The Northern Midlands Council is calling for tenders to push ahead with plans to subdivide land at Perth it purchased for close to $500,000 over its value last year.
The subdivision at 10 Norfolk Street will cost the council an estimated $450,000-$500,000.
In February, the council approved plans to subdivide the lot into eight residential blocks and a 2.5-hectare public open space at its monthly meeting.
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Tenders for the site include the construction of road, sewerage, water supply, stormwater drainage and all associated works.
The Tasmanian government's Valuer-General valued the block at $165,000 in March 2019 at the time of the sale, yet the council purchased it for $640,909. A total of $475,909 over the government's valuation.
The council claims the purchase was "fair" yet refuses to release the property valuation report it had conducted before the purchase.
Mayor Mary Knowles said the subdivision would help offset the purchase cost and the cost of development.
"This will provide a cost-neutral project, further reducing the overall expense to ratepayers and increasing the liveability of west Perth by retaining and improving available public open space," she said.
"As it is predicted that the population of Perth will more than double within the next 10 years, council has been proactively working to mitigate any population growth issues that will arise by ensuring that adequate stormwater drainage and potential flooding issues are resolved."
Local Government Minister Mark Shelton was asked if councils should be purchasing private land and subdividing it to reclaim costs and if it was common.
A spokesperson from Mr Shelton's office said the questions were a matter for the NMC.
Similarly, the Local Government Association of Tasmania did not have data on councils purchasing private land to subdivide it.
LGAT chief executive officer Katrena Stephenson said councils undertake a range of roles and activities to plan for the needs of their communities into the future.
"Purchase of land or subdividing land are examples of a range of options council may use," she said.
"There is commonly variation between the government valuation and the final sale price for land or property.
"Purchasing decisions are decided on their merits within the context of the council's planned requirements in the best interests of the community."
The council also claimed it discovered a "previously unknown well" on the adjacent site during remediation works.
Councillor Knowles said the discovery of the well took workers by surprise as its existence was not recorded on any land titles or TasWater plans.
"When the well was discovered we engaged a heritage advisor who conducted extensive research into the history of the well but its origin remains unknown," she said.
"To ensure it poses no danger to the community, the well has been capped but it has not been filled.
"We have ensured the Certificate of Title will note the existence of the well on the site with a caveat to ensure it is protected in the future."
The well was found on the council's other site it purchased, 32 Norfolk Street, in March 2019.
Tasmanian company Casanda Securities bought the 10 Norfolk Street site in 2010 for $140,000 before selling the 3.211-hectare block last year to the council.
The proposal to purchase the land was discussed at closed council meetings in September 2017 and December 2018.
Tenders for the contract close on August 13 at 2pm.