All municipal leases are structured in one of two major ways. Some resemble long-term debt - like leases in Indiana and firm leases in California. In both cases, the lessee commits itself to a long term obligation. In Indiana, investors have the right to take possession of the lease-financed project in the event of nonpayment. In California, the holders of defaulted COPs or lease bonds usually have the right to relet, but not sell, the property.
Non-appropriation out leases are used in most states. These are year-to-year promises to pay which back long-term COPS or lease bonds. Here, the lessee annually makes a conscious decision to pay for the specific project. This sets up a natural tension between investor and lessee, and is one reason why leasing is the most heavily insured major market sector.