(a) The state of Tennessee may enter into contracts with municipalities, and any such municipality may enter into a contract with the state, concerning eligible projects. Any such contract may include such provisions as may be agreed upon by the parties thereto, and shall include, in substance, the following provisions:

(1) An estimate of the reasonable cost of the project as determined by the department;

(2)

(A) With respect to an eligible project receiving federal funds, an agreement by the state to pay to the municipality an amount equal to the actual cost of the project, or the reasonable cost of the project, whichever is lower, that is not paid by the federal government; and

(B) With respect to an eligible project receiving no federal funds, an agreement by the state to pay the municipality an amount sufficient to permit completion of such project. Part of the grant may be paid by the department to the municipality prior to the construction, or during the progress of the construction, or the grant may be paid following completion of the construction, as may be agreed upon by the parties;

(3) An agreement by the municipality to:

(A) Proceed expeditiously with, and complete, the project in accordance with plans approved pursuant to this part and § 68-221-102;

(B) Commence operation of the sewage treatment works on completion of the project, and not discontinue operations or dispose of the sewage treatment works without the approval of the department and of the authority;

(C) Operate and maintain the sewage treatment works in accordance with applicable provisions of this chapter, and rules and regulations of the department;

(D) Secure approval of the department before applying for federal assistance for pollution abatement, in order to maximize the amounts of such assistance received or to be received for all projects in Tennessee; and

(E) Provide for the payment of the municipality's share of the cost of the project; and

(4) A provision that, in the event federal assistance which was not included in the calculation of the state payment pursuant to subdivision (a)(2)(A) becomes available to the municipality, the amount of the state payment shall be recalculated with the inclusion of such additional federal assistance, and the municipality shall pay to the state the amount by which the state payment actually made exceeds the state payment determined by the recalculation.

(b) The department may adopt rules and regulations necessary for the effective administration of this part, including, but not limited to, the submission of plans, the procedures to be followed in applying for repayable grants, and for enforcing agreements entered into by municipalities with the department with respect to such grants.

(c) All contracts entered into pursuant to this section shall be subject to approval by the attorney general and reporter as to form and the commissioner of finance and administration. All payments by the state pursuant to such contracts shall be made upon warrant of the commissioner of finance and administration on vouchers approved by the department and such payments shall be subject to audit at any time.

(d) All action required or authorized to be taken under this part by the governing body of any municipality may be by resolution, which resolution may be adopted at the meeting of the governing body at which such resolution is introduced, and shall take effect immediately upon its adoption.