Section 6-L. Mandatory reserve fund for municipal corporations, fire districts and school districts

1. As used in  this  section,  the  term  "governing  board,"  in so far as it is used in reference to a municipal
  corporation, shall mean the "legislative body" thereof, as that term  is
  defined  in  section two of the municipal home rule law, as amended from
  time to time; in so far as it is used in reference to a  fire  district,
  shall  mean  the board of fire commissioners thereof; in so far as it is
  used in reference to a school district, shall mean the board of trustees
  thereof.
    2. Notwithstanding any other provision of this chapter, upon the  cash
  sale  by  a municipal corporation, fire district or school district of a
  capital improvement, as defined in section six-c of  this  chapter,  for
  the  cost of which obligations were issued pursuant to the local finance
  law, and when all or part of such indebtedness  is  outstanding  at  the
  time of such sale, a mandatory reserve fund shall be established for the
  purpose  of retiring such obligations, or, as an additional alternative,
  paying principal of, or redemption  premiums  in  connection  with  such
  obligations  or  other  obligations  of  at least equal weighted average
  life; provided however, that, if the proceeds of the sale  are  used  or
  set  aside  to  be  used  (i)  to  pay  or provide for the construction,
  reconstruction, acquisition or installation of capital  improvements  or
  equipment,  as defined in section six-c of this chapter, or (ii) for the
  payment of principal of, or redemption premiums in connection with,  any
  outstanding  obligations  issued  by  the  municipal  corporation,  fire
  district or school district to  finance  such  capital  improvements  or
  equipment, in an amount not less than the lesser of such proceeds or the
  principal   amount  of  the  indebtedness  outstanding  on  the  capital
  improvement sold, then such fund  need  not  be  established;  provided,
  however,  that  if  such  amount  to be so used, together with any other
  amounts so used pursuant to this sentence in the  same  fiscal  year  of
  such  municipal  corporation,  fire  district  or school district, would
  exceed one percent of the limit prescribed  by  section  104.00  of  the
  local finance law, then such fund shall nevertheless be established; and
  provided  further, that a municipal corporation, fire district or school
  district shall within  thirty  days  after  the  use  of  such  proceeds
  pursuant  to clause (i) herein, file a report with the state comptroller
  identifying: (a) the asset sold, (b) the amount  of  net  proceeds  from
  such sale, (c) the amount to be paid or provided pursuant to such clause
  (i),  and (d) the capital improvements or equipment to be so paid for or
  provided. When a municipal corporation, fire district or school district
  has outstanding indebtedness incurred to finance  the  cost  of  such  a
  capital  improvement,  federal and state aid received on account of such
  improvement, to the extent that  it  is  not  applied  directly  to  the
  payment  of  a  part  of  the  cost  of  such  improvement  or to retire
  indebtedness issued in anticipation  of  such  aid,  shall  likewise  be
  deposited  in  a  reserve  fund  for the purpose of retiring either such
  obligations or, as an additional alternative, other  obligations  of  at
  least  equal  weighted  average life. The entire proceeds of the sale or
  such state or federal aid  received,  as  the  case  may  be,  shall  be
  deposited  to  the  credit  of  such fund, provided however, that if the
  aggregate amount thereof shall exceed the principal of such indebtedness
  due or to become due, or if, when all such outstanding obligations  have
  been  retired,  any  moneys  remain unexpended in the reserve fund, such
  excess moneys may be used for any lawful municipal or district  purpose,
  as  the case may be. The provisions of this section shall not apply in a
  case where a provision of any other law requires that  the  proceeds  of
  the  sale  of a capital improvement shall be deposited in a reserve fund
  established for the purpose of retiring outstanding obligations.

    2-a.  The  provisions  of  this  section  shall   apply   to   capital
  improvements  of  town and county improvement districts. For the purpose
  of implementing the  provisions  of  this  section  in  regard  to  such
  districts,  the term "governing board" shall mean the governing board of
  the  town  or  county,  as  the  case  may be, in which such district is
  located, and the term "chief fiscal officer" shall mean the chief fiscal
  officer of such town or county.
    3. Appropriations from such fund shall be made only for the payment or
  payments of all or part of the said outstanding  indebtedness.  However,
  any  balance  remaining in said fund upon the payment of all outstanding
  principal and interest may be expended for any  lawful  purpose  of  the
  municipal corporation, fire district or school district.
    4.  The chief fiscal officer shall keep a separate account for each of
  such funds established. Such account shall show:
    a. The date of creation of the fund and the amount credited thereto.
    b. The interest earned by such fund.
    c. The capital gains or losses resulting from the sale of  investments
  of the fund.
    d. The interest or capital gains which have accrued to the fund.
    e. The amount and date of each withdrawal from the fund.
    f.  The  assets of the fund, indicating the cash balance therein and a
  schedule of the amounts  invested.  The  chief  fiscal  officer  at  the
  termination  of  each  fiscal year shall render a detailed report of the
  operation and condition of each of such funds to the governing board.
    5. The members of the governing board are hereby declared trustees  of
  such  funds  and shall be subject to all the duties and responsibilities
  imposed by law on trustees, and such duties and responsibilities may  be
  enforced by the municipal corporation, fire district or school district,
  as  the  case  may  be,  or  by any board, commission, agency, office or
  taxpayer thereof. An expenditure from such mandatory reserve fund may be
  made only by appropriation pursuant to a  resolution  of  the  governing
  board.
    6.  The moneys in each such fund shall be deposited and secured in the
  manner provided by section ten of this article. The governing  board  or
  the chief fiscal officer of such municipal corporation, fire district or
  school district, if the governing board shall delegate such duty to him,
  may  invest  the  moneys  in  each  such  fund in the manner provided in
  section eleven of this article. Any interest  earned  or  capital  gains
  realized  on  the  moneys  so  deposited or invested shall accrue to and
  become a part of each such fund. The separate identity of each such fund
  shall be maintained whether its assets consist of cash, investments,  or
  both.
    7. The members of the governing board shall be guilty of a misdemeanor
  if they:
    a. Authorize a withdrawal from any such mandatory reserve fund for any
  purpose other than as provided in this section.
    b. Expend any money withdrawn from any such mandatory reserve fund for
  a purpose other than as provided in this section.