Brighton and Hove City Council is set to hand over charity recycling bank sites to private companies.
A report to councillors estimates that tendering textile collections could raise an annual income of £90,000, with 90% of the proceeds to be spent on improving recycling facilities and the rest handed to local third sector groups.
A roll-out of wheelie bins for recycling will also be considered by the committee, funded by the collection changes, which it expects to result in an increase in the tonnage of material collected.
The 64 clothes bank sites on council land in Brighton are currently operated by charities including Oxfam, the Salvation Army and Traid.
Fareham Borough Council awarded European Recycling Company (ERC) a contract in 2013 to operate 29 textile collection points including 14 previously operated by charities.
In that instance, a much higher 90% of profits went to local charities, with the rest subsidising the council tax.
Traid has rejected the suggestion that Brighton’s proposal could increase recycling rates, with its website saying that Fareham recorded an 8% year-on-year drop after the banks were handed over to ERC.
A national survey commissioned by the charity in May 2014 found that 83% of respondents would stop or reduce bank use if private enterprise was involved, and only 9% were happy with funds going to councils.
The charity said it is set to lose around £160,000 of income a year if the proposals go through.
The Charity Retail Association said in an open letter to Brighton council it was concerned about the effect that commercial contracts could have on charitable income.
Chief executive Martin Blackwell said: “Unless charity shop textile banks are explicitly protected, we believe that any joint contract will price charities out of the sites they currently occupy. This would be at the potential cost of millions of pounds annually for our members.”
The council votes on 7 July on the proposals to be enforced from November.