My city also requires yard waste to be separated and placed in the paper bags. Keeps it out of the landfill, and the county uses the compost for things. They might sell some it, not sure. It's not about the cost to dump it, it's about the landfill nearing capacity. My city also requires people to pay for recycling with trash pickup, if you do it or not. (Some of the people on my street don't, and it makes me really mad.)
I compost my own yard waste (along with vegetable food waste, and litter box waste) in my yard. Keep expecting a neighbor to make a stink about it, but they can go jump.