15.2-2644 - Issuance or exchange for indebtedness to be retired; sale and disposition of proceeds; rights of owners.
§ 15.2-2644. Issuance or exchange for indebtedness to be retired; sale anddisposition of proceeds; rights of owners.
Any refunding bonds may be issued or exchanged for the indebtedness to beretired by them, including indebtedness not matured, redeemable orsurrendered for retirement. Unless so exchanged, any locality may sellrefunding bonds authorized under the provisions of this article in suchmanner, either at public or private sale, and for such price as the governingbody of the locality may determine. The proceeds of any refunding bonds maybe applied to (i) the payment of matured or redeemable indebtedness,including any redemption premium, (ii) the payment of unmatured indebtednessthe evidences of which are on deposit with a bank or trust company designatedby the locality for surrender to the locality upon receipt of payment in anamount not exceeding the amount of the indebtedness, or (iii) theestablishment of an escrow or sinking fund consisting of cash and noncallableobligations of, or unconditionally guaranteed by, the United States ofAmerica or noncallable obligations of, or unconditionally guaranteed by, theCommonwealth in an amount which together with interest to be earned on suchobligations shall be sufficient to pay all indebtedness to be refunded eitherat maturity or upon redemption as provided for upon the creation of theescrow or sinking fund. Any escrow or sinking fund established, in whole orin part, from the proceeds of the sale of refunding bonds shall beirrevocably pledged to the payment of the indebtedness to be refunded andshall be used solely to pay the indebtedness at maturity or upon redemptionor for the purchase of not less than all of the indebtedness to be refunded.It is the intent that any escrow or sinking fund established pursuant to thissection shall constitute a special fund for the payment of the refundedindebtedness and that the refunded indebtedness shall not be included for thepurpose of determining any limitation upon the amount of indebtedness of thelocality which is imposed by law.
The owners of any outstanding indebtedness to be refunded shall be divestedof all rights and security relating to the indebtedness, except the right topayment when due of principal, premium, if any, and interest, which shall bepaid solely from the escrow or sinking fund; provided that, in the case ofdebt issued before March 27, 1977, the governing body of the locality mayprovide that if the escrow or sinking fund is in any respect insufficient tomake payment of principal, premium, if any, and interest, the original rightsand security relating to the indebtedness shall be restored to the extentnecessary to provide full payment.
(Code 1950, § 15-666.34; 1958, c. 640; 1962, c. 623, § 15.1-193; 1977, c.442; 1985, c. 196; 1991, c. 668, § 15.1-227.45; 1994, c. 714; 1997, c. 587.)