Mr Snelgrove said residents would have to pay about $40,000 per property - which was hoped would be brought down to $15,000 to $20,00.
"The options for payment would be lump sum or added to rates ... Any assistance is gratefully received."
He said the committee would be looking at "five community, culturally based options" to work out the best practical option environmentally, financially and culturally.
The preferred option would be recommended to the community later in the year.
Tarawera Ratepayers Association chairwoman Libby Fletcher was "absolutely delighted" government funding had been received.
"It was a big task to fill in the application [for funding]. It was done in conjunction with the council, the Tarawera sewerage committee, residents and Guy Salmon, a well-known ecologist."
Mrs Fletcher said the feedback she had received from permanent ratepayers at Tarawera had been "very positive".
At the steering committee's next meeting on August 25, "the number one thing on the agenda would be the offer of funding", she said.
"We haven't met yet to discuss where we go to from here ... We've been pushing water quality for a number of years, it's a long road ahead but we'll get there."
Mrs Fletcher said residents were also working on the proviso "we got the same sort of deal, a subsidy, as Lake Okareka residents" towards payment.
Don Atkinson, chairman of the community-based advocacy group Lakes Water
Quality Society, said historically projects such as these were funded by the regional council, additional to what the district council provided.
He said would ratepayers contribute "significantly" by direct payment, or paying off a loan.
"I hope all the parties contribute."