(1)    The legislature finds that state financial assistance for the construction and financing of pollution prevention and abatement facilities is a public purpose and a proper state government function in that the state is trustee of the waters of the state and that such financial assistance is necessary to protect the purity of state waters.

   (2)   In order that the construction of pollution prevention and abatement facilities necessary to the protection of state waters be encouraged, a state program of assistance to municipalities and school districts for the financing of such facilities is established and a program of state advances in anticipation of federal aid reimbursement is established to meet the state’s water quality standards. These state programs shall be administered by the department of natural resources and the department shall make such rules as are necessary for the proper execution of the state program.

   (2m)   In this section “estimated reasonable costs” include the costs of preliminary planning to determine the economic and engineering feasibility of pollution prevention and abatement facilities, the engineering, architectural, legal, fiscal and economic investigations and studies, surveys, designs, plans, working drawings, specifications, procedures and other action necessary to the construction of pollution prevention and abatement facilities and the erection, building, acquisition, alteration, remodeling, improvement or extension of pollution prevention and abatement facilities and the inspection and supervision of the construction of pollution prevention and abatement facilities.

   (3)   

      (a)    The department shall establish criteria to determine those municipalities and school districts and projects which are eligible for the state program and to determine appropriate priorities among the projects.

      (c)    All municipalities and school districts are eligible for agreements under sub. (6) (b) based on the criteria in this paragraph. The criteria shall consider the health hazards of existing conditions, the extent and nature of pollution, per capita costs of the project, property valuation of the municipalities or school districts as equalized by the state, income of the residents in the municipalities or school districts, the availability of federal funds for the project, soil conditions, the feasibility and practicality of the project, the borrowing capacity of the municipality or school district and any other factors which the department considers important. Municipalities or school districts commencing projects but not completed prior to January 18, 1970, shall be deemed eligible for agreements under sub. (6) (b). School district projects are not eligible if the project is located within the corporate limits of a city or of a village with an operating municipal sewage system.

   (4)   Municipalities or school districts which desire to participate in the state program shall submit application for participation to the department. The application shall be in such form and include such information as the department prescribes.

   (5)   The department shall review applications for participation in the state program. It shall determine those applications which meet the criteria it established under sub. (3), and shall arrange the applications in appropriate priority order.

   (6)   The department may enter into agreement with municipalities and school districts to provide state assistance for the financing of those pollution prevention and abatement facilities projects it approves under sub. (5).

      (b)    The department may enter into agreements with municipalities and school districts to make payments to them from the appropriations made by s. 20.866 (2) ™.

         1.    These payments shall not exceed 50 percent of the approved project in conjunction with the state program of advancement in anticipation of federal reimbursement under sub. (2). To provide for the financing of pollution prevention and abatement facilities, the natural resources board, with the approval of the governor, subject to the limits of s. 20.866 (2) ™ may direct that state debt be contracted as set forth in subd. 2. and subject to the limits set therein. Said debts shall be contracted for in the manner and form as the legislature hereafter prescribes.

         2.    It is the intent of the legislature that state debt not to exceed $150,850,000 in the 10-year period from 1969 to 1979 may be incurred for state water pollution and abatement assistance.

      (e)    The department shall review and approve the plans and specifications of all facilities designed and constructed by agreement under this section.

   (7)   This section shall be construed liberally in aid of the purposes declared in sub. (1).

   (8)   After June 30, 1979, the department may not enter into any agreements or contracts under sub. (6) (b), but the department shall continue to make payments on existing agreements and contracts until the terms of the agreements and contracts are fully satisfied.