Community loans policy

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

2.0 Implementation

Council will consider the relative priorities/merits of each loan application against a set of criteria. Small and medium loans will be considered throughout the year by the appropriate community board or council committee. The process for the approval of large loans will be through the annual plan process each year. This will allow council to incorporate the costs associated with large loans (nominal cost of interest) into its budget and for the public to make comment on the proposed large loans included in the annual plan.

Loan applications will be considered against financial criteria, project development criteria and community benefit criteria.

2.1 Criteria

Loan applications will be considered against criteria at various stages of the process. The criteria will also assist those organisations that wish to approach council in making their application. (Appendix 3 gives details of the criteria used.)

2.1.1 Eligibility criteria

• applicants must be non-profit making community, arts, sport, cultural or recreational organisations
• applicants must be legally constituted, such as an incorporated society or charitable trust
• applications must be for facility development or enhancement
• applications must be for facilities of local, citywide, regional or national significance or for capital works proposed by a legally constituted Mainstreet Association (the works having been previously approved by council) within the area of that Mainstreet.
• the facility must be in Auckland City
• debt servicing and operating expenditure is specifically excluded
• projects for core or primary health, education and welfare facilities or places of worship are excluded
• organisations applying must be willing to enter into a fixed price contract for the construction or redevelopment of the facility

2.1.2 Further criteria

Each application will be assessed as to extent to which it meets or contributes to the following criteria:

• community benefit
• project development
• track record
• financial and organisational viability
• security of council investment

2.1.3 Terms and conditions

Community loans will be set with the following terms and conditions

• standard commercial terms and conditions between borrowers and lenders will apply to these loans (except for the concessions relating to such matters as interest rates as acknowledged below and agreed between the parties and in regard to contractor progress payments).
• interest rates for small and medium loans will be set at 50 per cent of the cost to Auckland City to borrow funds (currently 4.5 per cent)
• the interest rate for large loans will be determined based on the amount of private benefit derived from the project in comparison to public benefit and the level of commercial activity involved in the project, ie: the higher the private benefit/good and commercial activity the higher the interest rate. The lowest interest rate will not be less than that for small and medium loans
• term of the loan will be a maximum period of 5 (five) years for small loans, 10 (ten) years for medium loans and large loans to be negotiated on a case by case basis, to a maximum of 20 (twenty) years
• terms and conditions of small and medium loans may be varied by the Group Manager Recreation and Community Services
• terms and conditions for large loans may be varied by the Group Manager Recreation and Community Services and the Chair of the Community Development and Equity Committee (or its closest equivalent)
• a minimum level of community access will be included as part of the agreement
• appropriate acknowledgment of council's contribution to the facility on publicity material and signs will be included as part of the agreement
• requirement to comply with all appropriate legislation such as Construction Contracts Act 2002, Charities Act 2005, etc
• loans that have not commenced drawdown within 12 months of the approved date will be deemed to have expired and the organisation would need to reapply.

2.1.4 Default in payment of loan

In the first instance, council will work with the organisation and its parent body, if appropriate, to remedy the situation.

Failing that, in conjunction with the organisation and parent body if appropriate, options available will be explored eg: amalgamating organisations, selling property or buildings, council varying its payment schedules, council calling in its security, parent body assistance, etc. This would then require approval from the appropriate senior manager or committee chair of council.

Any remedy will be subject to other statutes that may have preference over this or other council policies and agreements.

Published July 2005