The error came to light at a council infrastructure subcommittee meeting this week, at which council waste minimisation officer Sophie Mander presented a report outlining the mistake.
Despite the council's outstanding payments to WasteBusters of an estimated $59,575.95, it will not retrospectively pay the amount.
Ms Mander said, because the council budgeted on a yearly basis, it would be extremely difficult to allocate the money in a lump sum.
She said the council had provided extensive funding to WasteBusters through other grants since 2002, and its budget for the recycling company this financial year was $228,230.
The committee resolved to recommend to the council's operations committee it should revoke the resolution made in 2002 which enabled the limited payment, as well as adopt the intended 90% reimbursement.
Proper payment should be allocated to WasteBusters from now on, and retrospectively paid to July 1 this year, the subcommittee resolved.
The operations committee will consider the recommendation at its next meeting on September 17, after which it is estimated revised payments could be made official from October.
WasteBusters manager Karen Noble said the $60,000 would have been welcome, but it would not have been paid in a lump sum anyway so it was not an amount budgeted for.
Mrs Noble said WasteBusters accepted the shortfall in funding was a genuine mistake on the council's behalf, and said the company was grateful for its continued support.
The council's initial resolution, made in March 2002, stated WasteBusters would be paid for 90% of the costs incurred in transporting and dumping waste at a landfill station.
Instead, the council has annually paid a fixed price calculated on 90% of such costs for the 2002 year, despite regular increases in transport and landfill costs since.
In 2002, the price of disposing waste at landfill stations was $44.50 per tonne plus $16 for transport, which meant WasteBusters received $54.45 reimbursement for each tonne of waste it diverted from landfill.
In her written report to the committee, Ms Mander said the "unfortunate administration error" was amplified in 2003, when the council cemented the flat rate, not realising its mistake, during the annual plan process.
It had not been altered since, she said, although the amount of work WasteBusters did for the council had also subsequently increased.
With a change in the resolution requiring the council to pay 90% of landfill and transport costs this year, as opposed to a flat rate based on 2002 figures, WasteBusters would receive an additional $24,570 in the 2008-09 year alone, Ms Mander said.
