The ACT government will sell a block of land in Ngunnawal opposite the local centre for a mixed-use development after it was declared excess open space.
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The almost 3000 square metre block of land at the intersection of Yarrawonga Street and Jabanungga Avenue will be auctioned this financial year.
The government contacted local residents about the decision this week, which is more than two years after the first round of consultation took place.
The block was initially due to be sold in 2011-12.
Land Development Agency chief executive David Dawes said the release of the block was delayed to allow further consultation with the community and other stakeholders on the future use of the site.
He said as a result of further community consultation changes had been made to the original block to retain a number of trees.
"Additionally further investigations by the LDA determined that the most appropriate use for the block would be mixed use including residential and commercial, but excluding retail," Mr Dawes said.
"This included consideration expressed by many residents throughout the community consultation that they would like to see more activity at the local shops.
"This can be achieved by this sort of development."
The government removed the block of land from the land release program last year following the first round of consultation.
The Economic Development Directorate's community engagement report released in September said this was as a result of the Ngunnawal community's view that the land should be included in the open space network.
However Territory and Municipal Services declined to add the land to the official open space next to the site, advising there was already sufficient space and children's play facilities in the immediate area.
A second round of consultation was held with residents in December and January about redeveloping the site and Ngunnawal residents have just been informed of the outcome.
The letter said "due to ongoing negative activities occurring around the existing local centre" the community and government had concluded a mixed-use site was of more value, and would provide additional commercial activity and passive surveillance of existing facilities.
Resident Anthony Burr, who signed a petition to save the land during the initial round of consultation, said he was surprised by the government's decision.
"It doesn't really wash with me, or other people I've spoken to in the area," he said.
Mr Burr said there was still strong community support for the land to be retained and it didn't make sense to provide more commercial space when several shop fronts at the centre remained vacant.