85-1-323. Debt service funds. (1) The department shall provide, in the proceedings authorizing the issuance of each series of bonds or in the trust indenture securing the bonds, for the paying into the appropriate debt service fund at stated intervals all money then remaining in the water fund after paying all costs of operation, maintenance, and repairs of the works. All money in each debt service fund must be pledged for the payment of and used only for the purpose of paying:

(a) the interest upon the bonds as interest is due;

(b) the necessary fiscal agency charges for paying bonds and interest;

(c) the principal of the bonds as due; and

(d) any premiums upon bonds retired by call or purchase as provided in this chapter.

(2) (a) Prior to the issuance of the bonds of each series:

(i) the department may provide by resolution or by trust indenture for using the debt service fund or any part of the fund in the purchase of any of the outstanding bonds payable from the fund at the market price of the bonds but not exceeding the price, if any, at which the bonds, at the next interest date, are payable or redeemable;

(ii) all bonds redeemed or purchased must be canceled, and bonds may not be issued in place of the canceled bonds.

(b) The money in each debt service fund, less the reserve that may be provided for in the resolution authorizing the bonds or in the trust indenture for the payment of interest and principal, if not used within a reasonable time for the purchase of bonds for cancellation as provided in this section, must be applied to the redemption of bonds then subject to redemption at the redemption price then applicable.