"I remember looking at the faces of the students as she told one of her stories," Mr Nielsen recalls.
"They were enthralled, completely mesmerised by her words.
"Following the dedication, she came and had a cup of tea with us in the staffroom and captivated staff in exactly the same way."
She told students that when she returned to Whakatane it felt like a part of her had never been away.
"I feel like I belong here," Ms Mahy said.
Describing the author as a very special lady, Mr Nielsen said that while it was very sad she haddied, he was glad the school had an ongoing remembrance of her with the Margaret Mahy Library.
Another to express sadness, was Eastern Bay author and illustrator Nikki Slade-Robinson.
"I was absolutely gutted when I heard," Mrs Slade-Robinson said.
"She has been so influential in the lives of so many and it's really sad thinking of that coming to an end."
Mrs Slade-Robinson recalls having to draw a caricature of Ms Mahy and thinking it would be really cool to meet her.
"But every time she came back to the Eastern Bay I had something else on. I am absolutely in awe of all she has done. We have a huge and well-worn collection of her books at home - my children love them."
Mrs Slade-Robinson said there was a poem in Ms Mahy's The Word Witch that she felt was almost a eulogy written by the author herself.
"I would let you know the name of the poem but I can't find the book. It's my daughter's favourite book and has probably been stashed somewhere."
Ms Mahy's presence is especially felt in the town's Margaret Mahy Courtyard, next to the Whakatane District Council Chambers, and the town's former library.
In 2007 in recognition of her birthplace, the courtyard was given her name and a bronze lion sculpture installed in a garden to reflect one of her most famous books, A Lion in the Meadow.
The lion was commissioned by the Molly Morpeth Canaday Trust and created by Jonathan Campbell.
Whakatane Mayor Tony Bonne said that while the death of any person was sad, it was also an opportunity to reflect on their life.
"Of course, with someone as famous as Margaret Mahy, that reflection will go on forever and a day," Mr Bonne said. "As typical Kiwis, we have always thought of Margaret as a Whakatane-ite."
Many of Ms Mahy's books will be on display this week at the Whakatane Library and Exhibition Centre, with public readings to be held over the weekend.
Library Services co-ordinator Tangimeriana Rua said Ms Mahy was a librarian, so it was even more fitting she was honoured with a celebration of the books and stories she had gifted to the world.
At 11am and midday on Saturday and Sunday public readings of Margaret Mahy stories will be held in the Little Orchard Activity Room and Atrium at Te Koputu a te whanga a Toi - The Whakatane Library and Exhibition Centre.