One hundred and fifteen years ago, the bubonic plague hit Sydney and the state government seized waterfront buildings.

It was an emergency measure that was never overturned and it is how the state came to be saddled with the fiddly responsibility of acting as landlord to much of Sydney Harbour.

Only this week has the arrangement finally shown signs of disintegrating, with the axing of the Sydney Harbour Foreshore Authority, the agency that manages about 250 Harbourside properties – including pubs, an amusement park and shopping centre.

Its role has been subsumed by a branch of the finance department in a move critics fear portends, if not the commercialisation of Harbourside land, then an end to the days where it was managed like public domain.

The government broke the news gently. It was overleaf on press release about new ferry wharves at Circular Quay.

Curiously, for such an announcement, the transport minister was absent. Standing in his place was the Finance Minister, Dominic Perrottet. What's more, the wharves rebuild was not to commence until 2019.

This appeared to be less about a new piece of infrastructure and more about how it would be paid for.

The government said it would raise $200 million by selling 99-year-leases to a selection of assets from a pool that includes hotels such as the Four Seasons and Shangri-la and office blocks in Darling Quarter.

"There is no reason the government needs to be a landlord for luxury hotels," Mr Perrottet said.

But the first question hanging over the plan is whether these sales can be made at all.

This is not the first government to realise it is sitting upon a harbour-side goldmine.

In 2010, former premier Kristina Kenneally announced a grand plan to flog off assets in the Rocks and Darling Harbour to fund more than $800 million in spending on schools and hospitals. The announcement was many times more ambitious but in many ways uncannily similar to last week's, down to the Novotel and the Shangri-la.

"It ended up being much about nothing, about $10 million [… raised mostly from] a car-park sale in Pyrmont," said Egle Garrick​, who was then SHFA former general manager and now a board director and consultant. "It was essentially selling a discount on future rent, so not a particularly attractive proposition for any of the owners [and] not that easy to sell."

It remains to be seen whether hotels can be coaxed into buying this time – and if they do just how much it would be worth. (One SHFA source suggested that the hotels, though central to the government's pitch, would raise negligible amounts on the market).

The state government says the market for real estate is much improved compared to 2010. Labor warns of the risk of a fire sale.

Good economic timing is part of why the Baird government thinks this is a prime time for the "recycling" of assets, whereby old and useless assets are sold off and proceeds are used to build new ones.

But government departments get recycled too, and the latest changes have some worried about the future of the harbour.

In its short history SHFA had its share of controversies. It was revealed in a Herald investigation that a finance manager, Andrew Kelly, accepted a holiday from the wealthy Kazal family, which happened to receive a lucrative George Street lease. Before the axe landed this week, it had already been subject to several reviews and had many of its powers shorn away in recent years.

But now its whole reason for being is being reversed.

In 1998, the then Labor government merged three bits of bureaucracy to create a single Harbour manager.

"Sydney needs a more holistic approach to foreshore planning," said Labor's then-planning minister Craig Knowles. "[There is] growing public concern about the multiplicity of authorities responsible for planning and management decisions in and around the harbour."

Less than two decades later, that amalgamation is being disassembled.

The finance department is harbour landlord; Destination NSW manages its events; and the Greater Sydney Commission – a super, city-wide planning body – is in charge of its heritage.

Other parts of the Harbour, such as the Bays Precinct are run by the government's property developer, UrbanGrowth and Barangaroo, too, has its own bureaucratic outpost.

Labor's leader, Luke Foley, argues that this fractures bureaucracy into smaller less accountable pieces, none of which has preserving the harbour and its heritage as part of its mission.

"The harbour foreshore needs a guardian," he said. "The government is unapologetically driving its commercialisation agenda and somewhere in the government we need a guardian of public access."

Foley points as an example of this approach to a recent plan to put a five-star hotel on the Botanic Gardens (also subject to its own bureaucratic agency) that drew howls of outrage.

Leichhardt Council says it is worried about the future of heritage sites such as Ballast Point Park and the White Bay Power Station when managed by the finance department.

Mr Perrottet was at pains to guarantee that any changes to the way the Harbour foreshore was managed would not come at the expense of any heritage.

The government has promised that responsibility for guarding the Harbour's heritage will now be in the hands of the Greater Sydney Commission, a new super planning body. But how well it performs that role is yet to be seen.

"There's always a risk when you make a change, but the Greater Sydney Commission makes sense [to me]," said Patricia Forsythe, a former Liberal MP who is now chair of the Sydney Business Chamber.

But a senior SHFA insider said that once you had an agency with both eyes on the bottom-line managing tenancies in the Rocks, the area's ambience would immediately change.

"If you forfeit control of property at the Rocks [as landlord] what you'll get is a shitbox. It will all be $2 shops and imitation aboriginal art vendors."

SHFA had been selective about businesses and tried to get the right mix between business and heritage.

If it can achieve its plans to sell off leases to harbourside buildings, Ms Garrick is sanguine about the government selling-off its landholdings. "That's why you have heritage laws to protect historic sites," she said. "I can't see any reason why the government should be owning restaurants and pubs – it probably always made sense for SHFA to have a sunset clause.

"The obvious thing to do is pass the land back to the City of Sydney, but neither this government nor the Labor government has had a good relationship with the City of Sydney."

Indeed, Sydney's Lord Mayor Clover Moore was this week calling for the City, which approved about $4 billion in development last year, to be granted power back over the harbour. "People expect the city's public areas to have consistent planning and management".

The idea is not new. By 1903, two years after the bubonic plague outlet on the Rocks settled down, the Herald called on the state government to give control of the area back to the council for re-development. "Between these [… authorities …] the area remains in point of fact completely tied up".