American Institute of Certified Planners (AICP) Practice Exam

Which of the following is NOT a method of municipal financing?

1. Lease purchase

2. Corporate sponsorship

3. Tax increment financing

4. State and federal grants

The correct answer is: Corporate sponsorship

Corporate sponsorship is not typically considered a method of municipal financing. Municipal financing generally involves mechanisms that directly provide funding to government entities for infrastructure, services, and public projects. Lease purchase agreements allow municipalities to acquire assets while making payments over time, which is a recognized finance method. Tax increment financing (TIF) enables municipalities to use future tax revenues from an area to pay for current infrastructure investments, making it a legitimate municipal financing tool. State and federal grants involve funds provided by governmental levels to support various public projects or initiatives, which is also a common method of municipal financing. Corporate sponsorship, while it may provide funding or support to specific projects or events, does not function as a direct financing method for municipal operations or capital projects in the same way the other options do. It is often based on partnerships or marketing agreements rather than serving as a structured financing option accessible to municipalities.