What is non appropriation (“funding out”) language?

Why is non-appropriation language so important?  Great Frequently Asked Questions About Municipal Leasing FAQ'squestion!   This unique municipal-lease contract language effectively relieves the government entity of the obligation to pay in the event funds are not appropriated in any subsequent budget period, for any legal reason.  Our municipal leases automatically include non-appropriation (or “funding out”) language wherever required by law.  Try getting that from a commercial lender!

Every governing body must reaffirm their “willingness” and their financial “ability” to pay a municipal lease, every year.

The government entity does this by simply including the lease payments in each budget (no special paperwork).   With just a handful of exceptions, most government entities aren’t allowed under state and local laws, to incur a multi-year municipal obligation that doesn’t include non-appropriation language.  Most governments treat multi-year municipal lease obligations (with non-appropriation provisions) as expenses, rather than debt.  That’s a crucial distinction for governments.

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Do you have additional questions about how non-appropriation works?

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