The fundamental problem here is that 300 years ago the population was measured in hundreds of millions. Now it's measured in tens of billions. You are no doubt aware of the problems that cities and civilization faced while growing in that direction?
I'm not trying to argue with you about the merits of our current population size. But what I'm trying to point out is that your solutions of "local problems should have local solutions" don't work very well when you have 10,000 people in a 1000x1000 area. Suppose you were in New York City, where would you put the sewage to be processed by those 10,000 within that 1000x1000 area? I'm starting to wonder if you are considering these problems, or if you rather have a pet philosophy and a utopia that you want everything to conform to.
Just to let you know, utopias are not "ideal" in the sense that they are great societies to live in and I can think of examples of utopias that are very very bad for individuals. It's not something to be strived for it's a tool for thought experiment. You might appreciate most the concept of an Industrialist utopia, where all time is measured, efficiency is maximised, workers are tools, and resources are meant to be extracted.
To address one of your points regarding sanitation: we do not "[take] all the sewage and [group] it into a river of muck to discharge it at sea." If you look at how a modern sanitation system works, the sewage is very highly treated before discharge, and it flows through entirely separate, self-contained underground waterways before it reaches the processing center. To liken this to dumping untreated sewage into the sea is very disingenuous. Solids, chemicals, bacteria, salts, and other undesirable elements are extracted either in settling ponds or via aerobic or osmotic extraction. And it's utterly impossible to build and maintain something like this for a community without levying some tax from that community. Even something as simple as a community septic system requires ongoing maintenance and repair.
But everyone in the community benefits from not getting the diseases that are associated with having untreated sewage flowing on top of the ground. If one person in that community is allowed to opt out, what would they do with their sewage? In the worst case they might dump it on the ground, which makes everyone around them sick. What you propose is that they should be allowed to ignore externalities and do their own thing. That's not fair to the other 9,999 people in the 1000x1000 block who don't want to get cholera and typhoid and anything else from that 1 person's untreated sewage.