However, the Tamatea St strip was not returned to iwi and instead, in 1958, was transferred to the then-Rotorua County Council. This has been the subject of a long-standing grievance by Ngati Tamateatutahi ever since.
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Last week's committee recommendation would now go to the next council meeting on October 1, for a final decision on whether to proceed. However, that decision would be subject to Te Tahuna Trust protecting existing rights of local residents and securing ongoing public access to the reserve and lakefront, with the council continuing to cover the cost of road maintenance.
Te Tahuna Trust had already signalled its acceptance of the provisions.
Councillor Karen Hunt said the decision to return ownership to iwi would be about righting a wrong.
"I am really delighted with this. It has sat around for 100 years and it is high time it was resolved," she said at the meeting.
Deputy mayor Dave Donaldson said because the trust owned all the land leases, it would be in its interest to retain the road access.
Mayor Steve Chadwick earlier said the decision would make little material difference to the council, to Tamatea St property owners or to the general public.
"The land's return will be of enormous historic and cultural significance to Ngati Tamateatutahi.
"The recommendation sends a very strong signal that we want to work hand-in-hand with iwi to build a positive future together for our district," Mrs Chadwick said.
If the strategy, policy and finance committee recommendation is endorsed by the council at its next meeting, a public notification process would be undertaken where objections can be lodged by the public before any transfer of title can proceed. The outcome of any objections received, and the final status of the land, would be ultimately determined by the Environment Court.