An integrated optimization approach to assess the sustainability of water management strategies in a macroscopic system is proposed. Those strategies include alternative water sources, such as rainwater harvesting, and the design of distributed water treatment systems. To deal with the economic challenges inherent to wastewater treatment, an economic penalization scheme is presented as an alternative that can achieve better cost-effectiveness and pollution abatement than traditional command and control practices. The proposed approach results in an MINLP multiperiod model, which has been solved through the GAMS (R) modeling environment. The solution of our case-study allows finding the minimum investment to meet the desired environmental goals with respect to freshwater consumption and pollution abatement. Results include the number, size, and location of rainwater storage devices as well as treatment technologies, the total amount of recycled wastewater, and the total amount of fines charged to the users for violation of environmental regulations. (C) 2017 American Institute of Chemical Engineers