Lake Hawea residents are using the state of the town's wastewater treatment plant in their battle to stop a 400-lot special housing area [SHA] being built on the edge of town.
The plant, operated by the Queenstown Lakes District Council, has been non-compliant on a number of occasions since the Otago Regional Council granted consent in 2010.
The annual report for 2017-18 says: "the plant is not suitable for the current resource consent conditions".
"There is no design basis for the oxidation pond to remove nutrients reliably."
In a letter sent to the regional council this week, Hawea Community Association chairwoman April Mackenzie said the report "clearly shows" the plant was failing to comply and was not coping with the current demand, "let alone demand from growth of multiple new dwellings".
Ms Mackenzie said the community was "highly concerned" about possible pollution of the Hawea River and the Hawea Basin aquifer.
"This will be further compounded by the additional housing proposed in an application for a SHA."
The treatment plant's consent expires in 2022 and the district council is planning to pipe Lake Hawea sewage to its main Upper Clutha treatment plant, Project Pure, at Wanaka Airport.
A council spokeswoman said construction was "currently scheduled to begin in 2020".
"The Project Pure plant needs to expand before Hawea can be connected."
She did not respond to a request for a timeline.
Ms Mackenzie said it was her understanding the pipeline was unlikely to be completed for at least four years.
The council is considering three options to deal with wastewater from the SHA: a temporary on-site treatment plant, transferring it to Project Pure by truck, or storing it during the day and pumping it to the Hawea plant during periods of low flow.
A decision on whether the housing area should be allowed to go ahead is due to be made by Associate Minister for Housing and Urban Development Jenny Salesa.