Austin's "Dillo Dirt" is made from yard waste and treated human sewage. Less-treated sewage gets used to fertilize ranchland. As you suspected, there's more than a little controversy over whether the result is well-composted enough for health and aesthetics, but it's mixed up with concern over the standards for various non-fecal pollutants. Presumably whatever closed loop fertilization trist is advocating wouldn't have to worry so much about the various kinds of industrial and medical waste people dump down their drains.