$5.5m bail-out loan to pay college debts

The Government is bailing Northland Polytechnic out of debt with a $5.5 million loan.

It is also appointing a minder to ensure the polytechnic avoids future financial strife.

The loan was announced by Associate Education Minister Steve Maharey.

Polytechnic council chairman Jules Flight said it was "vital".



"It's a lifeline," he said. "We couldn't have continued trading without it."

The money would enable the polytechnic to get over its short-term problems and work on the medium and long-term future.

It would be used to offset a forecast $3.7 million deficit this year and to cover the costs of redundancies and restructuring.

The deficit followed a loss last year of $1.2 million, after a five-year deficit-free run.



Mr Maharey said he was "deeply disappointed" with the polytechnic's financial management over the past few years.

But the loan and appointment of a Crown manager gave the Government "some confidence" that the polytechnic would be able to address its weak position.

The polytechnic was "working hard" to make improvements, and the Government was committed to providing tertiary education in the region.

He said the polytechnic's review and recent changes - including the cutting of 35 full-time staff positions - would help avoid future deterioration in financial performance.

The manager will be Brian Roche, who was a Crown observer on the council during the polytechnic's review this year.

A spokesman for Mr Maharey said Mr Roche's appointment as Crown manager would give him greater authority over the financial running of the polytechnic.

"The situation they have at the moment is unsustainable," he said.

"There is no desire on the part of the Government to come in and run them long-term, but we clearly need to be involved at the moment while they're going through a difficult time."

Mr Flight said the loan gave the polytechnic some breathing space to set up prudent planning.

It had dispensed with the "ambitious growth strategy" of last year that had led to over-staffing when student numbers did not meet estimates.

This year's review and the budget process had ended with more realistic targets, reduced staff levels and elimination of courses that weren't viable.

Mr Flight said students could now feel safe to apply for courses.

"It's a good indication that the Government wants the thing to survive in Northland. It wouldn't be putting that sum of money into the polytechnic if it was a basketcase."

Tai Tokerau MP Dover Samuels said the loan was a "great Christmas present for Northlanders".

"The availability of quality tertiary education is an essential tool for the economic and social development of Northland," he said.

No deadline has been set for the loan to be repaid, but Mr Flight said it could take "some time".

"It's a substantial sum of money and we won't be posting substantial surpluses in the years to come.

"But, hopefully, we'll pay it off over the next five years."

Last year, the Government bailed out four polytechnics, including Taranaki, Wanganui and Upper Hutt's Central Institute of Technology, after they ran into money problems.

Wairarapa Community Polytechnic was loaned $1 million and merged with Palmerston North's Universal College of Learning.

- NZPA