(a) Ten million dollars ($10,000,000) of the money in the fund shall be deposited in the Water Conservation Account and shall be available for appropriation by the Legislature for loans to municipalities to aid in the conduct of voluntary, cost-effective capital outlay water conservation programs and the purposes set forth in this section. Notwithstanding subdivision (e) of Section 13999.5 and subdivision (f) of this section, all of the funds deposited in the Water Conservation Account by this subdivision shall be available for water conservation programs. None of the funds deposited in the Water Conservation Account by this subdivision shall be expended for costs of administration.

(b) Any contract entered into pursuant to this section may include provisions as may be determined by the department. However, any contract concerning an eligible, voluntary, cost-effective capital outlay water conservation program shall include, in substance, all of the following:

(1) An estimate of the reasonable cost and benefit of the program.

(2) An agreement by the public agency to proceed expeditiously with, and complete, the program.

(c) Loan contracts may not provide a moratorium on payments of principal or interest.

(d) Any loans made from the Water Conservation Account shall be for a period of up to 25 years with an interest rate set annually by the board at 50 percent of the average interest rate paid by the state on general obligation bonds in the calendar year immediately preceding the year in which the loan agreement is executed. All principal and interest from loans shall be deposited in the Water Conservation Account for new obligations.

(e) No single project may receive more than five million dollars ($5,000,000) from the department.

(f) As approved by the Legislature annually in the Budget Act, the department may expend up to 5 percent of the funds in the Water Conservation Account for the administration of this section.

(Added by Stats. 1984, Ch. 377, Sec. 1. Approved in Proposition 25 at the November 6, 1984, election.)