Master Lease Purchase Program Overview
The Master Lease Purchase Program ("MLPP") is a lease revenue
financing program established in 1992, primarily to finance
capital equipment acquisitions by state agencies, as authorized by
Texas Civil Statutes, Article 601d, §9A (now, Texas Government.
Code, §1232.103). MLPP also may be used to finance other types of
projects that have been specifically authorized by the Legislature
and approved by the TPFA Board. The typical financing vehicle for
MLPP is a revenue commercial paper program established pursuant to
Texas Government Code, Chapter 1371; however, other financing types
may be utilized.
Under the program, the TPFA borrows money to pay for an agency’s
equipment or other project by issuing debt instruments, typically
commercial paper notes. The agency and the TPFA enter into a lease
pursuant to which TPFA takes title to the equipment or other
project and leases it to the agency which is required to make rent
payments to TPFA. TPFA uses the rent payments to pay the
principal and interest on the outstanding debt. When the lease is
fully paid, the agency receives title to the equipment or other
financed project. In certain circumstances, an agency may prepay
its lease without penalty.
The commercial paper program carries ratings from Standard &
Poor’s of A-1+, Moody’s of P-1, and Fitch’s of F-1+. Liquidity
for the program is provided by the Texas Comptroller of Public
Accounts. For additional information, you may review the Offering
to Offering Memorandum) and the Liquidity Agreement (link
to Liquidity Agreement).
Who may use MLPP?
MLPP is available to any Texas state agency. A "State Agency" is any board, commission, department, office, agency, institution of higher education, or other governmental entity in the executive, judicial, or legislative branch of state government. (See, Texas Government Code, § 1232.003.)
What may be financed?
MLPP may be used for any fixed asset used by a state agency to conduct official State business, including vehicles, telecommunications systems, automated information systems, computers and computer software, provided, that such property has a useful life of at least three years and an aggregate value of at least $10,000. Individual items may be bundled and financed in one purchase.
MLPP may also be used to finance any physical structure that has been specifically authorized by the Legislature for the Authority to finance, as well as the land and major equipment or personal property that is functionally related to the physical structure.
In the MLPP documents and rules, the term "Eligible Project" is used to define and describe projects that may be financed.
Why might an agency choose to use the Master Lease program:
Emergency Needs - Unforeseen circumstances often give rise to the need for purchases that simply can’t wait until the next biennium. Perhaps a vehicle in your fleet is destroyed, or a rack of servers goes down. Master Lease can help leverage funds to get the equipment you need now.
Leverage Dedicated Revenue Sources - Many equipment assets are deployed as part of revenue-generating projects and activities. While operating expenses tend to be concurrent with revenue, capital equipment costs must be paid in advance. The Master Lease program can be used to align equipment costs with the timing of cash flows associated with its use, reducing the need for appropriations of General Revenue.
Align capital costs with savings - Similarly, when working on projects such as energy retrofit, equipment is often deployed as part of cost reduction strategies. By financing equipment over its useful life, energy projects can be structured with little or even zero budget impact.
Maintain base appropriations - Despite the best planning efforts, capital equipment costs are rarely consistent from one biennium to the next. By deploying a financing strategy, capital budgets remain level and predictable.
After the agency has determined that it has the authority to purchase or complete an Eligible Project, the agency’s governing body must adopt a resolution that determines financing the project is appropriate, approves and authorizes a request for financing, designates an officer or employee and delegates to that officer or employee authority to proceed with the submission of a request for financing and completion of the financing. To view a sample
resolution, click here.
An agency may use its own form of resolution as long as it contains the substantive evidence that the governing body approved the financing request and the officer or employee signing the documents is authorized to do so.
The agency is required to obtain approval of the Bond Review Board (other approvals may also be required).
Bond Review Board Approval
A lease for an amount of $250,000 or more, or for a term of 5 years or more, requires Bond Review Board ("BRB") approval. The agency is responsible for submitting its own application and obtaining approval of the BRB. However, as the BRB’s current application form requires the attachment of an amortization schedule prepared by TPFA, the agency should notify the TPFA of its intent to seek BRB approval as soon as practicable. For
further information, please consult the BRB.