Council staff yesterday confirmed they had dropped the fee, which would have been applied to groups running public food stalls as fundraisers.
Green Island School principal Steve Hayward greeted the news with delight when contacted, saying the council's move was "brilliant".
He had objected earlier this week, after calculating margins which showed the school would have to hand over to the council proceeds from the first 60 sausages sold at each fundraiser.
"The right thing has happened.
We are very happy," he said after hearing of yesterday's decision.
The back-down came after news of the planned fee was first reported by the Otago Daily Times on Tuesday, then picked up by national media yesterday, drawing criticism from around the country.
However, council environmental health team leader Ros MacGill said yesterday's "media frenzy" was not the reason for the about-face.
Instead, the decision had been made on Tuesday, after she had her first opportunity to finalise a report on fee changes with council development services manager Kevin Thompson.
They had agreed the $5000 in revenue that would be raised by imposing the fee "wasn't worth the hassle".
The change could only be confirmed yesterday, because the report had to be finalised and sent to councillors before its contents could be divulged.
The $16 fee was among several fee changes proposed by Ms MacGill in an attempt to offset costs incurred by the council's environmental health team.
Councillors raised concerns when the fee changes were discussed during last week's 2012-13 pre-draft annual and long-term plan meetings.
A proposal remained in the report to lift the fee for commercial food stall operators from $16 to $30, and introduce a fee of $111 for every 10 stalls to cover the cost of inspecting "high risk" markets, to be paid by event organisers.
The report would come before councillors next Wednesday.
