(1)    The department may award a municipal clean drinking water grant, from the appropriation under s. 20.866 (2) (tb), to a municipality for capital costs to achieve compliance with standards for contaminants established by the department by rule under the safe drinking water program under s. 281.17 (8), if the municipality is not in compliance with those standards on or after April 1, 1990, if the municipality incurs the capital costs after January 1, 1989, and if the violation of the standards for contaminants occurs in a public water system owned by the municipality.

   (2)   The department shall approve grants under this section equal to 90 percent of the amount by which the reasonable and necessary capital costs of achieving compliance with the standards for contaminants exceed an amount equal to $25 times the population that is served by the contaminated public water system for which a grant is sought if the reasonable and necessary capital costs of achieving compliance with those standards are an amount equal to an amount that is greater than $150 times the population that is served by the contaminated water system.

   (3)   The department shall rank applicants for grants under this section on the basis of the severity of risk to human health posed by each applicant’s violation of the standards for contaminants. If insufficient funds are available for providing grants to eligible municipalities, the department shall allocate grants based on the severity of risk to human health.

   (4)   The department shall promulgate rules for the administration of the program under this section that include the establishment of which capital costs are eligible for reimbursement and the method for ranking applicants under sub. (3).