Local Government Association of Tasmania president Doug Chipman appeared before a parliamentary inquiry investigating the proposal.

He said a major concern was how the government were going to cap price increases for water and sewerage services at an unsustainably low level without affecting TasWater’s operations or having it plunge further into debt.

Mr Chipman said there were further concerns regarding ministerial interference, as permitted under the legislation; pointing to Treasurer Peter Gutwein’s promise to make it easier for businesses to deal with trade waste issues.

Several submissions to the inquiry have criticised TasWater’s trade waste solutions program which they say will force businesses to close due to the expense of refurbishments and new equipment costs.

Mr Chipman said TasWater chief executive Mike Brewster was in discussions with the Environmental Protection Authority to find ways to make the program more flexible and still stop trade waste violations.

He said TasWater could accept a lower environmental standard for trade waste and it might be that the state government would need to financially support some businesses to make change.

​"We don't want to see businesses going out of business; we don't want to see third-world standards," Mr Chipman said.

Acting LGAT chief executive Dion Lester said of TasWater’s 2700 trade waste customers, 1500 were found to be compliant.

He said the vast majority of other businesses did not have an issue with meeting the required compliance levels.

Councils will continue to receive TasWater dividends annually until 2024-25 if the company falls under state ownership next year.

Mr Chipman said the company received $29 million in profit with year but $16 million in dividends.

He said ratepayers had paid for the water and sewerage assets in the past and were deserving of continued returns. "Ratepayers putting money in the water and sewerage assets means there has been less for parks, facilities and other services.”