(a)(1) In order to secure bonds and notes issued under this chapter, the legislative body of the municipality may create and establish a capital reserve fund and the municipality shall pay into such capital reserve fund (A) any moneys appropriated and made available by the municipality for the purpose of such fund, (B) any proceeds of sale of notes or bonds, to the extent provided in the resolution or resolutions of the legislative body authorizing the issuance thereof, and (C) any other moneys which may be made available to the municipality for the purpose of such fund from any other source. All moneys held in the capital reserve fund, except as hereinafter provided, shall be used, as required, solely for the payment of the principal of bonds secured by the capital reserve fund as the same mature or any annual sinking fund payments, the purchase or redemption of such bonds, the payment of interest on such bonds or the payment of any redemption premium required to be paid when such bonds are redeemed prior to maturity; provided moneys in such fund shall not be withdrawn therefrom at any time in such amount as would reduce the amount of such fund to less than the maximum capital reserve fund requirement, except for the purposes of paying interest on such bonds, principal of such bonds and any annual sinking fund payments, as the same become due and for the payment of which other moneys of the municipality are not available. Any income or interest earned by, or increment to, the capital reserve fund due to the investment thereof or any amount in excess of the maximum capital reserve fund requirement may be transferred by the municipality to other funds or accounts of the municipality established pursuant to this chapter to the extent that such transfer does not reduce the amount of the capital reserve fund below the maximum capital reserve fund requirement.

(2) A municipality shall not issue bonds secured by the capital reserve fund at any time if upon issuance the amount in the capital reserve fund will be less than the maximum capital reserve fund requirement, unless the municipality, at the time of issuance of such bonds, shall deposit in such fund from the proceeds of the bonds so to be issued, or otherwise, an amount which, together with the amount then in such fund, will not be less than the maximum capital reserve fund requirement.

(3) In computing the amount of the capital reserve fund for the purposes of this section, securities held as a part thereof shall be valued in the manner provided in the resolution or resolutions authorizing the issuance of bonds secured by the capital reserve fund.

(b) The municipality may create and establish such other fund or funds, including other capital reserve funds with the same force and effect and upon the same terms and conditions and subject to the same limitations as provided in this section, as may be necessary or desirable in furtherance of the purposes of this chapter.

(P.A. 79-596, S. 8, 17.)