Lease-Backed Debt

A municipality or state may wish to finance assets but not have the debt count against its general obligation debt limit. Or there could be statutory limitations on issuing conventional debt. For this reason, many jurisdictions may choose to lease the assets, whether it be a new courthouse, some police cars or something else. This can be accomplished by selling bonds that are secured by the lease payments rather than some other source that may be more restrictive in its use. One of the most popular structures is the certificate of participation (COP) structure.

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