It could be six weeks before Motueka's wastewater plant is functioning properly again.
Tasman District Council said the final membranes in the filtration system were degraded and not working as expected.
It had reverted to using an older system, where partially treated sewage was being discharged into a wetland area and filtered through the ground.
The council's community infrastructure manager, Richard Kirby, said the health risk to the community and environment was low.
"Going into waterbeds and being exposed to sunlight, most of the bacteria will be killed off," he said. "But we have put warning signs up to let people know not to pick up shellfish in those areas, because there may be a risk of contamination and the like. "
Kirby said new membranes for the plant had been ordered, and should be functioning again within the next six weeks.