GYM owners say the City of Launceston has lost financial control over the aquatic centre and have re-lodged their submission to the Tasmanian Economic Regulator to take action over unfair practices.
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A group of 14 gym owners says the council should not continue to throw ratepayers' money at the centre through the LAfit gym, while its deficit has almost doubled in just over one year - rising from $1.6 million to $2.96 million and when three gyms have closed down.
Council general manager Robert Dobrzynski refuted the figures, saying the overall deficit had actually declined from $1.6 million to $1.3 million.
He said the $2.96 million deficit figure, provided to The Examiner on September 14, actually included "non-cash figures for full cost attribution, competitive neutrality, depreciation and the notional cost of capital as part of our accounting exercises".
The re-lodged submission comes just days after Mr Dobrzynski pulled the development application for a 2.6-metre-high security fence expansion.
In April 2014, the economic regulator found the council had "contravened" the National Competition Policy Competitive Neutrality Principles when it opened LAfit because the premium pool and gym membership of $21 was not reflective of full-cost attribution.
At the time, the economic regulator held no powers to force the council to alter its charges, however new legislation introduced in July gives the state government powers to act if fault is found.
Health and Fitness World owner Rod Ascui questioned Mr Dobrzynski's explanation of the deficit figures and said if one of his managers had overseen a $1.6 million deficit and then saw it climb to $2.96 million he would sack them.
"I think this is unconscionable behaviour towards us," Mr Ascui said.
"Under corporate law, when a large corporation behaves in a way that smashes the little players like us, they've behaved in an unconscionable way - there's no doubt."
He said according to figures he'd obtained from council papers, if the average ratepayer was paying about $2000 a year in rates, about 5 per cent of that would be going towards the centre.
Brian Finch, of KFM Fitness, said gym owners were sick of being ignored by council management.
Alison Baker, of Anytime Fitness, said the council should be trying to find other avenues to reduce the deficit, such as making it more reflective of the true cost.
Mr Dobrzynski said the figures quoted previously to The Examiner were not "cash figures".
"This therefore does not reflect the true cost of the operation of the centre," he said.
"Without these non-cash figures, the operational deficit for 2014-15 was $1.3 million.
"This represents a more accurate picture of the operating costs of the centre."
Mr Dobrzynski said the council had worked closely with the economic regulator and appropriate minister to satisfy "all legal requirements" and had withstood scrutiny.
"The council's policy view is clear and evidence-based - wet facilities cost money and dry facilities make money."
