Council officers have proposed the council buy a beachside site at the northern end of the Sandon Point Reserve for $1.52 million, dedicating the site as community land. The site had been valued at $2.7 million.

Another smaller site, known as the "pathway land", would be acquired for $315,000.

Meantime, Stockland would not be required to pay the council for land set aside for an extension to Wrexham Rd, south of Thomas Gibson Park at Thirroul.

The recommendations will be voted on by administrators at Tuesday's council meeting.

A Stockland spokeswoman said yesterday the company would continue to work with the council on the issue but did not want to pre-empt its decision.

But the Northern Illawarra Residents' Action Group (NIRAG) is angry the council intends to pay for the sites, while Stockland will retain land at the end of Hill St, which is declared an "Aboriginal place" under the National Parks and Wildlife Act.

The group's publicity officer Jill Merrin said there was no new justification for handing ratepayers' money to Stockland.

"The land is zoned for public recreation and should be gifted back to the public," she said.

Former independent councillor Alice Cartan said more than $4 million was initially set aside to purchase the sites - before legal advice last year that the land should be dedicated to council for free.

"If they have got away with buying what was proposed for $4 million for under $2 million, then that's great," Ms Cartan said.

"But I am concerned whether that other land (Hill St) will be protected from future development."

NIRAG president Alex Peterson said the proposal would give Stockland the "golden key" for development at Wrexham Rd and is concerned over council's claim it is unsuitable as public open space.

Sandon Point campaigner Jill Walker labelled the deal a "scam", saying that the Hill St site would not be sufficiently protected in the hands of Stockland.