Bond counsel Jim Saffian, of Pierce Atwood, speaks about the proposed bond partnership between Lincoln Academy and Newcastle during a public hearing Monday, June 12. (Maia Zewert photo)
Newcastle residents posed several questions to Lincoln Academy officials about the $10 million bond the academy is asking the town to sponsor during a public hearing the evening of Monday, June 12.
LA Head of School David Sturdevant and Chief Financial Officer Helen Telfer attended the meeting with F. Stephen Ward, chief financial officer for First National Bank, and bond counsel Jim Saffian, of Pierce Atwood.
During the hearing, residents asked about the reasons the school is pursuing the bond, whether the academy plans to offer a payment in lieu of taxes based on what it saves from the refinancing of the bond, and the overall relationship between the town and the school.
In February, Rob Nelson, the treasurer of the Lincoln Academy Board of Trustees at the time, visited the board of selectmen to discuss how the town could help the academy secure a better interest rate to refinance its debt. The town would act as a sponsor, or issuer, of the bond, which would allow Lincoln Academy to take out a municipal bond with a lower interest rate.
The town would be acting as a “conduit” of the bond, and would not have any obligation or responsibility to repay the bond, Saffian said. Both Saffian and Ward repeatedly said that the bond would not impact Newcastle’s ability to take out a bond in the future, nor would it impact the interest rate for any future municipal bonds.
“It’s very clear in both (state) statute and the agreement that there is no recourse to the town,” Saffian said.
Under tax code, municipalities can issue less than $10 million in tax-exempt debt in a calendar year with a low interest rate, known as bank-qualified debt. Lincoln Academy is asking that the bond the town would sponsor be designated as bank-qualified.
The town can issue more than $10 million in tax-exempt bonds each year, but it would be at a slightly higher interest rate. In the event Newcastle needs to issue another tax-exempt bond in the calendar year, LA has agreed to pay the difference in the interest payments for up to six months, Newcastle Board of Selectmen Chair Brian Foote said.
Newcastle resident Nicholas Barth asked about the potential savings Lincoln Academy would see as a result of the bond. The savings would total more than $1 million over the 25 years until the bond matures, Ward said.
After hearing the figure, Barth “strongly and respectfully” recommended that the selectmen require the school to make a payment in lieu of taxes for the benefit of using the town’s low interest rate.
“It seems to me that this provides a huge benefit over a 25-year period for the school, and the town reaps zero of that,” Barth said.
Sturdevant said LA has made payments to the town in lieu of taxes in the past. Last year, the academy made a payment of $2,500 after months of discussion about whether the staff apartments in the dormitory were tax-exempt.
In June 2015, Newcastle Assessors’ Agent Jim Murphy valued the apartments at $726,900 and taxed the school $13,120.55 after determining the staff apartments in the dormitory and pre-existing staff housing in Hall House were taxable, even though the majority of the campus is tax-exempt. The selectmen granted Lincoln Academy’s request for abatement in February 2016.
After saying he was “totally in favor” of the town sponsoring the bond, Dennis Anderson asked about the relationship between the town and the academy.
Anderson referenced a discussion between the Newcastle School Committee and the academy in 2015, when Central Lincoln County Superintendent of Schools Steve Bailey wrote to Sturdevant asking for a tuition waiver for two students living in staff housing.
Sturdevant “respectfully declined” the request in a letter, writing that although the students do live on campus, they are entitled to have their tuition covered because they live in Newcastle.
“It seems the town has bent over backward for the academy,” Anderson said. “What is the nature of the relationship, and what input do taxpayers have in regard to policy that’s created at LA or anything else that goes on in there?”
While recognizing that Lincoln Academy is “virtually a public school,” Foote compared LA to a private business regarding its obligation to accept public input.
Foote also said the school has always allowed the town to use its facilities for meetings and events, including presentations by the Newcastle Local Planning Committee.
Newcastle Fire Chief Clayton Huntley spoke about the school’s support of the fire department, a relationship that “has become much better situated” in recent years. Later this month, a county-wide training exercise with LifeFlight will take place on the campus, Huntley said.
The selectmen closed the hearing after almost an hour of discussion. The board will address the concerns raised at the public hearing with the town’s bond counsel and consider official action at a future meeting, Foote said.
