A south-east Queensland council unintentionally undercut commercial waste businesses when it launched its own residential green waste bin program, the Queensland Competition Authority (QCA) has found.
Logan City Council (LCC) established a green waste program for residents last year, but months later a local waste business complained that, as a local government, the council had an unfair advantage.
The QCA investigated the competitive neutrality complaint, and this month found the council was charging its own green waste service significantly less than the fees it charged commercial waste operators.
"We find that the LCC has been charging its own green waste bin service a cost that is substantially lower than the disposal fee it charges private commercial operators for what are essentially the same green waste services — that is, a difference of $48 per tonne," the QCA's report said.
Competitive neutrality is the principle that public sector entities should compete with private businesses on a level playing field, with no advantages from government ownership.
Fees and charges
The authority found LCC intended to cover the full costs of the program when setting its fees but was not charging enough to do so.
"In contrast to the $75 per tonne disposal fee for commercial operators, the LCC's financial modelling for pricing its green waste bin service is based on a disposal cost of $27 per tonne for the processing and ultimate removal of green waste," the QCA report said.
The council said green bin pricing had been calculated well ahead of the program's launch, so had included a "range of assumptions" that could now be corrected in future budgets.
The council only included collection and disposal costs when calculating pricing and did not include $85,000 for a two-year marketing program, or $32,000 for an administration staff member.
It also incorrectly allocated the collection and disposal costs, the watchdog found.
According to the council's current pricing guide, ratepayers who opt in are charged $48 for a single 148-litre green waste bin annually.
More than 8,500 bins were issued in July last year when the program launched.
Eight recommendations
The QCA's report concluded the council "had not conducted its green waste bin service in accordance with the competitive neutrality principle" and made eight recommendations.
At a city governance meeting last week, Logan councillors accepted six recommendations in their entirety and conditionally accepted one.
Councillors rejected one recommendation that it drop the fee for commercial operators to $27 per tonne — the same price it was charging its own green waste disposal program.
Instead, it argued that commercial operators should apply full cost price principles to their own fees and charges.
The council conditionally accepted a recommendation to "reset" its green waste program pricing, saying those fees would be reviewed "as part of future budget processes".
However, it said any changes might be made "incrementally over a number of years".
Logan Mayor Darren Power told the city governance meeting it was a "good outcome".
"I'm quite sure that it will stand to the [QCA] in regards to our reasonings, and [I] understand that we've got to address these issues when they come up," Mr Power said.
