The Barnett government has slammed Fremantle council's bid to develop part of the Fremantle Harbour and Swan River into a massive waterfront development, calling the proposal "significantly flawed".
The City of Fremantle flagged it was interested in developing 120,000 square metres of prime waterfront land from the WA Maritime Museum down to South Quay, just past the Fremantle Traffic Bridge, for housing, hotels, cafes, bars and restaurants.
The majority of the land leased to the Fremantle Ports by the Barnett government is currently used for storing new cars.
Treasurer Mike Nahan didn't pull any punches about the project, saying Fremantle council "simply didn't understand the needs of the port".
The WA government is currently looking at selling off the port which could pour as much as $2 billion into the state's kitty.
"This is a significantly flawed proposal," Dr Nahan said.
"The very core of Fremantle is its identity as a port city, yet this proposal would strangle the port's economic viability.
"The due diligence process for the proposed divestment of Fremantle Port is currently underway.
"This work includes financial analysis and consideration of a wide range of marine and landside issues. Assessing container trade capacity, operational needs, land requirements and uses (including Victoria Quay) and potential for future development is part of this process."
Fremantle mayor Brad Pettitt said on Monday the proposal was a once-in-a-generation project and it would be bigger than Elizabeth Quay and the Perth City Link combined.
"Imagine a publicly accessible historic port waterfront from the WA Maritime Museum down to the Fremantle traffic bridge," he said.
Fremantle's proposal would waste hundreds of millions of dollars.
"Imagine the Fremantle Passenger Terminal not surrounded by a sea of parked cars but instead being part of an attractive precinct to greet cruise ship tourists. Imagine restaurants, bars and cafes overlooking the working cranes across the water on North Quay."
But Dr Nahan was scathing of the city's idea of slicing up the port for development, saying Fremantle's proposal would waste hundreds of millions of dollars in existing infrastructure.
"Even if the Victoria Quay/South Quay was not constrained by buffer zones and remediation costs, its value does not come close to approaching the value of the replacement infrastructure," he said.
"Existing buffer areas, such as those relating to dangerous good operations, surrounding the inner harbour have a critical influence on the nature and scale of development that is permissible on Victoria Quay and surrounds."
Dr Nahan said the project did not consider the future needs of the state.
"These issues directly impact the value that may be derived by the state from any land reserved from the transaction," he said
"Further, the proposal apparently ignores the extended timeframe required to develop replacement infrastructure (assuming it could be funded) to free up the inner harbour land, and then the development timeframe for the remediation and sale of land."
Dr Pettitt hit back at the treasurer, saying the land around South Quay - used for parking new cars - was "low-hanging fruit, ripe for the picking".
"Moving the storage of new cars from the south part of the port is moving the cheapest, least infrastructure intensive port use, which also happens to be on the best land, closest to the centre of Fremantle," he said.
"The City of Fremantle has commissioned an independent economic analysis to examine the costs and benefits of this approach, which we will feed into the formal port sale process.
"Restricting the operational port area to the north side would shift the buffer zone away from the centre of Fremantle and enable a far broader range of uses on South and Victoria Quay than is currently allowed potentially including residential and hotel uses.
"This will also increase the value of the land on Victoria and South Quay."