Section 165.00. Deposit and use of proceeds from sale of bonds, bond anticipation notes, capital notes, urban renewal notes or budget notes

a.  The  proceeds,  inclusive  of premiums, from the sale of bonds, bond
  anticipation notes, capital notes, urban renewal notes or  budget  notes
  shall  be  deposited  and  secured  in  a  special account in the manner
  provided by section ten of the  general  municipal  law,  shall  not  be
  commingled  with  other  funds of the issuer, and shall be expended only
  for the object or purpose for which such obligations were issued. In the
  event that any portion of the proceeds, inclusive of premiums, from  the
  sale  of  bonds,  bond  anticipation notes, capital notes, urban renewal
  notes or budget notes is not expended for  the  object  or  purpose  for
  which  such  obligations were issued, such portion shall be applied only
  to the payment of the principal of and  interest  on  such  obligations,
  respectively.   Notwithstanding   the   foregoing   provisions  of  this
  paragraph, the finance board of any  municipality,  school  district  or
  district  corporation  may adopt any or all of the following resolutions
  to provide that:
    1. The proceeds, inclusive of premiums, of  capital  notes  issued  in
  amounts  of  one  hundred thousand dollars or less, and of budget notes,
  need not be deposited in a special account  but  may  be  deposited  and
  commingled  with  other funds of the issuer in any account of the issuer
  in a bank or trust company located and authorized to do business in this
  state, but such power shall not be construed as authorizing the  use  of
  such  proceeds  for  an  object or purpose other than that for which the
  obligations were issued.
    2. The proceeds, inclusive of premiums, from the sale of  any  two  or
  more  issues  of  bonds,  bond  anticipation notes, capital notes, urban
  renewal notes or budget notes need not be deposited in separate  special
  accounts  but may be deposited in a single special account of the issuer
  in a bank or trust company located and authorized to do business in this
  state, but shall not be commingled with other funds of the  issuer.  The
  chief fiscal officer shall then maintain a separate accounting record of
  each issue to insure that the proceeds shall be used only for the object
  or purpose for which the obligation was issued.
    3.   Moneys   appropriated   for  a  purpose  for  which  bonds,  bond
  anticipation notes, capital notes  or  urban  renewal  notes  have  been
  authorized  may  be deposited in the same bank account with the proceeds
  from the sale of such obligations. Such power shall not be construed  as
  authorizing the use of the proceeds of such obligations for an object or
  purpose  other  than that for which they were issued. Provided, however,
  that any moneys remaining in such  bank  account  after  the  object  or
  purpose  has been completed or abandoned shall be applied to the payment
  of the principal  of  and  interest  on  such  obligations;  any  excess
  remaining thereafter may be used for any lawful purpose.
    b.  Notwithstanding the provisions of paragraph a of this section, the
  proceeds,  inclusive  of  premiums,  from  the  sale  of   bonds,   bond
  anticipation  notes,  capital  notes  and  urban  renewal  notes  may be
  invested in the  manner  provided  by  section  eleven  of  the  general
  municipal law. Such investment shall be made by the finance board or the
  chief  fiscal  officer, if the finance board shall delegate such duty to
  that person. The separate identity of the  proceeds  from  the  sale  of
  bonds,  bond  anticipation notes, capital notes, urban renewal notes and
  budget notes shall be maintained at all  times,  whether  such  proceeds
  consist  of  cash or investments or both. Any interest earned or capital
  gain realized on any investment shall be applied to either  the  payment
  of  the principal of and interest on the bonds, bond anticipation notes,
  capital notes, urban renewal notes or budget notes, as the case may  be,
  the  proceeds from the sale of which were used in making such investment

  or for any other purpose or purposes for  which  such  issue  of  bonds,
  capital   notes   or   urban   renewal   notes   has   been  authorized.
  Notwithstanding the preceding sentence, any interest earned  or  capital
  gain  realized  on  any  investment  shall,  to  the extent necessary to
  maintain the exemption from federal income taxation of interest  on  the
  obligations the proceeds from the sale of which were used in making such
  investment,  be  paid  to  the United States treasury department, or any
  agency of the United States. Where the proceeds from the  sale  of  bond
  anticipation  notes  have been invested and such notes have been retired
  from the proceeds from the sale of the bonds in  anticipation  of  which
  they  were  issued,  any interest earned or capital gain realized on any
  investment shall be applied only to the payment of the principal of  and
  interest on the bonds.
    c. Notwithstanding the provision of paragraph a of this section or the
  provision  of  subdivision three of section ninety-nine-o of the general
  municipal law, the  proceeds  of  obligations  issued  for  the  partial
  refinancing  of  mass commuting vehicles by the county of Suffolk may be
  used to reimburse in whole or in part any accounts or funds  from  which
  moneys  were  disbursed  to meet the cost of the original acquisition of
  such mass commuting vehicles. As used in this paragraph "mass  commuting
  vehicles"  means  any  bus, subway car, rail car, locomotive, or similar
  equipment used or to be used to provide mass commuting services, whether
  or not operated by a private operator under agreement with the county of
  Suffolk.
    d. Notwithstanding the provisions of paragraph a of this  section,  if
  obligations  issued by a school district or a city on behalf of a school
  district have been refunded with bonds issued by the dormitory authority
  of the state of New York pursuant to subdivision thirty-nine of  section
  sixteen  hundred  eighty  of the public authorities law, that portion of
  the proceeds that are  allocable  to  obligations  refunded  with  bonds
  issued by the dormitory authority of the state of New York and that have
  not been expended by the school for the object or purpose for which such
  obligations  were  issued  shall  be  applied only to the payment of the
  principal  of  and  interest  on  the  bonds  issued  by  the  dormitory
  authority.