(a)

(1) The state is authorized to make grants to municipalities to assist them in the construction of wastewater treatment works.

(2) The department shall administer this grant program.

(b) The department shall promulgate regulations setting forth procedures for the submission of applications by municipalities for these grants and for the approval or denial of these applications by the department, and setting forth the criteria upon which these approvals and denials will be made, the method by which the grant amount for an individual project is determined, and the method of grant payment.

(c) Except as provided in subsections (d) and (i), grants shall be fifty-five percent (55%) of the eligible portion of the wastewater treatment works project, except that where innovative or alternative projects or portions of projects have been approved by the department, the grant shall be seventy-five percent (75%) of the portion of the project which utilizes, or is necessary for the utilization of, an innovative or alternative technology.

(d) In addition to the basic grant provided for in subsection (c), municipalities that are receiving grants or that have received grants pursuant to this section may be eligible for a supplemental grant. Supplemental grants shall be grants to municipalities receiving either a basic grant or grant from the United States environmental protection agency (EPA). The combination of a supplemental grant and either a basic grant or a grant from the EPA may not be more than ninety percent (90%) of the eligible portion of the wastewater treatment works project. The amount of the supplemental grant shall be determined in relation to an economic index, which is based upon factors which include, but are not limited to, per capita incomes and property values. Municipalities with the lowest economic index shall be eligible for the largest supplemental grants. The department shall promulgate regulations which shall include the economic index, the size of supplemental grants for different levels on the economic index, the level on the economic index above which municipalities will be ineligible for supplemental grants, and give preference to those municipalities that are eligible for EPA grants.

(e) Grants shall be made only for those wastewater treatment works projects that qualify for funding based on their placement on the department priority ranking list.

(f) Grants may be made for the most cost effective innovative or alternative collection system or the most cost effective on-site system or systems.

(g) No portion of a grant made pursuant to this part may be used to acquire land or to pay any costs associated with acquisition of land; provided, that expenditures for land that will be an integral part of the treatment process or that will be used for the ultimate disposal of residues resulting from such treatment may be made out of a grant made pursuant to this part.

(h) No portion of a grant made pursuant to this part shall be used to construct reserve capacity in a wastewater treatment works; provided, that reserve capacity in eligible interceptors and in collection systems for a community with a population of less than three thousand five hundred (3,500), according to the 1980 federal census or any subsequent federal census, using alternative technology may be funded out of such grants.

(i) Grants made in conjunction with loans from the wastewater facility revolving loan fund pursuant to the Wastewater Facilities Act of 1987, compiled in part 10 of this chapter, may be made in such amounts as may be determined by the department.