Lincoln Academy approached Newcastle at the beginning of the year to help the school avoid paying federal taxes as it consolidates $10 million in loans.

Helen Telfer, Lincoln Academy’s chief financial officer, said the loan could save the school as much as $30,000 to $50,000 annually. “That’s a great deal of money for programming. We’d be able to offer our students additional opportunities and classes that we can’t offer now because we’re paying interest on our debt.”

“Lincoln Academy is pursuing a tax-free municipal bond through the Finance Authority of Maine (FAME),” head of school David Sturdevant wrote in a March 9 email response to questions from the Wiscasset Newspaper. “Working with a municipality such as Newcastle offers a more favorable rate than just working with FAME.”

Sturdevant said the town would be a “pass-through” and would incur no risk. “All risk and responsibility remains with Lincoln Academy and the financial institution that extends the loan,” Sturdevant wrote.

According to Newcastle Town Administrator Jon Duke, Newcastle, as a taxing authority, has access to better rates than the nonprofit school would.  The loan is more than three times the town’s annual, approximately $3 million budget. Town attorney Peter Drum said the lender would likely be The First, if the deal goes through. He agreed that the town would not be liable for the debt if Lincoln Academy could not pay it.

Duke said the idea is in “concept,” but that Lincoln Academy was eager to move forward with the loan quickly. According to Telfer, once both parties – the town and the school – complete their portions of the application,  the loan may take 60 to 90 days to be realized.

Telfer said the school had completed its portion of the paperwork, and that Newcastle was working on its portion.

However, the board of selectmen did not have a great deal of information on the issue. At the board’s March 27 meeting, members said they didn’t know the status of the loan application, and expected another meeting with the school.

According to Sturdevant’s email, the savings realized would be spent on other needs that would directly affect students.

Telfer said the funds would not be used for additional building projects or capital improvements, but would be used instead for taachers’ salaries and for materials for students.

Lincoln Academy is one of the largest employers in Newcastle, and it is the high school the majority of Newcastle students attend. Duke said in many respects, the town and the Academy have grown up together. “The success of the school is linked to the success of the town, and vice versa. The tuition paid by the state isn’t keeping up with the Academy’s needs,” he said. “It’s not keeping up with any high school’s needs, really. But unlike schools that are underwritten by the towns they are in, Lincoln Academy doesn’t have any taxing authority, so they can’t just ask the town to increase taxes to pay for things. That’s why Lincoln Academy came to us to ask us to co-sign, I suppose, on this loan. Unlike an ordinary co-signing, though, the town won’t be responsible for Lincoln Academy’s debt.”

Duke said he did not have the impression from Lincoln Academy that the funding was critical. “It will just free up cash to spend someplace else,” he said.