The Tauranga container village Our Place pays $1 for its lease on Willow St in the CBD, the Bay of Plenty Times Weekend has learned.
The "peppercorn" lease agreement has drawn criticism from a regional hospitality industry leader, who says it is unfair to other competing businesses in the city.
But the owner of a popular downtown pub says Our Place adds another dynamic to the CBD "that Tauranga really needs" and that the local industry needs to adapt.
It was revealed last Saturday that Our Place, a container retail and eatery precinct, had already received $357,824.78 of ratepayer funding and was asking the Tauranga City Council for more.
Claims by two contractors that they were still owed tens of thousands of dollars for work they did for Our Place months ago, were also revealed.
Then on Tuesday the council approved a further $60,000 in public funding for Our Place.
The Bay of Plenty Times Weekend has this week confirmed with the council that the Willow St site was leased to Our Place for $1 for the duration of the Licence to Occupy agreement.
The site was initially leased for 12 months, but councillors have now agreed to extend Our Place's lease to June 2020.
In a press release on Tuesday evening, the council said Our Place was established by the owners of Little Big Events, Christopher and Rachelle Duffy, following the council's request for proposals.
"The arrangement was for a peppercorn lease of the 91 Willow Street site in return for the delivery of a place-making activation to bring more vibrancy and community connection to the city centre," the press release said.
Asked about the $1 lease, Christopher Duffy said it was "as per the terms agreed in the public registration of interest for this temporary place making project".
It was acknowledged in Tuesday's council meeting that only one proposal was received for the 91 Willow St site and that was the one put forward by Little Big Events.
The council has since added that there was another proposal, but it was not considered because it was late.
Brian Berry, chairman of the Mainstreet Downtown Tauranga board, said earlier this week that the board was not aware of the nature of Our Place's funding until very recently, "i.e. last week".
Concerns had since been raised by some member businesses, Berry said, which had also said in the past that they were struggling competing against Our Place.
"Following the article in the Bay of Plenty Times ... I've had further feedback. Very real concerns have been raised by some of our members regarding the funding of the project by the council."
However, Berry said Our Place was set up with the best intentions and he did believe it was creating "a good vibe" in that area of the CBD and attracting people into the city centre.
Sally Cooke, from Downtown Tauranga's management and marketing team, later reiterated the organisation's "unwavering support" for Our Place.
"It attracts thousands of people into the city centre, which is exactly what we strive for and contributes to our city centre's revitalization."
Meanwhile, Hospitality New Zealand Bay of Plenty regional manager Alan Sciascia told the Bay of Plenty Times Weekend he was concerned "at the clear commercial advantage that has been allowed by Tauranga City Council in allowing Our Place to operate with a peppercorn rental".
"Traditional hospitality businesses pay very high rentals to operate in the CBD and their businesses are affected by Our Place being allowed to operate under such conditions," he said.
"I cannot see how council can justify using ratepayers money to subsidise temporary businesses."
Sciascia said businesses he had spoken to were unhappy "with what council has done in creating this facility in such a competitive environment".
In relation to the concerns raised by other CBD businesses, Christopher Duffy said: "The organisations involved and indeed Tauranga City Council who are partners in this project have shared aspirations in creating a vibrant and successful city centre where more people want to work, live, learn and play. Our Place Tauranga is setting out to meet those objectives."
The concerns of struggling businesses in the CBD were also noted by councillors who voted both for and against the extra Our Place funding on Tuesday.
Jessica Rafferty, owner of The Crown & Badger on The Strand, said she appreciated both sides of the argument and understood why businesses would be upset, as Our Place did hurt lunch trade.
But she said Our Place was a "brilliant venue" that offered a lot of things to the city centre that other vendors did not, and vice versa.
"Yes, they've got a $1 lease but the people that operate in it, don't. They still have all the overheads that the rest of us have. It might be marginally cheaper, but they're only there temporarily."
Rafferty said the local hospitality industry needed Tauranga to be buzzing, and she believed Our Place was helping with that.
"The more the merrier, really. Competition is going to turn up, whether it's in the form of Our Place or not. It's just something the industry needs to adapt to."
Gareth Wallis, the council's acting general manager of city transformation, said the arrangements between Our Place and their tenants were separate to that of the council.
"Council is supporting Our Place to strategically activate the old council site, particularly while a high level of development across the city centre is occurring."
He said there were many businesses in the city centre providing alfresco hospitality that did not pay any rental for occupying public spaces such as footpaths and parks.
Our Place's ratepayer funding
•There was $526,000 budgeted for the activation of the 91 Willow St site in the Tauranga City Council's Long Term Plan 2015-25 Amendment.
•The council has already spent $340,000 of that funding, which covers an area that also includes the current customer service centre and council building, to establish the site for Our Place.
•The council's events department has also provided Our Place with $17,824.78 in funding for four different events. That money is not part of the $526,000 budgeted for the site.
•The $60,000 of extra funding approved on Tuesday is part of the $526,000 budget.