(1) The proceeds derived from the issuance of refunding bonds under the provisions of this article, together with other legally available funds, if any, of the public body, shall either be immediately applied to the payment or redemption and retirement of the obligations to be refunded and the cost and expense incident to such procedures or shall be placed in escrow or trust to be applied for the purposes and in the manner required or permitted under this article as the governing body may determine.

(2) Proceeds of refunding bonds, including proceeds of special obligation refunding bonds, if any, and other moneys which are placed in escrow or trust, pursuant to the determination and direction of the governing body, shall be used and applied for the following purposes and in the following manner, the details of which shall be set forth in full and at length in the escrow agreement:

(a) For the purpose of paying the principal of, interest on, and prior redemption premiums, if any, for the obligations refunded only;

(b) For the purpose of paying all or specified portions of the principal of, interest on, and prior redemption premiums, if any, for the obligations to be refunded or the refunding bonds or any combination thereof;

(c) For the purpose of paying all of the principal of, interest on, and prior redemption premiums, if any, for the obligations refunded, and all of the principal of, interest on, and prior redemption premiums, if any, for all special obligation refunding bonds issued as a part of the refunding transaction;

(d) In specified portions, for one or more or all of the purposes described in this subsection (2).

(3) The escrow agreement shall in each case designate and set forth with regard to the obligations refunded, the refunding bonds, and the special obligation refunding bonds, if any:

(a) Any amounts of principal, interest, prior redemption premiums, and costs and expenses of the refunding transaction to be payable from the escrow or trust account; including, without limiting the generality of the foregoing, the capitalization of interest on the refunding bonds for such period of time as the governing body may determine;

(b) Whether each such amount is to be payable:

(I) From funds originally placed in such escrow or trust account; or

(II) From the interest or other income derived from the investment of the funds originally placed in such escrow or trust account; or

(III) From a specified combination of subparagraphs (I) and (II) of this paragraph (b), and, if so, in what proportions; or

(IV) From any moneys in such account without specification or restriction; and

(c) The order and priority, if any, which is to govern the use and application of all or any part of the funds held in said escrow or trust account to payment of any such amounts.

(4) The incidental costs and expenses of the refunding transaction may be paid by the purchaser of the refunding bonds, or by the public body from any general fund, subject to appropriations therefor and any other limitations on the use thereof as otherwise provided by law, or from other available revenues of the public body under the control of the governing body, or from the proceeds of the refunding bonds, or from the interest or other yield derived from the investment of any refunding bond proceeds or other moneys placed in the escrow or trust, or from any other sources legally available therefor, or any combination thereof, as the governing body may determine.

(5) Any accrued interest and any premium appertaining to a sale of refunding bonds may be applied to the payment of the interest thereon or the principal thereof, or to both interest and principal, or may be deposited in a reserve therefor, or may be used to pay refunded obligations by deposit in the escrow or trust account, or otherwise, or may be used to defray any incidental costs and expenses appertaining to the refunding, or any combination thereof, as the governing body may determine. In the event of any use of such accrued interest or premium other than for payment of interest on or principal of the refunding bonds, or as a reserve therefor, the net interest cost figures on the refunding bonds used in making the computations required in sections 11-56-105 (6) and 11-56-107 (1) shall be adjusted upward accordingly to reflect the amounts actually to be paid by the public body.

(6) For the purpose of implementing the provisions of this article, the governing body shall have the power to enter into escrow agreements and to establish escrow or trust accounts with any commercial bank having full trust powers located within the state of Colorado and which is a member of the federal deposit insurance corporation under protective covenants and agreements whereby such accounts shall be fully secured as provided by section 11-56-109.