The Old Gaol is a nationally recognised, largely intact example of the style of gaol construction of the period at the height of the goldrush. It is zoned residential but the whole site is on the National Heritage Register, the National Trust Register, has Heritage Victoria registration and has a local heritage overlay. Last year Mount Alexander Shire Council (MASC) voted to sell the Gaol, with no conditions, to residential developers by expressions of interest. The prevailing view was that the site was a millstone on Shire finances, costing too much in maintenance and administration, and bringing no benefit to the Shire, despite being tenanted for 14 years (from 1995-2009).

In March 2012, the Council appointed a real estate agency with international connections to market the unique heritage property in Australia and overseas. Their media release described the site as "ripe for development". "There is also a large area of land which has the potential to accommodate around 22 townhouses and 16 dwellings, plus motel accommodation," an agent was quoted as saying.

The agents produced a prospectus for interested developers that touted the site's "excess land" with "panoramic views", and included a Site Strategy Plan (commissioned a year earlier by Mount Alexander Shire Council) showing potential for 40 two- and three-storey townhouses and dwellings around and even inside the Gaol walls.

The Gaol has received over $800,000 in State and Federal grants to perform restoration works, including asbestos removal, floor renovations, rising damp mitigation, plumbing, a major restoration of the Governor's residence, and restoration of the exterior and slate roof of the Wardens' quarters. Sale of the asset by Council now could be seen as "cashing in" this grant money, and at well less than full value.

The Gaol complex is historically significant and includes a burial site. Up to ten executed prisoners were buried within the walls in the 1860s and 1870s. The precise location of the burial site is not known but is thought to be in a yard partially earmarked for dwellings on the strategy plan.

When details of the proposed sale emerged, concerned residents formed an action group to ask Council to conduct meaningful public consultation. The response was that Council considered they had done all required by law at the time the decision was taken – six months earlier. Questioned at Council meetings and again in a private meeting with the Shire CEO, the Mayor and officers insisted that the public consultation requirements in Sections 189 and 223 of the Local Government Act 1989 relating to sale of public assets had been "comprehensively" met.

However, no public meetings were called, the real estate prospectus was never made public, the valuation of the site was kept secret. The public was kept in the dark about the planned future of their asset.

In June, in the absence of Council leadership, the newly formed Friends of Old Castlemaine Gaol (FOCG) began circulating relevant material to the public. Inspired by the response, they called a public meeting of their own, at which 140 people overwhelmingly approved a campaign to pressure the Council to reopen public consultation. In addition, they submitted an expression of interest outlining plans to retain ownership of the Gaol by a community board with the vision of creating a vibrant arts, cultural, heritage and tourism precinct at the Gaol site, but offering no monetary payment. After all, the Gaol is already a public asset.

Over 1500 people have signed 2 petitions, 450 have joined an email information list, and many more have offered their services and resources to help FOCG keep the Gaol in public ownership. Overwhelmingly, when shown the proposed level of development, residents and visitors are shocked and surprised. They want to know how they didn't know about it, and what they can do to stop it.

Expressions of interest closed Wednesday June 29. Councillors completed an assessment of the EOIs received at a closed briefing held on 17 July, and invited five of the six respondents to submit a final tender submission closing 4 pm on Wednesday 8 August 2012.

On Friday August 3, FOCG notified MASC of an apparent breach of statutory public notice requirements - under Section 223 of the Act - regarding the period of "community consultation" held in late 2011. Council did not respond. Legal advice was sought which confirmed the apparent breach, and a further legal notification was sent to the Shire on August 5. Again, Council did not respond.

On the evening of Friday August 10 (just two days after final tenders) a late agenda item was announced for the Council meeting the following Tuesday. After a few hours, detail emerged of the content of that item. Council has been recommended to agree to accept a tender of $500,000 (plus GST) for the site. The same document identifies the official valuation of $1.2m, but lengthily points out commercial and economic conditions that resulted in lower offers. FOCG is aware that this was NOT the highest offer of the three tenders made.

The recommendation includes provision for a new period of public consultation under Section 223 of the Act. The whole thing will need to be rushed through to ensure Council can sign off on a preferred option just days before going into caretaker mode prior to elections in October.

MASC have doggedly refused to treat the Gaol as anything other than real estate, to be disposed of as just another vacant parcel of land close to the CBD. FOCG and its supporters see it very differently.

The CEO at the National Institute of Economic and Industry Research, Peter Brain, states in a recent research paper; The contribution of Mount Alexander Shire built heritage assets to the Shire's economic activity in 2010-2011 that:
"It is clear that heritage should be protected, not only because of its visible and tangible linkage to the past and its contribution to a sense of community and social cohesion but also because of its role in attracting communities which are best skilled to contribute to economic growth, to live in the region."

He puts the economic value in social capital existing now in the Old Gaol is in the order of $1m. He predicts this figure has the potential to increase to $5-6m over the next ten years if the Gaol is retained and developed for community use. This current economic value to the shire is lost if the Gaol is sold to a private developer for housing. Assuming these figures are correct and ignoring the capital works expenditure to date, the sale of the Gaol, at $500,000, represents a net loss of $500,000 to the Shire in the first year alone.

The Mount Alexander Branch of the National Trust of Australia (Vic) has said the Old Castlemaine Gaol is significant to the Castlemaine landscape, and agrees about its potential for use as a social and community hub. Branch President Janet Gilmore said preservation of heritage is critical as buildings and landscapes can never be replaced once they have been demolished or destroyed. "The Trust recognises that the Gaol must be retained as an integral part of the social framework of the community and must be developed economically for community use. However, we believe that it must not be subdivided within the perimeter boundaries and no dwellings should be built within the walls."

Castlemaine, and its iconic Old Gaol, are at the centre of a campaign to achieve World Heritage Listing for the Castlemaine Diggings National Heritage Park. Letting the Gaol go to inappropriate residential development would inevitably have a negative impact on that campaign.

Simply put, the sale of the Old Castlemaine Gaol to private residential developers is poorly conceived, poorly executed, is bad economics and goes against the wishes of the community right now. In future years it would be seen as a lost opportunity and a crucial error of judgment. If it is allowed to happen.