9-535.01. Refunding bonds and revenue-producing undertaking; refunding utility purchase contracts; form; sale and investment of proceeds; limitation on amount issued

A. Bonds may also be issued hereunder for the purpose of refunding any bonds issued under authority of this article or any bonds issued under the authority of title 35, chapter 3, article 3 or 4, for the acquisition, construction or improvement of any utility undertaking. If any city or town has outstanding unpaid balances on contracts heretofore entered into for the acquisition of water or other utility properties or facilities and such contracts are payable solely from the revenues thereof or of the utility undertaking extended or added to with the properties or facilities so acquired, whether or not title to such properties or facilities shall have vested in such city or town, all or any part of such unpaid balances may also be refunded hereunder and all such contracts so refunded are hereby validated and declared to be effective in accordance with their terms. No election on the issuance of such bonds shall be required, but if such bonds are combined into a single issue with bonds authorized for nonrefunding purposes hereunder, the bonds so authorized for nonrefunding purposes shall have been submitted at an election as otherwise provided in this article.

B. Refunding bonds issued hereunder shall have such details, shall bear such rate or rates of interest, and shall be otherwise issued, sold and secured as provided by the governing body of the city or town and as otherwise provided in this article, except that such changes in the security and revenues pledged to the payment of the obligations so refunded may be made by the governing body as may be provided by it in the proceedings authorizing such bonds, but in no event shall such bonds ever become a general obligation of the municipality issuing such refunding bonds unless such refunding bonds or the bonds to be refunded are tax secured bonds.

C. Refunding bonds issued hereunder may be exchanged for no less than a like principal amount of the bonds or unpaid contract obligations to be refunded, may be sold at a private or public sale or may be exchanged in part and sold in part. If sold, the net proceeds may be invested in obligations issued by the United States government, or one of its agencies, or obligations fully guaranteed by the United States government as to principal and interest so long as such investments will mature with interest so as to provide funds to pay when due, or called for redemption, the bonds or unpaid contract obligations to be refunded together with interest thereon and redemption premiums, if any, and such proceeds or obligations shall, and other funds legally available to the city or town for such purposes may be deposited in trust with a banking corporation or association doing business in Arizona that is a member of the federal deposit insurance corporation, or any successor thereto, to be held for the payment and redemption of bonds or unpaid contract obligations to be refunded and such deposit and any reinvestment thereof shall be held in trust by the escrow agent for the payment of bonds or unpaid contract obligations with interest and redemption premiums, if any, on maturity or on an available redemption date or on an earlier voluntary surrender with the consent of the issuer. As to obligations so escrowed for the payment of contract balances payable in amounts or at times not fixed but dependent on earnings of the undertaking, it shall be sufficient if the obligations so purchased, if liquidated on the market at the par value thereof, will produce enough to pay such balances as the governing body estimates would have become payable under the terms of the contracts had such balances not been refunded, but the escrowed obligations must be not less in principal amount than the principal amount of the balances so refunded, and if at any time the income from the escrowed obligations is insufficient to pay all interest when payable on such refunded balances, such deficiencies shall be made up from the earnings of the undertaking on such priority basis as would have been applicable to such payment had such balances not been refunded. The term " net proceeds" as used above shall mean the gross proceeds of the refunding bonds after the deduction therefrom of all accrued interest and expenses incurred in connection with the authorization and issuance of the bonds and the refunding of the outstanding obligations, including all cost and expenses resulting from price variation to par or otherwise incurred in the purchase of obligations for escrow and in the distribution of the refunding bonds. The determination of the governing body issuing refunding bonds that the limitations herein imposed on the issuance of refunding bonds have been met shall be conclusive in the absence of fraud or arbitrary and gross abuse of discretion.

D. Bonds or unpaid contract obligations not maturing or callable for redemption under their terms may not be refunded hereunder without the consent of the holders unless the proceedings authorizing the issuance of the refunded bonds provide that they may be so refunded.

E. With respect to bonds issued to refund tax secured bonds, the provisions of title 35, chapter 3, article 4 shall govern in the event of any inconsistency between such article and this section.