Whenever it appears to the Governor from an affidavit filed with him by or on behalf of the owner or owners of any general obligation bonds of any locality, or by any paying agent for the bonds that the locality has defaulted in the payment of the principal of or premium, if any, or interest on any of its outstanding general obligation bonds, the Governor shall immediately make a summary investigation into the facts set forth in the affidavit.

If it is established to the satisfaction of the Governor that the locality is in default in the payment of its bonds or the interest on them, the Governor shall immediately make an order directing the Comptroller to withhold all further payment to the locality of all funds, or of any part of them, appropriated and payable by the Commonwealth to the locality for any and all purposes, until the default is cured. The Governor shall, while the default continues, direct in writing the payment of all sums withheld by the Comptroller, or as much of them as is necessary, to the owners of the bonds in default, or the paying agent for the bonds, so as to cure, or cure insofar as possible, the default as to the bonds or interest on them.

The Governor shall, as soon as practicable, give notice of the default and of the availability of funds with the paying agent or with the Comptroller by publication one time in a daily newspaper of general circulation in the City of Richmond and in the case of registered bonds, by mail, to the registered owners of the bonds. The cost of the publication and mailing shall be a further charge against the funds in the hands of the Comptroller payable to the locality. Any payment so made by the Comptroller to the owners of the bonds in default, or to the paying agent for the bonds, shall be credited as if made directly by the locality and shall be charged by the Comptroller against the first appropriations otherwise payable to the locality as if paid to the locality. The owners of the bonds in default, or the paying agent for the bonds, at the time of payment or at the time of each payment shall receipt for the payment and deliver to the Comptroller all bonds and interest coupons or assignments, in a form satisfactory to the Comptroller, of the right to receive the principal or interest satisfied by the payment. The Comptroller shall report each payment made to the governing body of the defaulting locality and deliver or send by registered mail to the governing body all bonds, interest coupons, and assignments received by the Comptroller under the provisions of this section.

If there is no paying agent for the bonds, the Comptroller shall hold for the benefit of the owners of the bonds in default who do not present their bonds, coupons or assignments for payment their pro rata share of the amounts so withheld and shall pay their share of such amounts when the bonds, coupons or assignments are presented.

For the purpose of this section, bonds of any magisterial district or school district of any county shall be treated as bonds of the county in which the magisterial district or school district is located.

Nothing in this section shall be construed to create any obligation on the part of the Comptroller or the Commonwealth to make any payment on behalf of the defaulting locality other than from funds appropriated and payable to the defaulting locality.

Code 1950, § 15-666.66; 1958, c. 640; 1962, c. 623, § 15.1-225; 1964, c. 46; 1971, Ex. Sess., c. 224; 1988, c. 210; 1991, c. 668, § 15.1-227.61; 1997, c. 587.