Ownership of TECT Arena at Baypark has been transferred from the Tauranga City Council to its council controlled organisation Tauranga City Venues Limited.

The arena opened for business in September 2011, and is operated by Tauranga City Venues Ltd. The arena was built using funding from TCC loans, development contributions and a TECT grant of $6 million.

Tauranga City Venues Limited now has ownership of TECT Arena.

The ownership transfer is in line with an earlier agreement between TECT, the council and TCVL that the $6 million grant was contingent on the arena being transferred to TCVL on completion. That way the full $6 million is applied to the purchase price.

The asset transfer does not include the site, which is on land leased by TCVL from TCC, granted when the stadium assets were transferred to TCVL in 2007.

The $41million arena is paid for by a $24 million loan and $11 million loan obtained by the city council, plus the TECT $6 million.

Described by councillor Catherine Stewart as 'smoke and mirrors accounting”, the capital and funding structure is to be a money-go-round. TCVL will issue $11 million of ordinary unpaid shares to Tauranga City Investments Ltd, and, in turn, TCIL will issue $11 million in shares to the TCC. The subscription price will be paid on the day of issue.

TCVL will issue $16 million of uncalled ordinary shares to TCIL which will in turn issue $16 million in shares to TCC. The subscription price is to be unpaid until a call is made by the shareholder for payment.

The city council acting chief executive will also initiate a two way loan under which TCC agrees to advance TCVL a sum to fund the balance of the purchase, about $24 million.

The settlement date is August 12 to coincide with the expiry of the defects liability period under the construction contract. Risk will pass to TCVL on the settlement date.

The move answers some of the challenges put to the council by accountant Ian Stevenson about the recipient of the TECT cheque.

In the ten year plan submission process, he asked for clarity over whether the TECT cheque to TCC was actually banked by the CCO, which would obtain tax credits unable to be claimed by the council itself. A related decision to give the CCO an additional uncalled capacity of $2 million may be in answer to Ian's accusation that TCVL has been trading while insolvent.

'What's happened since we originally set up CCOs is we have learned a bit more about how to properly set up these companies,” says Dean. 'That's not to say they are improperly set up organisations, but if we were to set them up from scratch there are things we would do to make provision for the uncalled capacity to be part of the funding of CCOs.”

In an earlier email to city councillors, Ian says the plan saddles TCVL with $24 million of new debt, requiring it to pay the council about $1.6 million a year in interest.

That will be in addition to operational losses, says Ian. He says only 20 per cent of the arena's operational costs are planned to be recovered from users.

Councillor Catherine Stewart says because of the amount involved she would have preferred to see in writing the legal and tax advice Dean Riley says he obtained.

When she asked why it wouldn't be left until the expected CCO review is completed, Mayor Stuart Crosby said the council would be breaching its agreement with TECT to transfer ownership to the CCO.