More than 3.2 gigalitres of rain and other water resources could be captured and reused for irrigation and other non-potable uses under a proposed new City of Sydney water strategy.

The City is seeking tenders to develop a Decentralised Water Master Plan aimed at producing more 10 per cent of the City's water supply from local sources.

Utilising a city-wide recycled water network, the plan would also cut pollutants discharged into Sydney Harbour and the Cooks River by around 50 per cent.

The tender, which closes September 7, will explore different business models to implement the masterplan, including a private sector water services company or a public/private joint venture.

The inner city currently imports 32 gigalitres of drinking-standard water from Warragamba Dam, but only 20 per cent is used for cooking, drinking and washing. The other 80 per cent could be supplemented by recycled water for toilet flushing (19 per cent), air-conditioning cooling towers (15 per cent) and irrigation (3 per cent).

The City Council accounts for 1.5 per cent of water use in the local government area, with around 80 per cent used by apartments, commercial and institutional buildings.

Its consumption has fallen by 37 per cent over the past six years to 432 mega litres in 2008-2009. This reduction in water consumption is a result of water restrictions and initiatives such as retrofitting Council buildings, parks and pools with water efficient dual flush toilets and tap aerators.

The council has also installed rainwater tanks at nearly 20 childcare, kindergartens and community centres. There are also 20 stormwater harvesting and reuse projects completed or under construction to irrigate the City's park and sporting fields.

The City aims to achieve its target of 50 per cent reduction in pollutants entering waterways through stormwater harvesting and integrating natural treatment devices such as raingardens into the City's roads and footpaths.

It is currently working on a $1.3 million project at Sydney Park to capture and treat 51 million litres of stormwater annually. Gross pollutant traps and a bio-retention basin using soil and plants will remove plastic bags, detergents, nutrients and heavy metals that currently flow into to the Cooks River. The filtered water will then be used in the park's wetlands which lose 40 million litres a year in evaporation.

The recycled water networks identified in the Plan will be integrated with the city's planned low carbon zones powered by trigeneration plants, with common trenches used to house pipes for recycled water, district heating, cooling and automated waste.