The figure is the most the city has spent at one time to repair its infrastructure, spokeswoman Alicia Cahill said.
The wastewater treatment plant in Galveston, slammed by the September 2008 storm, was swamped during Ike, frying the unit's electrical system, the Galveston County Daily News reported.
City council members on Thursday accepted the federal money earmarked to replace hurricane-damaged infrastructure and hired Beck Disaster Recovery to administer the grant funds.
The wastewater plant will be elevated by 13 feet to avoid future storm surges. The city also will make sure the plant, not improved since 1972, is brought up to state code, at a cost of up to $70 million, according to Eric Wilson, director of municipal utilities.
Galveston is using disaster recovery money instead of Federal Emergency Management Agency funds because FEMA would pay to repair the plant to its previous condition, not improve it, officials said.
Funding also will be used to elevate a fire station, preserve historic building fronts and install a 20-inch waterline connecting Galveston to Pelican Island. The water line also will support the University of Texas Medical Branch.
The grant also will go toward building a vocational technical center for Galveston College and constructing two storage tanks to stockpile water for use during shortages.