The government has withdrawn an offer of capital funding to Otago Polytechnic to help build the proposed Otago Institute of Design. The institute had been widely supported locally as a collaborative education proposal that would support 800 students and staff.

The previous government had agreed to a suspensory loan of up to $12.5 million. Now the current government has withdrawn that offer, saying that Otago Polytechnic failed to agree to certain terms and conditions.

“Otago Polytechnic did not accept a key condition of the funding offer made in 2008 by the previous government,” said tertiary education minister Anne Tolley. “The polytechnic requested that this condition be varied, and Cabinet considered this request. However, after careful consideration, the government has decided that it is not willing to vary this condition and therefore the offer has been withdrawn.”

However the polytechnic and former government minister involved Pete Hodgson have disagreed with Mrs. Tolley. Otago Polytechnic Chief Executive Phil Ker told the Otago Daily Times that the disputed condition of the contract was a requirement that the polytechnic agree to the appointment of a Crown manager to oversee its financial transactions.

He said this condition contradicted an earlier verbal agreement with a TEC staffer that the polytechnic would get the money it if agreed to a lower-level Crown observer being appointed to ensure the building project had no negative financial impact on the rest of the polytechnic’s operations. Ker said a crown manager would be unacceptable to the Polytechnic.

Mr Hodgson said he had been assured before last year’s announcement that the polytechnic and TEC had agreed to the level of Crown involvement in the polytechnic’s financial affairs.

“Otago Polytechnic was not, and is not, in a severe financial state . . . but some financial supervision seemed appropriate… My suspicion is the Government has simply reopened the dispute over Crown management as an excuse to walk away.”