(a) The board may use the fund:
(1) to make loans to political subdivisions at or below market interest rates for projects;
(2) to make grants, low-interest loans, or zero interest loans to political subdivisions for projects to serve areas outside metropolitan statistical areas in order to ensure that the projects are implemented, or for projects to serve economically distressed areas;
(3) to make loans at or below market interest rates for planning and design costs, permitting costs, and other costs associated with state or federal regulatory activities with respect to a project;
(4) as a source of revenue or security for the payment of principal and interest on bonds issued by the board if the proceeds of the sale of the bonds will be deposited in the fund;
(5) to make transfers from the fund to the financial assistance account of the Texas Water Development Fund II created under § 17.959 for the purposes described in § 49-d-8, Article III, Texas Constitution, other than for the purposes described in Sections 17.957 and 17.958; and
(6) to pay the necessary and reasonable expenses of the board in administering the fund.
(b) The board shall transfer back to the state water implementation fund for Texas any money disbursed to the fund as described by § 15.973(b)(9) if the requirements of § 15.435 are satisfied.

(c) Principal and interest payments on loans made under Subsection (a)(3) may be deferred for a maximum of 10 years or until construction of the project is completed, whichever is earlier.