Karen Naylor signs up as a new city councillor with Palmerston North mayor Grant Smith in 2016.

Palmerston North mayor Grant Smith has hit back at dissenting councillor Karen Naylor for her opposition to the council's $391,000 grant to Toyota New Zealand.

The council authorised a grant in September 2017, Smith describing it as essential to make sure the motor company retained its national office and $23 million warehouse extensions in Palmerston North.

Councillor Karen Naylor opposed the grant, and the secrecy surrounding it, and claimed there was no evidence a move away from Palmerston North was likely.

In what Smith describes as his "final reply" on the subject, he said Naylor's comments were at odds with the council's big city vision of business growth and prosperity for all residents, and appeared to be politically motivated.

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DAVID UNWIN/STUFF Mayor Grant Smith, Toyota NZ chief executive Alistair Davis and general manager for Asia Region Toyota Motor Corp Toshiyaki Ueshima.

"To speculate there was no evidence in making the decision to support Toyota is simply untrue.

"A decentralised distribution model was already being trialled by the company in Auckland and and the build project was competitive.

"This was a decision council could ill afford to not influence and acted accordingly."

He said international companies could "move in a heartbeat", referring to Glaxo, Sanitarium and Sunbeam as examples of companies lost to Palmerston North.

Toyota New Zealand has declined to comment, and Stuff's request for copies of reports to the council meetings that resulted in the decision to make the grant have been turned down.

A complaint has been lodged with the ombudsman's office.

Naylor said she was disappointed by the personal tone of Smith's comments.

She said she had a lot of positive feedback from people who either opposed the grant, the secrecy around it, or both.

"I totally support Toyota's expansion in Palmerston North.

"But I do not think council support should equate to a financial handout. It's not appropriate, and sets a precedent."

MURRAY WILSON/STUFF Toyota New Zealand received a $391,000 grant from Palmerston North ratepayers.

Smith said cities large and small around New Zealand had to work hard to attract and retain business.

"The city fathers did this to attract Massey University in the 1920s.

"You only have to see the demise of once-thriving provincial towns which are now ghost towns struggling with unemployment and social issues, to understand the social and economic implications of losing businesses of scale."

Smith said to think Toyota's investment in Palmerston North was too big for it to walk away, or that the city could depend on its advantages in terms of size, affordable living costs and location as carrots to retain business was "naive".

"The right decisions were made by all, and the National Distribution Centre expansion was built in the city."

Naylor said she was flattered by public comments that she should stand for the mayoralty in October's elections, but she would not be doing that.

The former mayoress said she was well aware of the skills needed by a mayor, and thought her attributes were more suited to being a valuable part of a team.

Chief executive of the ratepayer-funded Central Economic Development Agency Linda Stewart supported the council's decision to provide an incentive to Toyota New Zealand.

"The reality is we are in a competitive national and international environment to attract and retain talent, businesses and investment to our region.

"We have to be aware that other regions and countries, for example Australia, are actively providing financial incentives for businesses and investment to go to their region."

The council made the grant to Toyota directly rather than going through the agency's processes because it wanted a quick decision.

Manawatū Chamber of Commerce chairman Blair Alabaster said there would be no comment from the business group on the Toyota grant.