He believed the last tenant to occupy the hall was a church group and, since then, about eight years ago, it had been boarded up because windows were being smashed.
Mr McNaughton remembered playing table tennis in the hall when he was a youngster and had attended functions such as family reunions there.
Acting Mount Maunganui Police Senior Sergeant Phil Gillbanks said the blaze was suspicious because it was a building that had not been used for some years.
"We don't know what the cause of the fire is so at the moment it is being treated as suspicious.
"It is a building that hasn't been used in a number of years.
"The biggest issue is getting water to the scene which is why we have blocked off the road."
"It's just so sad, it's been such an icon for the old Papamoa community," he said. "It's all gone, it's terrible."
The hall had been a big part of the old Papamoa community, when the population of the area was only about 2000 people and it was a hub for people to get together.
Western Bay of Plenty mayor Ross Paterson said he was disappointed the building had been destroyed by fire.
"It did have quite a history earlier in its lifetime, before the State Highway got to its present size.
"It's been there for a long time ... it possibly had a future once the TEL [Tauranga Eastern Link] was finished and it would have been on a local road."
Mr Paterson said he would not comment further on the allegations that were made by Mr McNaughton.
Western Bay of Plenty council communications adviser Peter Hennessey said the hall had been vacant for a number of years and had been a target for minor vandalism in the past.
The council was sad to learn of the blaze and would be working with the fire service this morning to determine the cause, Mr Hennessey said.