(1) The state transportation commission, county road commission, and a city or village may enter into a contract providing for the construction or reconstruction of highways, including limited access highways, under the jurisdiction and control of 1 of the contracting parties to the extent that the contracting parties are otherwise authorized by law to expend moneys on the highways, roads, or streets, which contract shall provide for allocation of the share of the cost of the construction or reconstruction to be borne by the department or a county road commission, city, or village in annual installments for a period not to exceed 30 years. The contract shall designate the department or a county road commission, city, or village to carry on, in whole or in part, the engineering, construction, or reconstruction work required by the contract, which may include the construction or enlargement, reconstruction, or relocation of existing highways and work incidental to the engineering, construction, or reconstruction work. The contract shall designate the department or a county road commission, city, or village to undertake the acquisition of rights of way required for the highways, which rights of way may be acquired by purchase or condemnation by the department or a county road commission, city, or village in its own name for the purposes of the construction or reconstruction. The department or a county road commission, city, or village may make a contribution to the cost of its highway construction and reconstruction projects as are provided for in contracts authorized in this section. A governmental unit may make irrevocable pledges of its Michigan transportation fund receipts to meet its annual obligations pursuant to the contracts. A governmental unit that is a party to a contract may make an additional irrevocable pledge of a contribution or funds received, or to be received, by the department or a county road commission, city, or village from the federal government or 1 of its agencies or from any other source for or in aid of the highway construction or reconstruction projects provided for in the contracts. A governmental unit that is a party to the contracts may borrow money and issue bonds in accordance with this act for the purpose of providing funds for the immediate construction or reconstruction of the highway projects contemplated by the contracts. The bonds shall be secured by an irrevocable pledge of the annual contributions required to be made by the department or a county road commission, city, or village that is a party to the contracts. Before the issuance of the bonds by a governmental unit, the issuance of the bonds shall be approved by a resolution of the state administrative board and by a resolution of the county road commission of each county and the governing body of each city or village that is a party to the contracts. The annual contribution required by the contracts shall be paid to the governmental unit issuing the bonds. A governmental unit that is a party to the contracts, at any time, may pay all or part of the unpaid annual contributions undertaken by it in a contract, and may raise money for that payment by the issuance of bonds in accordance with and subject to this act. A contract executed under this section may authorize the governmental unit issuing the bonds pursuant to the contract to receive bids for the bonds, accept the best bid, and issue and deliver the bonds for and on behalf of all the parties to the contract.

    (2) The aggregate amount of annual contributions from the Michigan transportation fund that may be made by a county, city, or village under this section and pledged for the payment of principal and interest on bonds issued pursuant to a contract, shall not exceed 40% of the total amount received by it from the Michigan transportation fund during the last completed fiscal year ending on the June 30 before the execution of a contract. The amount of an annual contribution made by the state transportation department and pledged for the payment of bonds pursuant to this section shall be included in computing the bonding limit set forth in section 18b. The total aggregate amount that may be pledged by a city or village for the payment of principal and interest on bonds issued pursuant to a contract entered into in accordance with this section and 1952 PA 175, MCL 247.701 to 247.707, shall not exceed 50% of the total amount received by the city or village from the Michigan transportation fund and the highway construction fund during the last completed fiscal year ending on June 30 before the issuance of the bonds.

    (3) Bonds issued and contracts entered into under this section are not subject to the revised municipal finance act, 2001 PA 34, MCL 141.2101 to 141.2821.

    (4) The issuance of bonds under this section is subject to the agency financing reporting act.