(a) No local government which, upon the activation of a special district created by this chapter, fails or refuses to plan, coordinate, and implement local government services in such special district as provided for in this chapter and authorized pursuant to a resolution of the authority shall be eligible for any state grant of any kind whatsoever except such grants as may be related directly to the physical and mental health, education, and police protection of its residents, nor shall any funds appropriated to or otherwise obtained by the Department of Transportation pursuant to Article III, Section IX, Paragraph VI(b) of the Constitution of this state and paragraphs (2) and (7) of subsection (a) of Code Section 32-2-2 be utilized for designation, improvement, funding, or construction of any land public transportation system or any part of the state highway system lying within the boundaries of such local government's jurisdiction, or for the nonsafety related maintenance of any land public transportation system, highway, road, or bridge operating or located within such local government's jurisdictional boundaries, nor shall such local government be permitted to receive federal grants or funds for any such purpose, unless such funds are within categories applicable to state-wide inspection or improvement required for compliance with federal law or regulation.

(b) By resolution, the authority may restore eligibility for funding and receipt of grants denied pursuant to the provisions of subsection (a) of this Code section where such local government demonstrates to the satisfaction of the authority that it is taking or shall take appropriate action to cooperate with the authority.