(A) Monies currently held as a reserve for the refunded bonds and not a part of the issuer’s funds shall be credited to, and become a part of, the Debt Service Reserve Account created hereby as of the date of the refunding of the refunded bonds. The town shall deposit as a reserve for the refunding bonds, into the Debt Service Reserve Account, either net revenues of the works on a monthly basis or funds of the works now on hand so that the reserve equals but does not exceed the least of:
(1) The maximum annual debt service on the refunding bonds;
(2) One hundred twenty-five percent of average annual debt service on the refunding bonds; or
(3) Ten percent of the proceeds of the refunding bonds plus a minor portion, as defined in the Internal Revenue Code of 1986, being 26 U.S.C. §§ 1 et seq. (the reserve requirement).
(B) If the town deposits net revenues into the Debt Service Reserve Account on a monthly basis, the amount of each monthly deposit shall be equal in amount and sufficient to accumulate the reserve requirement within five years from the date of delivery of the refunding bonds. The balance in the Debt Service Reserve Account shall never exceed the reserve requirement.
(C) The Debt Service Reserve Account shall constitute the margin for safety and as protection against default in the payment of principal and interest on the refunding bonds, and the monies in the Reserve Account shall be promptly made up from the next available net revenues remaining after credits into the Bond and Interest Account. If monies in the Debt Service Reserve Account are transferred to the Bond and Interest Account to pay principal and interest on refunding bonds, then this depletion of the balance in the Debt Service Reserve Account shall be made up from the next available net revenues after the credits into the Bond and Interest Account.
(D) Any monies in the Debt Service Reserve Account in excess of the reserve requirement may be used for the prepayment of installments of principal on the then outstanding bonds which are then callable or prepayable, or for the purchase of outstanding bonds or installments of principal of fully registered refunding bonds and accrued interest, or shall be transferred to the Sewage Works Improvement Fund.
(1996 Code, § 9-97) (Ord. 89-04-05, passed 4-24-1989)