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NCJRS Abstract

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NCJ Number: 114210 Find in a Library
Title: Lease-Purchase Financing of Prison and Jail Construction
Author(s): J Chaiken; S Mennemeyer
Corporate Author: Abt Associates, Inc
United States of America
Date Published: 1987
Page Count: 31
Sponsoring Agency: Abt Associates, Inc
Cambridge, MA 02138
National Institute of Justice (NIJ)
Washington, DC 20531
National Institute of Justice/
Rockville, MD 20849
NCJRS Photocopy Services
Rockville, MD 20849-6000
US Dept of Justice NIJ Pub
Washington, DC 20531
Contract Number: J-LEAA-011-81; OJP-86-C-002
Sale Source: National Institute of Justice/
NCJRS paper reproduction
Box 6000, Dept F
Rockville, MD 20849
United States of America

NCJRS Photocopy Services
Box 6000
Rockville, MD 20849-6000
United States of America
Document: PDF
Language: English
Country: United States of America
Annotation: Tax-exempt lease purchase (LP) agreements provide a means for State and local Governments to finance the construction of prisons, jails, and other large institutional facilities.
Abstract: Unlike the general obligation bond, the LP is not technically a debt obligation. Under LP, private-sector investors provide funds to enable a Government to buy property until all payments have been made. LP's provide a means for dealing with financing obstacles such as debt limits and restrictions on incurring new debts, voter resistance, the need for a special election or referendum, and pressures related to court-ordered prison improvements. In some instances, LP's may result in cost savings associated with low interest rates or anticipated increases in construction costs. Potential cost savings may be offset by higher interest or increased legal and underwriter expenses. In addition, LP's may raise political issues by sidestepping taxpayer scrutiny. While riskier than general obligation bonds, LP's are less risky than moral obligation bonds; and their tax exempt status makes them attractive to investors. The typical LP agreement involves a unit of Government, a quasipublic corporation such as a building authority, and investors. The building authority borrows the money, contracts construction, and eventually pays off its debts using the lease payments made by the Government unit. The authority releases title to the Government once the LP bonds have been paid off. An example of LP and general obligation bond financing illustrates relative advantages and disadvantages of the two methods. 2 tables, 2 appendixes, and 6 figures.
Main Term(s): Program financing
Index Term(s): Prison construction; Prison costs; Privatization in corrections
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