language that allows the Lessor to assign the Lease Agreement. Typically the lease requires the Lessee be notified of an assignment after the assignment has been made so the Lessee will know where to send lease payments. It is clear that the lease is owned by the Lessor similar to bank who owns a portfolio of loans or residential mortgages. This has been an issue of considerable discussion as some leases have been sold into a trust and redistributed as a security known as Certificates of Participation. The Lessee will be concerned as to the way credit information is disclosed. In the case of COP's it would be advisable to notify the Lessee (Borrower) of your intention prior to the assignment. Some states require approval by the oversight board or state bond advisor prior to an assignment of state agency leases.

If you have a question and cannot find it here, please send an email to info@govlease.net.

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