Shoalhaven City Councillors have overturned a decision to seek to list the Huskisson Anglican Church site as a Local Heritage Item.
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A petition with 2861 signatories imploring councillors to 'Save Husky Church' and recommend an interim heritage order to the NSW Office of Heritage was presented to council on Tuesday night.
A slight majority of councillors instead reaffirmed council's strong opposition to heritage listing of the site.
The matter of unmarked graves on site was addressed at the meeting, as conservation experts have said the grounds were likely to contain more than the seven graves discovered, which include remains of European and Aboriginal people.
Stephen Bartlett, the proponent interested in developing the site, made a deputation, promising, "Nobody's going to be exhumed."
Indigenous elder Aunty Jean Carter warned councillors against siding with developer.
"He says the building is going to zig-zag around the sacred land, let me tell you, the proper probing hasn't been done and I don't want to see a probe done on it," Mrs Carter said.
"It is very sacred ground where ancestral burials have been laid."
Shoalhaven Councillor Andrew Guile said by opposing the heritage listing, he was not siding with the developer, rather protecting the property owners from economic losses.
"A heritage listing will devalue the site, to devalue someone's property is a principle I'd never want to see council uphold," Cr Guile said.
"We all lose sight this is a privately-owned parcel of land," Cr Greg Watson said.
Cr Bob Proudfoot was among six councillors to support an interim heritage order.
"The issue must be deal with sensitively in an informed way," he said.
"We need to come together with greater knowledge and in consultation with Aboriginal experts."
Motions carried
FOR: Crs Joanna Gash, John Wells, Patricia White, Guile, Watson, Mark Kitchener, Mitchell Pakes
AGAINST: Crs Proudfoot, John Levett, Annette Alldrick, Nina Digiglio, Kaye Gartner, Amanda Findley
A rescission motion overturned a decision to seek heritage listing for the site. The next motion reaffirmed council's strong opposition to heritage listing.