(a) Whenever the board of directors determines that prudent management of the fiscal affairs of the district so requires, it may refund by defeasing or calling for redemption any outstanding bonds, subject to all of the following:

(1) The last-maturing refunding bonds shall mature not later than the date on which the last-maturing bonds being refunded would have matured.

(2) Refunding bonds shall not be issued unless the total interest cost to maturity of the refunding bonds added to the principal amount of those refunding bonds will be less than the total interest cost to maturity of the bonds being refunded added to the principal amount of the bonds being refunded. If any of the refunding bonds or the bonds being refunded, or both, bear or may bear interest at a variable rate, thereby making the actual total interest cost to maturity indeterminable in advance of maturity, the determination required by this paragraph may consist of a finding made by the board based on substantial evidence, which means evidence that is reasonable, credible, and of solid value and ponderable legal significance, based upon the record as a whole. The test in Section 53552 of the Government Code need not be met if the determination in this paragraph is made.

(3) The savings achieved through the refunding of bonds shall be used by the board of directors solely to reduce the assessments or charges, or both, which are fixed and collected for the payment of principal of, and interest on, the refunding bonds. The reductions to reflect the savings in any fiscal year shall be made not later than the next succeeding fiscal year.

(b) The refunding bonds shall be issued according to Article 9 (commencing with Section 53550) of Chapter 3 of Part 1 of Division 2 of Title 5 of the Government Code.

(c) When the originally issued bonds have been refunded, the refunding bonds shall thereafter take the place of, and be deemed for all purposes to be, the bonds corresponding to the portion of the authorization by the voters from which the refunded bonds were originally issued and shall be payable from the same funds as those refunded bonds. Following the refunding, the same portion of the corresponding voter authorization as was previously canceled by issuance of the refunded bonds shall remain canceled and shall be deemed to be the amount of indebtedness issued from the voter authorization representing the refunding bonds. However, refunding bonds issued under this section shall be used only for the purpose of reducing debt service costs on bonds issued from indebtedness approved by the voters prior to July 1, 1978, or refunding bonds issued in place thereof under this section.

(d) Notwithstanding Section 53569 of the Government Code and Section 35996 of this code, if the board of directors determines that to do so would be consistent with prudent management of the district’s fiscal affairs, the board may sell refunding bonds issued under this section at private sale without advertising for bids.

(e) The disbursement of the proceeds of the refunding bonds, pursuant to this section, shall be at the direction of the board of directors or the district’s authorized officers.

(Amended by Stats. 1985, Ch. 645, Sec. 2. Effective September 17, 1985.)