Statement of Lease Financing Policies and Goals Policy

Policy number: 2026-01

Effective date: January 21, 2026

Last revision date: January 21, 2026

On this page

1. Definitions
2. Policy Statement
3. Purpose
4. Scope
5. Principles
6. Roles and Responsibilities

1. Definitions

“Financing Lease” is a lease which covers most of the useful life of the capital asset. This type of lease is typically non-cancelable (or cancelable at a significant penalty) and is based on the lessee (Haldimand County) effectively guaranteeing the residual value of the leased asset at the end of the lease term. The lessor (an outside firm) usually allows the lessee to buy the formerly leased asset upon payment of a pre-determined residual value. 

“Operating Lease” is a lease that is essentially a rental agreement that generally has a shorter term than a finance lease and usually shorter than the life of the asset, and may be cancelable without a significant penalty. The lessee (Haldimand County) does not guarantee any residual value, and at the end of the lease term, the lessee must return the asset to the lessor (an outside firm), who will either sell the asset or lease it to other users. In an operating lease, substantially all the risks and benefits incidental to ownership of the leased asset remain with the lessor. 

2. Policy Statement

Haldimand County is committed to achieving the lowest cost of funds, based upon current capital market conditions, when financing capital funding requirements. When making decisions regarding the financing of a capital asset, Council must be satisfied that the lowest cost alternative is utilized from a total cost of ownership perspective.

3. Purpose

This policy constitutes Haldimand County's statement of policies and goals relating to the use of lease financing agreements as required under Ontario Regulation 653/05 and 403/02 under the Municipal Act, 2001, S.O. 2001, c. 25 (“Regulations”).

4. Scope

This policy applies to all leases that will be entered into by Haldimand County, as well as those entered into by the County’s boards.

5. Principles

Haldimand County’s Council and the Treasurer are responsible to ensure that financing leases are recognized as a form of capital financing and are subject to prudent financial management. The decision to enter into a financing lease is based upon a detailed net present value and cost/benefit evaluation of the financing lease proposal relative to ownership of the asset as well as other financing alternatives. In order to achieve consistency in the decision making process, the Treasurer will conduct this analysis on a uniform basis for all lease financing proposals being considered by Haldimand County and/or its boards. 

5.1  Before Haldimand County enters into a lease financing agreement, Council shall: 

a.  have the Treasurer prepare a report with a recommendation, assessing, in the opinion of the treasurer, the costs and financial and other risks associated with the proposed agreement, including: 

1. a comparison between the fixed and estimated costs and the risks associated with the proposed agreement and those associated with other methods of financing;
2. a statement summarizing, as may be applicable, the effective rate or rates of financing for the agreement, the ability for agreement payment amounts to vary, and the methods or calculations, including possible financing rate changes, that may be used to establish that variance under the agreement;
3. a statement summarizing any contingent payment obligations under the agreement that in the opinion of the treasurer would result in a material impact on the municipality, including agreement termination provisions, equipment loss, equipment replacement options and guarantees and indemnities;
4. a summary of the assumptions applicable to any possible variations in the agreement payment and contingent payment obligations, and
5. any other matters the treasurer or Council considers advisable. 

b.  obtain legal advice and financial advice with respect to the proposed agreement; 

c.  consider if the scope of the proposed transaction warrants obtaining legal advice or financial advice with respect to the proposed agreement that is from a source independent of the source of the advice mentioned in clause (b); and 

d.  consider and give its assessment of the report prepared under clause (a), including whether, in its opinion, the costs of financing for the proposed agreement are lower than other methods of financing available to the municipality, and whether the risks associated with the proposed agreement are reasonable. 

5.2  Reporting on lease financing agreements: 

If Haldimand County has one or more lease financing agreements outstanding in a fiscal year, the Treasurer shall prepare and present to Council a detailed reporting, on an annual basis, containing the following: 

a.  a description of the estimated proportion of the total financing arrangements of the municipality that is undertaken through lease financing agreements to the total long-term debt of the municipality and a description of the change, if any, in that estimated proportion since the previous year’s report; 

b.  a statement by the Treasurer as to whether, in his or her opinion, all lease financing agreements were made in accordance with the statement of lease financing policies and goals adopted by the Municipality; and 

c.  any other information that the Council may require or that, in the opinion of the Treasurer, should be recorded. 

5.3  Permitted exceptions under the Statement of Lease Financing Policies and Goals: 

a.  Non-Material Leases: Any cost or risk that would not have a significant impact on the County’s debt and financial obligations is defined as any lease with total payments below $100,000 or a building/land lease with a term of 2 years or less.  

b.  Operating leases that will be entered into by Haldimand County and its Boards form a special category of leases under this Statement for which compliance with this Statement is not required. In the opinion of the Treasurer and of Council, such leases would not result in a material impact for the County.  The Treasurer shall still complete a detailed net present value and cost/benefit evaluation on all categories of leases.  

5.4  Lease vs. Purchase/Net Present Value Analysis Criteria: 

The responsibilities of Council and the Treasurer is to ensure prudent financial management and compliance with the provincial legislation requires that any decision to enter into a financing lease be based on a detailed net present value and cost/benefit evaluation of the lease proposal relative ownership and capital financing alternatives.  

This evaluation must include a calculation of all cash flows and costs associated with each of the relevant acquisition alternatives. The cost of the lease must be compared (on a net present value basis) with other leases to ensure that the lowest cost of a financing lease is identified.  

From this evaluation, the lowest cost of funds lease proposal should be compared (again on a net present value basis) with the cost of alternative available capital financing methods that would be used if the asset or capital project was to be purchased.  

Many financing leases contain a variety of clauses that could increase the cost of leasing for the County, thus affecting the outcome of the cost/benefit analysis. These critical documentation issues should be considered and quantified during the analysis in order to ensure that all aspects of the proposed transaction are recognized.

6. Roles and Responsibilities

6.1  Haldimand County’s Council approves all lease financing agreements prior to executing the agreement and provides authorization to the Chief Administrative Officer (CAO) and the Treasurer  to sign all lease financing agreements subject to administrative review and approval.  

6.2  The Treasurer is responsible to review all categories of leases to ensure compliance with the legislative requirements and this policy and to direct the review of this policy, at minimum every five years, and recommend updates as required.