(a) Direct obligations of the United States of America or obligations the principal of and interest on which are unconditionally guaranteed by the United States of America and bank certificates of deposit secured by the obligations;

(b) Bonds, debentures, notes, certificates of participation or other obligations issued by a federal agency or other instrumentality of the federal government; or

(c) Other debt obligations determined by administrative rule of the State Treasurer to be highly secured and widely accepted in the marketplace as obligations for a defeasance escrow.

(2) A public body may not issue advance refunding bonds in a principal amount in excess of the minimum principal amount that is estimated at the time of sale to be necessary:

(a) To purchase a principal amount of government obligations that is, together with the interest earnings thereon, sufficient to pay the installments of principal, interest and redemption premiums, if any, on the bonds being refunded when due in accordance with the advance refunding plan; and

(b) To pay all costs in connection with issuing the advance refunding bonds and obtaining credit enhancement devices.

(3) If the public body that issues advance refunding bonds receives an amount of proceeds that exceeds the actual amount required under subsection (2) of this section, the public body must use the excess amount of proceeds to pay interest on the advance refunding bonds.

(4) Before applying advance refunding bond proceeds to the purposes for which the refunding bonds have been issued, a public body may invest advance refunding bond proceeds, together with other moneys set aside for the payment of the bonds to be refunded, only in government obligations.

(5) The public body shall make investments pursuant to subsection (4) of this section at times and in a manner required to provide funds sufficient to pay principal, interest and redemption premiums, if any, in accordance with the advance refunding plan. [2007 c.783 §57]