WILLOUGHBY City Council is taking the State Government to court after receiving about $27 million less than it expected for land the Government compulsorily acquired to sell to developers for apartments.

About 4000 square metres of land alongside Chatswood station was compulsorily acquired in 2004 as part of the construction of the Chatswood Transport Interchange, a public-private partnership between the Government and the development company CRI Australia.

In exchange for upgrading the station, building two new railway lines and a bus interchange, CRI Australia will be allowed to build 500 apartments in three towers near the station.

Two of the towers are planned for the land that the Government compulsorily acquired from the council. The developer will buy this land after the station upgrade is completed.

The council had expected to be paid up to $30 million for the site but the Government had offered only $2.7 million. "To add insult to injury, the Government has waived about $18 million worth of Section 94 contributions [usually paid by the developer]. That's money the council needs to pay for facilities for the community," said the Mayor of Willoughby, Pat Reilly. "It's a very good offer for the developer."

The council has appealed to the Land and Environment Court. A spokeswoman for the Transport Infrastructure Development Corporation said the land value was independently assessed by the Valuer-General.

"The land and interests in land were acquired for the public purpose of the Chatswood Transport Interchange under the terms of the Land Acquisition (Just Terms Compensation) Act 1991," the spokeswoman said.

"TIDC has acquisition powers under the Transport Administration Act 1988 and the Transport Administration Amendment (Rail Agencies) Act 2003.

"The market tendered on the Chatswood Transport Interchange project and CRI were chosen as the successful private sector partner."

The spokeswoman said the Section 94 contributions were waived because the project "includes substantial improvements to the infrastructure".

The chief executive of CRI, Malcolm Naylor, said providing housing close to transport was international best practice. But he would not say how much CRI was paying for the Chatswood land.

The company donated $3940 in past four years to the NSW ALP and thousands more to the NSW Liberal Party but Mr Naylor could not say why. "To be honest, I prefer not to answer that," he said.