(a) The reserve fund shall be established by written agreement with a trustee independent from the local government. The trust agreement shall contain:
(1) A description of the improvements for which the reserve is established;
(2) A covenant that the reserve funds will not be used for any purpose other than the purposes described in the trust agreement;
(3) A covenant by the trustee that all sums in the reserve fund will be invested by the trustee in a manner consistent with the "prudent man" rule, as authorized and defined by §§ 28-71-105 and 28-71-106;
(4) A covenant by the trustee to disburse the reserve funds only to the contractor or to a trustee for bonds or notes issued to finance the improvements or to disburse the reserve funds in such manner that they will be applied to the acquisition, construction, reconstruction, remodeling, equipping, extending, operating, maintaining, or providing the improvements;
(5) A term for the agreement which shall not exceed twenty-one (21) years.
(b) A trust agreement in which a city, town, or county is a party shall specify that each payment to the reserve fund shall be a separate contract with the trustee and shall specifically limit the amount of payments to the reserve fund in any fiscal year to the amount of the appropriation to the reserve fund for that fiscal year.
(c) The trust agreement may contain provisions providing for the trustee's fee, if any, to be paid from the reserve funds held in trust.
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