A study found the only chemicals left in recycled sewage (refined to drinking grade) were oestrogena and paracetamol, both of these at LOWER levels than the tap water you're drinking now.
it's the way of the future, we'd better get used to the idea because we wont have a choice sooner or later
as mentioned, the point is the energy needed to do this. we've got heaps of water, we just need to use it more efficiently, like u mentioned provide incentives for industry to save water and pipe irrigation channels.