(a) The bond bank authority, to carry out the purposes and policies of this chapter, may lend money to municipalities through the purchase by the bond bank authority of municipal bonds of municipalities and if the purpose of the loan is to provide financing for a municipal self-insurance program and the loan meets the credit standards of the bond bank authority, may lend money to municipalities, or municipal joint insurance arrangements organized under AS 21.76. Notwithstanding a home rule charter provision requiring public sale by a municipality of its municipal bonds, a municipality may sell its municipal bonds to the bond bank authority at a negotiated, private sale. The bond bank authority, for this purpose, may issue its bonds and notes payable solely from the revenues or funds available to the bond bank authority for such payment and may otherwise assist municipalities as provided in this chapter.

(b) Notwithstanding any other provision of law, to the extent that any department or agency of the state is the custodian of money payable to a political subdivision, at any time after written notice to the department or agency head from the bond bank authority that the political subdivision is in default on the payment of principal or interest on municipal bonds then held or owned by the bond bank authority, or amounts due under an agreement between the bond bank authority and a political subdivision or a municipal joint insurance arrangement organized under AS 21.76, the department or agency shall withhold the payment of that money from that political subdivision and pay over the money to the bond bank authority for the purpose of paying principal of and interest on the bonds or debt. The notice shall be given in each instance of default.