(a) Any bonds issued by the authority under this chapter may from time to time thereafter be refunded by the issuance of refunding bonds of the authority; provided, however, that no refunding bonds shall be issued unless the present value of all debt service on the refunding bonds (computed with a discount rate equal to the true interest rate of the refunding bonds and taking into account all underwriting discount and other issuance expenses) shall not be greater than 95 percent of the present value of all debt service on the bonds to be refunded (computed using the same discount rate and taking into account the underwriting discount and other issuance expenses originally applicable to such bonds) determined as if such bonds to be refunded were paid and retired in accordance with the schedule of maturities (considering mandatory redemption as a scheduled maturity) provided at the time of their issuance. Provided further that the average maturity of the refunding bonds, as measured from the date of issuance of such refunding bonds, shall not exceed by more than three years the average maturity of the bonds to be refunded, as also measured from such date of issuance, with the average maturity of any principal amount of bonds to be determined by multiplying the principal of each maturity by the number of years (including any fractional part of a year) intervening between such date of issuance and each such maturity, taking the sum of all such products, and then dividing such sum by the aggregate principal amount of bonds for which the average maturity is to be determined. Any such refunding bonds may be issued whether the bonds to be refunded shall have then matured or shall thereafter mature, and such refunding may be effected either by sale of the refunding bonds and the applications of the proceeds thereof to the payment or redemption of the bonds so refunded or by exchange of the refunding bonds for those to be refunded thereby. The holders of any bonds so to be refunded shall not be compelled without their consent to surrender their bonds for payment or exchange prior to the date on which they are payable, or if they are called for redemption, prior to the date on which they may be redeemed by the authority according to their terms. Any refunding bonds may be issued in such aggregate principal amount as the authority shall deem necessary to effect such refunding.

(b) The proceeds derived from any sale of refunding bonds remaining after payment of the expenses of their issuance shall be applied in accordance with the proceedings of the authority under which such refunding bonds are issued. Pending the application of said proceeds to the purchase, redemption or payment of such outstanding bonds, the said proceeds may be invested in permitted investments pursuant to a trust agreement providing for the future application of such proceeds to the purchase, redemption or payment of such outstanding bonds. Bonds refunded prior to their maturity with the proceeds of refunding bonds shall be deemed not outstanding if the authority, in the proceedings under which such refunding bonds are issued, establishes a trust fund consisting of cash or government securities, or both, sufficient to pay in accordance with the provisions of such trust fund when due, the entire principal of and the interest and premium (if any) on the refunded bonds; provided that such government securities shall not be subject to redemption prior to their maturities other than at the option of the holder thereof. Upon the establishment of such a trust fund, the refunded bonds shall no longer be deemed to be outstanding, shall no longer be secured by the funds pledged therefor in Section 22-3A-16, shall no longer be obligations of the authority, and shall be secured solely by and payable from the moneys and investments deposited in such trust fund.