Council shall create and maintain a sinking fund, from which shall be paid all bonded obligations of the Village, including both interest and the retirement of principal. Council shall appropriate to that fund all tax monies received for the payment of bond obligations, the proceeds of all special assessments collected by the County Auditor and remitted to the Village, and such other funds as may be necessary to retire all obligations of the Village as they become due, plus such additional funds as Council may deem appropriate.
   Such sinking fund shall be used only for the retirement of Village obligations or for the purchase of all or any part of any bonds being offered by the Village for sale, all of which bonds shall be first offered to the sinking fund trustees before they are advertised for public sale.
   Whenever the balance in the sinking fund exceeds the outstanding bonded indebtedness of the Village, the sinking fund trustees may, in their discretion, transfer any such excess back to the general fund, for reappropriation by Council as it deems proper.
   The sinking fund trustees may, in their discretion, sell any of the bonds of the Village in their possession to the trustees of the police pension fund at face value plus accrued interest.