(a) The state, acting by the commissioner, may enter into a contract with a municipality for state financial assistance in order to assist such municipality to apply for discretionary funds provided under Title I of said Housing and Community Development Act of 1974, as from time to time amended. Such contract may provide advances in an amount not in excess of that amount which the commissioner deems sufficient for the preparation of plans and surveys specifically required by the United States government for application under said Housing and Community Development Act of 1974, as from time to time amended, and for the preparation of any other application for federal financial assistance. Such contract may be entered into only if, in the discretion of the commissioner, sufficient funds or noncash assistance for the purpose of this section are not otherwise readily available.

(b) Advances provided pursuant to this section shall be repayable to the state out of the grants received by it under said Housing and Community Development Act of 1974 as a result of an application assisted under this section or out of grants-in-aid provided by the state pursuant to this section. The commissioner may, at his discretion, forego recovery of an advance under this section if no federal funds are obtained as a result of it by the municipality.

(c) The commissioner may set up a revolving fund for planning advances to be provided pursuant to this section. Such fund shall consist of any General Fund appropriations, bond authorizations, grants of federal funds, or grants from any other source received for the purpose of this section as well as any advances recovered pursuant to subsection (b) of this section.