Proceeds of refunding bonds.

A. The proceeds of refunding bonds shall either be immediately applied to the retirement of the bonds being refunded or be placed in escrow in a commercial bank or trust company, either a state or national banking institution that possesses and is exercising trust powers, that is located within New Mexico and that is a member of the federal deposit insurance corporation, to be applied to the payment of the bonds being refunded upon their presentation for payment; provided, to the extent any incidental expenses have been capitalized, that the refunding bond proceeds may be used to defray such expenses; and any accrued interest and any premium appertaining to a sale of refunding bonds may be applied to the payment of the interest on them and the principal of them, or both interest and principal, or may be deposited in a reserve as the board may determine. B. Nothing in this section requires the establishment of an escrow account if the refunded bonds become due and payable within one year from the date of the refunding bonds and if the amount necessary to retire the refunded bonds within that time is deposited with the paying agent for the refunded bonds. C. An escrow account shall not be limited to proceeds of refunding bonds but may include other money available for the account's purpose. Any proceeds in escrow may be invested or reinvested in bills, certificates of indebtedness, notes or bonds that are direct obligations of, or the principal and interest of which obligations are unconditionally guaranteed by, the United States. D. The proceeds and investments in escrow, together with any interest derived from the investment of the escrow account, shall be sufficient to pay principal, interest, any prior redemption premium due and any charges of the escrow agent payable from the escrow account and to pay the bonds being refunded as they become due at their respective maturities or due at any designated prior redemption date on which the board shall exercise a prior redemption option. E. Any purchaser of any refunding bond issued pursuant to the Water and Sanitation District Act is not responsible for the application of the refunding bond proceeds by the district or any of its officers, agents or employees.