Who establishes a nonprofit organization when using certificates of participation?

The government lessee is the entity that establishes a nonprofit organization when using certificates of participation (COPs). Certificates of participation are a financing mechanism used by government entities to fund capital projects without having to go through a lengthy approval process typically required for debt. In this case, the government lessee often forms the nonprofit organization to serve as the conduit for the issuance of COPs.

This structure allows the government to utilize the funds raised from investors, who purchase the certificates, to finance capital improvements or projects that they would not be able to fund through direct borrowing. The nonprofit acts on behalf of the government to facilitate the issuance of the COPs, providing a legal framework within which the lessee can effectively utilize the funds while minimizing immediate financial burdens.

The involvement of other entities, like investors or the lessor, is more about participation in the financial structure rather than establishing the entity itself. Investors buy into the financing; the lessor provides the leased asset, but it is the government lessee that ultimately initiates the nonprofit organization for these financing purposes.