Mr Hughes said once capped the small pond and at least half the main pond will be filled in and grassed over because the upgrade makes those areas redundant.
The treatment plant has been troubled from the time it was commissioned in 2007 and problems reached a head last December, with odour from the ponds blowing over the city. It was created by a huge build-up of sludge in the ponds.
The new plant, expected to be operating by early 2015, will see any sludge removed daily.
Residential and industrial waste will be pumped into a covered anaerobic pond, then shifted into stabilisation and clarifying ponds, before undergoing UV treatment and being pumped to sea through the South Beach outfall.
Once the bypass pipework is in place contractors can start removing the sludge, a job expected to take until the Christmas-New Year period.
Mr Hughes said initial plans were to dig it out, dump it on the ground to de-water it, and then truck it to the landfills, a job that would have created major odour problems and cost at least $1 million.
He said there would be some smell this summer and it would increase at various times while the sludge was taken out but that was unavoidable.
But once building of the new plant started in April next year, there would be no smell because any sludge would be contained within the covered pond.
The council wants to have the main contract out to tender before Christmas, with major work starting in March, 2014.
Mr Hughes said that, during the construction phase, the waste will have to be pumped directly into the sea but the council has been given consent to do that from April to December next year.