Kiama Municipal Council has spent $23,840 on a contractor to examine the type of fill on the 1.5-hectare site off Riverside Drive after councillor and chair of the council's revenue sub-committee, Warren Steel, proposed the site be subdivided and sold off.

Cr Steel first proposed putting 20 residential lots on the reserve in 2005, which attracted public backlash.

Former councillor and North Kiama Drive resident Bill Carey said Iluka Reserve was dedicated as part of the approval for Wilmore and Randall's original Kiama Downs subdivision and the council should live within its means.

"People purchased land and built houses to suit the reserve - council should respect that," he said.

"If Kiama council even debates the proposal to sell part of Iluka Reserve then they may as well debate selling a few blocks off Kiama Downs shopping centre car park.

"And while they're at it, sell off part of Kevin Walsh Oval at Jamberoo and Hindmarsh Park in Kiama."

Residents have pointed to the swampy nature of the reserve's northern side - heavy rain can cause run-off to flow through to North Kiama Drive and water can be retained on site for up to a week.

Angela Hay, whose house backs onto the reserve, took video footage of water streaming from the reserve past her property onto North Kiama Drive during the March 2011 floods, saying the amount of water was "amazing".

"If that's what it's like on vacant land, what will it be like when there's houses on it?" she said.

Flinders Avenue resident Craig Smith said he would have "extreme reservations" about building houses on the land.

"If they build on top of the fill and there's an issue, they'll never be able to get to it because of the buildings," he said.

Also the Kiama District Sports Association's secretary, Mr Smith said the association would approach the council proposing to use the site for training.

"A lot of existing grounds are overused - this would take a load off them," he said.

Mr Carey supported the idea of using the park for recreational purposes, specifically bike riding and cardiac fitness.

Kiama council general manager Michael Forsyth said the geotech study was not yet complete.

"The council recognises the site is underutilised and also the ongoing costs of maintenance," he said.

"The first issue is the fill, then the drainage, then what the site can possibly be used for."

Mr Forsyth said it could include a mix of recreational areas and housing.

He said the tennis courts had been infrequently used after the Iluka Tennis Club folded.

"We encourage people to use those facilities as much as possible," he said.