§ 105231 Equipment Trust Agreements

• •A purchase or lease contract can require the seller to transfer equipment to a bank or trust company.
• •The bank/trust holds the equipment for the benefit of equipment trust certificates (like bonds).
• •The trustee can deliver the equipment directly to the district’s designated officers.
• •The district can sign a purchase or lease agreement at the same time it gets the equipment.

A city transit district wants new subway cars. The contract says the manufacturer will sell the cars to a bank that holds them for bond investors, and the bank will then hand the cars to the district’s officials while the district signs a lease for the cars.

The law lets the district set up the deal so the equipment first goes to a trusted bank (the trustee) for the benefit of the investors, and then the district receives the cars and agrees to pay for them over time.