3.2.3 Lease-Supported Debt
Lease supported debt (Figure 3-4) represents a blend of direct debt and debt issued on behalf of another entity. With lease supported debt there is an issuer as the lessee, the source of repayment, and a lessor as a third party to the transaction. The proceeds of the debt flow to the lessor who builds (or pays the lessee to build) the facility. This structure constitutes the basis of the Lease Exception. (See Section 1.2.4.3, Lease Exception (the “Offner-Dean Lease Exception”)). The lessor may be a joint powers authority (JPA) or another financing authority within the public agency issuing the debt. Lease financing includes a structure known as a lease-leaseback financing. In this arrangement the public agency leases a facility to a lessor who leases it back to the public agency. The lease payments made by the public agency lessee provide the source of funds to repay the debt. The debt may be issued as a lease revenue bond or COPs promising investors a share in the lease payments.
