Museum manager Paula Gaelic told the council that a large mortgage guaranteed by the council and the museum's monthly running costs had kept them busy trying to stay afloat.
"It has taken time to position and collate a correct set of financial accounts, to put systems in place, and develop a business plan - the funding application organisations' standard requirements. Up until now this picture was not clear, factual or complete.
"This allowed the opportune time to ask council for assistance, for two-way communication, to seek constructive opinion and positive ideas, to work on a solution to move forward and to make this work. I believed the 'core responsibilities' from Government would have protected the museum.
"The council going guarantor at the time of the purchase indicated to me an acceptance of this responsibility."
Katikati Community Board was 100 per cent behind the museum. The council had proposed in this year's draft annual plan to rate-fund $65,000 of principal interest costs to enable the facility to continue operating for the 2014/15 financial year.
The council has reached an agreement with the trust to acquire the museum collection to hold it in storage.
Western Bay Mayor Ross Paterson said: "I have been a staunch supporter of the museum and I continue to see this collection as an important cultural and historical asset to use within the wider town centre development we will be undertaking over the next few years."
The museum's land and buildings will be put on the market.