(c) Any contract pursuant to this section may include provisions as may be agreed upon by the parties thereto, and the contract shall include, in substance, the following provisions:

1. (1) An estimate of the reasonable cost of the project.
2. (2) An agreement by the department to loan to the supplier, during the progress of construction or following completion of construction as may be agreed upon by the parties, an amount that equals the portion of construction costs found by the department to be eligible for a state loan.
3. (3) An agreement by the supplier to repay the state, (i) over a period not to exceed 50 years, (ii) the amount of the loan, (iii) the administrative fee as described in Section 13862, and (iv) interest on the principal, that is the amount of the loan plus the administrative fee.
4. (4) An agreement by the supplier, (i) to proceed expeditiously with, and complete, the project, (ii) to commence operation of the project upon completion thereof, and to properly operate and maintain the project in accordance with the applicable provisions of law, (iii) to apply for and make reasonable efforts to secure federal assistance for the project, (iv) to secure approval of the department and of the State Department of Health Services before applying for federal assistance in order to maximize and best utilize the amounts of the assistance available, and (v) to provide for payment of the supplier’s share of the cost of the project, if any.

(d) By statute, the Legislature may authorize bond proceeds to be used for a grant program, with grants provided to suppliers that are political subdivisions of the state, if it is determined that the suppliers are otherwise unable to meet minimum safe drinking water standards established pursuant to Chapter 4 (commencing with Section 116275) of Part 12 of Division 104 of the Health and Safety Code. The total amount of grants shall not exceed thirty million dollars ($30,000,000), of which up to fifteen million dollars ($15,000,000) may be used for grants for projects for the construction, improvement, or rehabilitation of domestic water systems that have become contaminated by organic or inorganic compounds (such as nitrates, DBCP (dibromochloropropane), TCE (trichloroethylene), and arsenic), or radiation, in amounts as to render the water unfit or hazardous for human consumption, and no one supplier may receive more than four hundred thousand dollars ($400,000) in total. Any of the moneys made available pursuant to this subdivision, for grants for projects, that have not been encumbered within two years after the effective date of amendments to this subdivision made by Assembly Bill No. 2404 of the 1979–80 Regular Session shall be available only for loans pursuant to this section.

The Legislative Analyst shall review the grant programs and report to the Legislature not later than February 1, 1981.