Thinking About Purchasing Equipment?

Submitted by Chad A. Kupper

If so, your District may need to determine whether a lease-purchase agreement is necessary. Under TABOR, Districts are precluded from incurring any form of multiyear indebtedness absent voter approval, including federal loans. However, a District can take a loan and use those funds to partially purchase equipment using a lease-purchase agreement. The Colorado Supreme Court has approved lease-purchase agreements as not being “debt” under TABOR because the annual payments are subject to appropriation by the Board each year.  In other words, if the District can’t afford the payment in any year, the Board doesn’t make an appropriation for that payment the next budget year, and the bank simply repossesses the equipment but can’t sue the District for any deficiency in the amount owed. A lease-purchase agreement must contain the magic TABOR provision making the yearly payment obligations subject to Board appropriation of funds for that payment each year.  If your District needs help purchasing equipment, don’t hesitate to contact our office to make sure the lease-purchase documents are in order.