Tamworth Regional Council has approved a development application it judged to be "contrary to the public interest from a broader community perspective".
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In April, car sales business JT Fossey asked the council to allow it to convert the old One of a Kind Community Support store on Hill Street into a vehicle sales and hire premises for MG Motors.
The council gave the conversion the green light in October, but time-limited approval to just a decade.
In its approval of the development application, council said it did not want the car sales industry to expand in the city's CBD area.
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Council said the development wasn't in line with its Blueprint 100 planning scheme, which has earmarked the area for new apartment construction.
"The development is deemed to be contrary to the public interest from a broader community perspective," the council said.
"An additional vehicle sales premises within the Tamworth CBD will result in further impacts on the current amenity of the nearby Bicentennial Park precinct."
The limited approval will prevent the subject land from being "sterilised by the existing automotive use" in a way "that is not consistent with the preferred future character of the area", the council said.
The development will cost JT Fossey some $325,000 to carry out.
The company already owns the existing covered lot on the corner of Kable Avenue and Hill Street.
The showroom will operate from 8am to 5pm on weekdays and 9am to 4pm on Saturdays.
The One of a Kind building is set to get new signage, a kitchen, office space and an MG Motors showroom.
It would be run by three full-time and administrative staff.
One of a Kind Community Support was forced to sell the building after going into administration in 2019, according to documents submitted to the Commonwealth government's charities regulator.
Both JT Fossey and Tamworth Regional Council were contacted for comment on this story and had no comment.
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