(a) Cities and counties are authorized to accept grants from the federal government to carry out economic adjustment projects. Cities and counties are also authorized to enter into contractual agreements with the federal government and with state government to accept grants and disburse or redistribute funds for purposes of economic adjustment projects, such disbursements to be in the form of grants and loans. No grant, however, shall be made to a private profit-making entity. Grants or loans can be made to a private or public nonprofit organization or association.

(b) Loans for commercial and industrial development purposes shall be legally binding obligations and shall require interest payments and shall be consummated in accordance with applicable state and federal statutes and regulations. Commercial loans can be made only for legal purposes and subject to safeguards to protect the public interest, and can be made in conjunction with another commercial lender, a federal agency, and a state industrial development authority. Commercial loans made under this chapter can be first, second or third mortgage loans. The claim and right for principal repayment on second and third mortgage loans shall be secondary and subordinate to the first mortgage loan, except that repayment of principal and interest shall be made and prorated concurrently as agreed among the several lenders. In cases of foreclosure and acquisition of assets for liquidation or resale, the claim and right of the city or county shall be in a first, second or third mortgage position, as appropriate and as agreed to.

(c) Loans made for public facilities, the repayment of which extends more than five (5) years, shall be in the form of municipal bonds, subject to the bond provisions and procedures spelled out by state enabling statutes for cities, counties and other political subdivisions. Loans made for less than five (5) years may be at a reduced interest cost, but not less than two percent (2%), simple interest.