Communities have come up with a variety of ways to provide low-cost loans to building owners for installing sprinklers. This is one way to reduce the net cost of retrofitting systems in existing buildings. One state added retrofit sprinkler systems to its list of public improvements, making them eligible for low-cost, long-term loans just like sewer improvements or street lights. Many communities in the state have retrofit requirements, and building owners who increase the size of a building over a certain area threshold are required to retrofit the entire building with sprinklers.
The loan is arranged through the individual community, which floats a general obligation bond which the builder pays off over 10-20 years at a favorable interest rate. This method of financing a retrofit has a big advantage for owner who have long-term leases with tenants. The monthly payments to pay off the bond issue are considered taxes, and the state's lease laws allow tax increases to be passed along to lessees immediately. Thus, the owner can recoup the installation costs without waiting until a lease expires to negotiate a higher payment.