Community loans policy

Contents | Introduction | Framework for the policy | Implementation | Loans pool | Monitoring and review | Appendix

1.0 Framework for the policy

1.1 Purpose

The purpose of this policy is to guide the provision of loans by council to community groups. The policy provides a bridge between the priority outcomes of the Community Vision: Auckland 2020, council's strategic plan and the operational level. The policy does this by providing a rationale for council's assistance to community groups, defining council's role and setting out the values and principles that underpin that role and guide the distribution of resources.

1.2 Scope

1.2.1 Types of assistance

This policy covers all the forms of loans that council provides to community groups and concessionary interest grants. This policy excludes grants covered by the facility partnership policy.

1.2.2 Definition of a "community group"

The term "community group" covers a wide range of groups involved in recreational, community, sporting, arts and cultural activities. However, what the groups have in common is that they exist to provide services for the community, not for private gain, and usually rely substantially or entirely on the work of volunteers. They are inclusive, democratic, accessible and affordable. The definition of a "community group" adopted for this policy is attached as Appendix 1.

1.3 Overall policy goal

The overall goal of the policy is to ensure that community groups have the ability and capacity to respond to the needs of Auckland's diverse communities. Council will directly provide loans to support the accommodation needs of community groups. Community groups will be encouraged to explore other avenues such as grants, sponsorship and partnerships, to achieve their aims, prior to entering into ongoing debt.

1.4 Policy outcomes

The following section describes the desired outcomes of the policy:

1.5 Policy objectives

The following section describes the desired objectives of the policy:

1.6 Principles

The key principles that council wishes to emphasis throughout the policy is that loans will be considered where

• a common vision can be realised
• a clear strategic need has been identified
• a payback to the community through good community access and/or economic return is realised
• quality developments can occur
• financial risk to the council can be managed and minimised.

1.7 Policy mechanisms

Council will achieve the policy outcomes through the following policy mechanisms:

1. Small loans
   • Loans under between $15,000 and $50,000
   • Opportunity for the local Community Board(s) to provide feedback on proposals
   • Committee decision based on financial viability and officer recommendations
   • Maximum term 5 years
2. Medium loans
   • Loans between $50,000 and $250,000
   • Opportunity for the local Community Board(s) to provide feedback on proposals
   • Committee decision based on financial viability and officer recommendations
   • Maximum term 10 years
3. Large loans
   • Loans between $250,000 and $1 million
   • Opportunity for the local Community Board(s) to provide feedback on proposals
   • Committee decision based on community need, financial viability and officer recommendations
   • Interest rate and term to be considered on a case-by-case basis to a maximum of 20 years.
4. Concessionary Interest Grants

   As an alternative, council could provide a concessionary interest grant to support the proposed development where a loan may not be considered appropriate. (A concessionary interest grant is an annual grant that equates to the difference in council's concessionary loan rate and the community group's cost of borrowing.)

   Minimum requirements would be

   • a funding agreement setting out the financial and community access terms
   • confirmation of loan terms from lending institution
   • the term of the concessionary interest grant will be for a maximum period of 10 years and the level of the interest concession grant would be fixed at assumed fixed interest rates (unless council's concessionary loan rate shifts in response to a greater than 2 per cent shift in the cost of borrowing for council).
   • the applicant will incur all legal costs associated with the disbursement of the grant.
   • the project must have started construction prior to any grant payments commencing
   • minimum level of community access
   • promotion of the facility for community usage
   • acknowledgment of council's contribution to the facility on publicity material and signs
5. Loan Guarantees and Overdraft Guarantees
   • Discontinued effective from July 2005
   • Loan guarantees in place at July 2005 will be grand-parented and continue until their expiry

Published July 2005