15.2-2623 - Defeasance of indebtedness; rights of owners.
§ 15.2-2623. Defeasance of indebtedness; rights of owners.
The governing body of any locality is authorized to provide by resolution orordinance for the defeasance of any bonds of the locality now or hereafteroutstanding, to the extent that the defeasance of such bonds is not otherwiseprovided for in the resolution, ordinance, indenture or other documentgoverning the issuance of such bonds. Bonds to be defeased pursuant to thissection shall be deemed defeased and no longer outstanding when there hasbeen established with a bank or trust company designated by the locality anescrow or sinking fund consisting of cash and noncallable obligations of, orunconditionally guaranteed by, the United States of America or noncallableobligations of, or unconditionally guaranteed by, the Commonwealth in anamount which together with interest to be earned on such obligations will besufficient to pay all bonds to be defeased either at maturity or uponredemption; however, if such bonds are to be defeased either at maturity orupon redemption, notice of the redemption of such bonds shall have been dulygiven or irrevocable instructions to redeem such bonds shall have been givenby the locality.
Any escrow fund established pursuant to this section shall be irrevocablypledged to the payment of the bonds to be defeased and shall be used solelyto pay such bonds at maturity or upon earlier redemption. It is the intentthat any escrow fund established pursuant to this section shall constitute aspecial fund for the payment of the defeased bonds and that the defeasedbonds shall not be included for the purpose of determining any limitationupon the amount of indebtedness of the locality which is imposed by law.
The owners of any outstanding bonds to be defeased shall be divested of allrights and security relating to the bonds, except the right to payment due toprincipal, premium, if any, and interest, which shall be paid solely from theescrow fund.
(1994, c. 714, § 15.1-227.24:1; 1997, c. 587.)