Gov. Jon Huntsman Jr. also declared an agricultural disaster in Washington and Iron counties.
House Bill 240 would provide short-term funding to help rebuild destroyed roads, bridges and the devastated river banks.
"This will get some cash into the hands of these local entities," said the bill sponsor, Rep. Ron Bigelow, R-West Valley City.
Santa Clara City Manager Matt Brower and St. George Mayor Dan McArthur thanked lawmakers.
"Nothing has been more devastating to me," said McArthur, who was wearing a T-shirt emblazoned with the logo of an assistance fund for families whose homes were damaged or lost.
"There is a lot of public infrastructure - roads, bridges, utilities - that we have lost. I can't express enough appreciation for the people of northern Utah and the rest of the state."
President Bush is expected to sign a disaster declaration in the next few days that would kick-start federal aid.
The Federal Emergency Management Agency will provide 75 percent of the money to repair public infrastructure, while local governments will need to chip in the rest. Washington County estimates the damage to public property in areas such as St. George and Santa Clara to be around $150 million.
Sen. Lyle Hillyard, R-Logan, said the state could turn the loan into a grant.
To begin with, the loan will carry a 2 percent interest rate and is scheduled to be repaid in a year.
HB240 says the money can be spent on "re-establishing the tourism industry," as well as rebuilding transportation, ensuring the county meets environmental standards and securing the public health and safety.
The state also will provide Washington County with $6 million in a revolving loan for water and sewer line repairs and the Utah Department of Transportation is working with the Federal Highway Administration to repair state roads and bridges.
The agricultural disaster declaration will start the request for a low-interest loan from the U.S. Department of Agriculture.
The floods covered 5,000 acres of land with sediment and debris and damaged ditches, pipelines and irrigation systems. Some small farms were swept away, according to Huntsman's office.
The damage estimate is $5 million.
