2. For the purpose of discharging the state responsibility with respect to the protection and promotion of the health of the inhabitants of the state by the provision of sewage treatment works, the commissioner, in the name of the state, may enter into contracts with municipalities having power to construct, operate and maintain sewage treatment works, and any such municipality may enter into a contract with the commissioner, 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: a. An estimate of the reasonable cost of the project as determined by the commissioner. b. An agreement by the commissioner to pay to the municipality, during the progress of construction of each phase of the project (said phases to be construction of interceptors, substructure, superstructure, outfalls or other similar major components of a project), subject to final computation and determination of the state grant upon completion of the entire project reflecting the actual eligible cost thereof, a portion of the cost of the project representing the part of the non-municipal share of the cost of the project that is not paid by the federal government, determined in the following manner:

1. (1) An amount equal to thirty per cent of the actual cost of the project, or an amount equal to thirty per cent of the estimated reasonable cost of the project, whichever is lower, provided, however, that the state payment under this subparagraph shall be reduced by the amount of any federal assistance received or to be received by the municipality which is in excess of sixty per cent of the cost of the project, together with,
2. (2) If necessary to limit the municipal share of the cost of the project to forty per cent, an additional amount which when added to the amount of federal assistance, if any, received or to be received by the municipality, equals thirty per cent of the actual cost of the project, or equals thirty per cent of the estimated reasonable cost of the project, whichever is lower. c. An agreement by the municipality
3. (1) To proceed expeditiously with, and complete, the project in accordance with plans approved pursuant to section 17-0701;
4. (2) To commence operation of the sewage treatment works on completion of the project, and not to discontinue operation or dispose of the sewage treatment works without the approval of the commissioner;
5. (3) to operate and maintain the sewage treatment works in accordance with applicable provisions of this article, the state sanitary code and rules and regulations of the commissioner;
6. (4) to apply for and make reasonable efforts to secure federal assistance for the project;
7. (5) to secure the approval of the commissioner before applying for federal pollution abatement assistance, in order to maximize the amounts of such assistance received or to be received for all projects in New York state, including amounts for reimbursement of payments made by the state pursuant to subparagraph (2) of paragraph b of this subdivision; and
8. (6) to provide for the payment of the municipality's share of the cost of the project. d. A provision that, in the event that federal assistance which was not included in the calculation of the state payment pursuant to paragraph b of this subdivision 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 either (1) pay to the state the amount by which the state payment actually made exceeds the state payment determined by the recalculation or, (2) if such additional federal assistance has not been received by the municipality, authorize the state to receive and retain such amount from the federal government.