What is a common drawback of financing leases for municipalities?

The common drawback of financing leases for municipalities is the potential for higher interest rates. When municipalities opt for financing leases, they typically acquire the use of assets without making an upfront purchase. However, financing leases can often involve higher interest rates compared to other financing options, such as traditional loans or bonds. This is because the lessor takes on more risk, leading to increased costs for the financing lease. As a result, while leasing can be an attractive option for obtaining necessary equipment or facilities without immediate capital outlay, the higher interest rates can lead to greater overall costs over the life of the lease.

In the context of the other options, an increased administrative burden can occur with leasing arrangements, but it's not universally considered a primary drawback compared to financing. Limited term lengths might apply to certain leases, impacting availability of the asset over time, but this does not universally apply to all financing leases. Restrictions on asset use is a consideration, particularly for specialized leases, but the impact of cost associated with higher interest rates generally takes precedence when analyzing financing leases for municipalities.