§ 243. Security documents

(a) An assignment, pledge, mortgage or other encumbrance of all or part of a municipality's right to receive payments with respect to an eligible facility contained in a security document shall be fully effective from the time when the security document is executed with or without any subsequent physical delivery or segregation of the money and without any filing or recording under the Uniform Commercial Code or otherwise.

(b) A security document may contain covenants of the municipality as to:

(1) the creation and maintenance of reserves;

(2) the issuance of other bonds with respect to the eligible facility;

(3) the custody, investment and application of monies;

(4) the disposition of insurance or condemnation proceeds;

(5) the use of surplus bond proceeds;

(6) action by the municipality in the event of a default by the user under the financing document;

(7) the subjecting of additional property to the lien of the security document;

(8) any other matter which affects the security for the bonds in any way;

(9) pledging any federally guaranteed security and monies received therefrom whether such security is acquired by the municipality or by a user to secure the payment of the bonds.

(c) A security document may limit the rights of bondholders to enforce obligations of the municipality thereunder or under the financing document. (Added 1973, No. 197 (Adj. Sess.), § 1; amended 1975, No. 18, § 10, eff. March 27, 1975; 1981, No. 54, § 10, eff. April 28, 1981; 1993, No. 89, § 3(b), eff. June 15, 1993.)