Meander Valley Council mayor Wayne Johnston believes the government should look to the Ashley Youth Detention Centre site as an option for building a new maximum security prison.
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The council wrote to the government in 2017 suggesting the Ashley site as a possibility for an adult prison, but land in Westbury's industrial estate was instead negotiated, before it was moved further north to a bush block following community concern.
Premier Peter Gutwein on Thursday announced Ashley would close in three years, with two smaller centres to be built - one in the North and one in the South - with a more "therapeutic" approach.
Cr Johnston said Ashley could make sense for an adult prison.
"I would encourage the government to look at that as an option compared with building on a greenfield site at Brushy Rivulet," he said.
"It would solve a lot of their problems in trying to build on a greenfield site and try to get through the green tape that'll be in front of them.
"From my point of view, there's a lot of infrastructure there and it's already being used as a remand centre. I'd like the state to consider it."
Ashley sits on a 38-hectare site, while the total area for the proposed Northern Regional Prison was 16 hectares.
The government this year embarked on a further $7.28 million in upgrades to Ashley, which will run their course.
Cr Johnston said the Premier rang him half an hour before the announcement that Ashley would close.
"We hadn't had any indication before then that it was happening," he said.
Meander Valley councillors are likely to "informally" discuss the issue ahead of next week's council meeting.
The government's decision to choose the Brushy Rivulet land resulted in further community concern due to conservation values with listed threatened species the grey goshawk, green and gold frog, wedge-tailed eagle and Tasmanian devil noted as present on the site in a departmental works authority.
The land was initially purchased in 1999 using Commonwealth funding from the sale of Telstra and was required to be legally protected for conservation values, but this did not occur.
Ashley site 'transition' not yet considered, Premier says
The government planned to have a development application before Meander Valley early next year, with due diligence works ongoing.
Mr Gutwein said it was too early to say whether Ashley would be considered for a maximum security prison.
"Obviously we'll have a conversation at cabinet in terms of that, and we'll speak with the Minister for Children in terms of what that transitional process might look like," he said.
"There have been a range of suggestions, a number of them made quite loudly today in terms of what we could do with that site.
"The decision that I announced yesterday in terms of Ashley was made with a focus solely on Ashley, the young people that are resident there and importantly the staff there, and looking at what a new model might be for that.
"I'm certain that there'll be a range of suggestions as to what that site could be used for, and the government will carefully consider those."
Deloraine community must be consulted, Westbury group says
Westbury Region Against the Prison president Linda Poulton said the government must undertake "genuine consultation" with nearby communities before deciding to relocate the proposed prison.
"Almost any other place would be a better place than the one they are proposing to use right now," she said.
"However, we have always maintained that the prison should go in a community that supports it being there.
"Whilst it might seem to many people obvious that this is a better site, it's obvious because the current site is so ridiculous. I think Deloraine should be consulted."
Ms Poulton said the council should hold another public meeting - similar to that held last month regarding the Westbury prison proposal - if the government pursued Ashley as a site for an adult prison.
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