The chairman of the Otago Polytechnic Council said there was unanimous support from council members for the institution forgoing a $12.5 million government suspensory loan, because the offer was tagged to the appointment of a Crown manager.
Accountant Graham Crombie said the Crown manager would have effectively controlled all the polytechnic's financial transactions and it could not agree to that.
"The appointment of a Crown manager was way out of proportion . . . and we were very surprised to see that condition turn up in the loan agreement.
Crown control of tertiary institutions, rare in New Zealand, is generally seen as a final step to sort out institutions with severe financial difficulties and multimillion-dollar deficits.
In 2005, a Crown manager was appointed to Maori tertiary institution Te Wananga o Aotearoa.
Later, most of the council was dismissed.
Since 2005, the Western Institute of Technology at Taranaki has had a Crown observer, a Crown manager and a commissioner.
The commissioner ran the institution after its council was sacked.
Mr Crombie said the Otago Polytechnic was a "well managed and well governed institution" and there was no need for a Crown manager.
The loan would have paid for a new building for the Otago Institute of Design, a joint venture between the polytechnic and the University of Otago.
Asked if the polytechnic should have agreed, under protest, to the appointment of a Crown manager in order to secure the loan, Mr Crombie said no.
The council would have been "negligent" to accept on that basis, he said.
"The staff and council have put in a huge amount of good work over the past six or seven years to manage the polytechnic out of financial difficulties.
We certainly wouldn't put that at risk . . . from a change process."
Chief executive Phil Ker told the Otago Daily Times on Tuesday he was given a verbal assurance by a Tertiary Education Commission staff member the loan would be approved if the polytechnic agreed to the appointment of a Crown observer, a less intrusive role than that of Crown manager.
However, the loan documentation did not reflect that assurance.
Mr Crombie said he had "no hesitation" believing Mr Ker's version of events.
"He has the highest integrity of anyone I have ever worked with."
The institute will continue to operate from a variety of sites.
The University of Otago, which had already bought the former Wickliffe Press site in Albany St as a base for the institute, would not be able to find the money for the building as well, pro-vice-chancellor (sciences) Prof Vernon Squire said yesterday.
"The university is involved in several capital works projects and could not commit a further $12.5 million."
