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Staff across the Dunedin City Council group have been granted millions of dollars worth of home loans sourced by the council's financial services arm, the Dunedin City Treasury.
Figures released to the Otago Daily Times showed DCT had granted 43 loans to staff across the council and its council-controlled organisations (CCOs).
The loans stretched back 14 years and were together estimated to be worth between $4.5 million and $5 million.
DCT chief executive John Knight confirmed most had since been repaid, and the policy of granting loans ceased last year, but 13 loans - together worth $1.1 million - were still active.
Staff qualifying for the loans were offered up to 80% of the valuation of their house, based on market rates and with repayment terms capped at 20 years.
Available records for the past 12 years showed the average loan was $114,000. Many were for much smaller sums and the largest individual loan was believed to have been about $300,000.
Mr Knight defended the loans, saying they did not cost the council or ratepayers anything and any suggestion of impropriety was "absolute nonsense".
"There's absolutely nothing smelly about it at all. Absolutely nothing."
Instead, the loan scheme was designed to create enough work with DCT to justify employing a part-time worker to support Mr Knight, he confirmed.
DCT was part of the group of companies under the umbrella of the council's holding company, Dunedin City Holdings Ltd, and provided funding and financial services across the group.
Cr Lee Vandervis told the ODT he accepted the loans did not cost the council anything, but criticised the scheme anyway as "misconceived".
"It's just not a wise thing for the DCC to be doing, because of the perception that you are giving your own employees some kind of perks.
"It could be perceived as being part of a perk culture," he said.
Cr Syd Brown, chairman of the council's finance, strategy and development committee, disagreed.
He questioned the scheme after first learning of its existence earlier this year, but had been reassured when details were explained to him and he "didn't have an issue" with it.
Neither did Dunedin Mayor Dave Cull, who said if staff were paying market rates, and DCT was making a margin, then "I don't see what's wrong with it, and I certainly don't see it as a perk".
Mr Knight said the scheme was offered to staff in Dunedin, and those working for CCOs buying homes elsewhere, including Queenstown.
DCT was "in the business of lending money" to other DCHL companies, and it "just seemed sensible to expand that".
DCT's directors wanted a second staff member to support Mr Knight because he was then the company's sole employee, and the directors "felt quite vulnerable" about what would happen if Mr Knight fell ill, he said.
It had been hoped the loan scheme would have the part-time employee handling up to $5 million in loans at a time, but the total only ever rose to $2 million, he said.
That generated a small surplus of several thousand dollars a year for DCHL, but not enough to justify continuing the scheme.
A policy change in May last year meant no new loans would be approved, but the increased workload associated with stadium debt meant DCT's part-time employee remained in their job, he said.
Mr Knight said he thought staff opting to take loans were attracted by having payments deducted directly from their wages and by being able to discuss matters they might not want to raise with a bank manager.
"Some of our rates were cheaper than some banks, but they were never cheaper than everybody's.
"I looked at all banks to make sure we were competitive, but not undercutting the market."
Details had also been included in DCT's financial statements for "years", and were cleared by Audit New Zealand each year.
The company had been "pretty conservative" in lending, and not all staff who applied had qualified for loans.
Of those who did, none missed payments, he said.
"The last thing I wanted to do was have to go to a staff member and seize his house, so we were pretty cautious."
It was not clear last week whether other councils offered their staff similar schemes.
A Wellington City Council spokesman said its staff did not have access to council home loans, but could opt for 0.25% off the "going rate" in a deal offered to the council's staff by the National Bank.
Christchurch City Council staff were not aware of any similar home loan scheme being offered, while Auckland Council staff did not respond to questions.
Local Government New Zealand and Audit New Zealand staff had no information on any similar loan schemes offered by other councils.