Blacktown City Council has been accused of potentially breaking the law by signing a "very bad" $42 million deal selling off key council properties to a major Sydney developer for the transformation of its CBD.

Walker Corporation signed the deal in March 2023 to deliver a $2 billion redevelopment of Blacktown's CBD with commercial office space and a new private medical facility and research institute, which it says will boost the local economy by as much as $1 billion annually.

Now Liberal councillors have accused the council of breaking the law by failing to put the sale to tender.

Liberal councillor Peter Camilleri, who has 30 years' experience in the construction industry, said such a significant sale of council-owned land should have gone to tender.

"At best it's a gross incompetence of use of public money and at worst it could be a corrupt deal," Cr Camilleri said.

He points to the Local Government Act which requires tendering of any "contract for the disposal of property of the council".

A copy of the contract of sale obtained by the ABC defines what was sold as "property", as opposed to land.

The sale includes Blacktown council's administration centre, Bowman Hall, Leo Kelly Blacktown Arts Centre and half of the K-mart car park on Flushcombe Road.

But Cr Camilleri said the legislation also requires a tender for a sale which involves payments over more than two years.

The sale contract seen by the ABC shows an instalment schedule over a 36-month period.

"There are two provisions there, and you don't need to meet both. It's either, you must do a tender," Cr Camilleri said.

Council says the sale was for land, which exempts it from the relevant legislation requiring a tender.

It says it received legal advice from law firm Clayton Utz and is confident the deal complies with NSW law.

"I'm confident in our expert legal advice, that we have abided by the New South Wales Local Government Act, that this was a sale of land," Labor Mayor Brad Bunting said.

"They do [give legal advice] for other councils, and they are experts in this field, we're confident what they've given us is the correct information."

Liberal councillor Jess Diaz said he and his colleagues support redeveloping Blacktown's CBD but want to make sure ratepayers got a fair deal.

"A sale of this land by instalment requires tender … that's very obviously a breach," he said

"In this particular deal, probably the biggest and most important one, it is amazing the lack of consultation with the public."

A spokesperson for Walker Corporation, which also developed the $3 billion Parramatta Square Precinct, said the Blacktown Quarter development will deliver more than 1,000 construction jobs over five years and permanently add more than 4,500 jobs and over $1 billion annually to the city's economy.

They said "one of the biggest" surveys ever conducted in the LGA of more than 2,700 Blacktown residents and visitors aged 12 to 85 found support for the plan.

The deal split the Labor-dominated council with two councillors crossing the floor and another not attending, leaving the late mayor Tony Bleasdale to make the casting vote in support of the contract.

Questions about valuation

According to the Liberal councillors, Blacktown council staff led negotiations and provided information about the deal to councillors in confidential meetings.

Former Labor Blacktown mayor and current Blacktown state MP Stephen Bali said there were questions about the transparency of the deal.

"My biggest concern is that it was all behind closed doors … I think the ratepayers should have the right to know what's happening," he said.

Cr Bunting said council had been open about the deal struck with Walker Corporation.

Cr Camilleri has also raised concerns about a change in the valuation of the property when the sale was being negotiated.

The original proposal involved selling the property to Charlie Teo to build a proposed Blacktown Brain and Spinal Institute (BBSI).

A 2021 presentation shown to councillors and seen by the ABC, suggested the property had an estimated value of about $80 to $100 million.

Cr Bunting said that "was never a figure".

"We've got independent legal evaluators that evaluated the land, and we got what the proper value is for our land investment for the community," he said.

The Liberal councillors said under this proposal, council would have maintained ownership of the property and only completed the sale to Professor Teo at the end of a seven to 10-year period at the future value of the property, potentially higher than $100 million.

The public was consulted on the terms of that deal, with a document posted on the council's website in January 2021 explaining the proceeds from the sale would provide "a significant portion of the cost of a new council administration building".

This version of the deal had unanimous support from all councillors.

But when the Walker Corporation stepped in and bought 100 per cent of Professor Teo's shares in BBSI, the deal changed.

By February 2023, a new valuation was presented to councillors slashing the value to $38 million, with the removal of a residential development option for 20 years.

"We would have sold the land for more if we were going to build apartments, but we're not about putting more houses here in the CBD," Cr Bunting said.

Mr Bali said the deal was rushed.

"The reason they went lower [on sale valuation] is because they put a caveat to block residential … for reasons that seem to be beyond anyone's comprehension," he said.

Cr Camilleri and his Liberal Party colleagues promised a review of the deal if they secure a bigger share of council seats at this month's local government election.

Cr Bunting would not commit to a review but said the deal was "all above board".

"We're moving forward now," he said.

Renting back their own premises

As part of the renegotiated $42 million deal signed in March last year, Blacktown Council immediately became the renter of its own chambers, council building and attached properties.

Cr Camilleri said he calculated that council would pay Walker Corporation almost $20 million in rent over the next seven-and-a-half years and millions more in ongoing costs like maintenance, insurance and tax.

Cr Bunting dismissed the estimate as "wrong".

"I'm not sure where Peter's getting these figures from but what I can tell you, it sounds like a desperate councillor on the eve of a local government election that's just spruiking all these figures out there that try to feel relevant when it comes to Blacktown Council, because they've struggled to feel relevant over the last eight years," he said.

Cr Diaz said the proceeds from the revised deal are too meagre to contribute meaningfully to the new council buildings, which will need to be built elsewhere.

"We are now left to fully fund the new council building, the chamber that we have to be in, in the tune of over $300 to $500 million. How do we get that? We haven't got anything, except to sell assets and to borrow money," he said.

"They sold Blacktown for a song … they've cheated the people of Blacktown."

Internal council documents from February 2023 seen by the ABC suggest building a new administrative building alone would cost $150 million.

Cr Camilleri said building a replacement for the arts centre, Bowman Hall and civic centre would make it even more costly.

"To build something of that magnitude, you're probably talking about $350 million without replacing all the ancillaries," he said.

The mayor said the cost of replacing the civic centre would be more that $100 million.

"I'm confident we'll be able to deliver this one as well within budget," he said.