Lease-Rental Bond. Bonds whose principal and interest are payable exclusively from rental payments from a lessee. Rental payments are often derived from earnings of an enterprise that may be operated by the lessee or the lessor. Rental payments may also be derived from taxes levied by the lessee.

STATE PUBLIC WORKS BOARD (PWB) LEASE-REVENUE BOND PROGRAMS

PWB is authorized to issue lease-revenue bonds to finance acquisition and construction projects when such projects are authorized by the Legislature.

In a typical project, the client department leases the site for a nominal fee to PWB, although for some projects the board may acquire the site directly. The client department then constructs the project as PWB’s agent. The board leases the completed facility back to the client department for a rental fee equal to the amount needed to provide for the debt service on the revenue bonds and associated administrative expenses. Leases can be for periods up to 35 years, although 20 to 25 years is typical. The lease term cannot exceed the useful life of the capital asset.