§ 7-492 — Capital reserve fund established. Petition. Referendum.

(a)(1) The municipality may create and establish a capital reserve fund and shall pay into such capital reserve fund (A) any moneys appropriated and made available by the state or municipality for the purpose of such fund, (B) any proceeds of sale of notes or bonds, to the extent provided in the resolution or resolutions of the municipality authorizing the issuance thereof and (C) any other moneys which may be made available to the municipality for the purpose of such fund from any other source or sources. All moneys held in the capital reserve fund, except as hereinafter provided, shall be used, as required, solely for the payment of the principal of bonds secured by the capital reserve fund as the same mature or the annual sinking fund payments, the purchase or redemption of such bonds, the payment of interest on such bonds or the payment of any redemption premium required to be paid when such bonds are redeemed prior to maturity; provided moneys in such fund shall not be withdrawn therefrom at any time in such amount as would reduce the amount of such fund to less than the maximum capital reserve fund requirement, except for the purposes of paying interest on such bonds, principal of such bonds and annual sinking fund payments, as the same become due and for the payment of which other moneys of the municipality are not available. Any income or interest earned by, or increment to, the capital reserve fund due to the investment thereof or any amount in excess of the maximum capital reserve fund requirement may be transferred by the municipality to other funds or accounts of the municipality established pursuant to this chapter to the extent it does not reduce the amount of the capital reserve fund below the maximum capital reserve fund requirement. (2) A municipality shall not issue bonds secured by the capital reserve fund at any time if upon issuance the amount in the capital reserve fund will be less than the maximum capital reserve fund requirement, unless the municipality, at the time of issuance of such bonds, shall deposit in such fund from the proceeds of the bonds so to be issued, or otherwise, an amount which, together with the amount then in such fund, will not be less than the maximum capital reserve fund requirement. (3) In computing the amount of the capital reserve fund for the purposes of this section, securities held as a part thereof shall be valued in the manner provided in the resolution or resolutions authorizing the issuance of bonds secured by the capital reserve fund. (4) In order to further secure bonds and notes secured by a capital reserve fund and to assure order in its budgeting process, a municipality may, if deemed necessary or appropriate in furtherance of the purposes of this chapter, include in the resolution authorizing the issuance of such bonds and notes provision for the municipality to covenant and agree with the holders of such bonds and notes that on or before the first day in April in each year the amount necessary to restore the capital reserve fund to the maximum capital reserve fund requirement, as such amount shall be certified by the treasurer or other officer acting as the chief financial officer of the municipality on or before the first day of December next preceding, shall be paid from the general fund of the municipality and shall constitute a legal pledge, charge and lien upon its income and receipts, and next upon its real property, any general statute, special act or municipal charter or ordinance to the contrary notwithstanding. Such covenant and agreement shall constitute a pledge of the credit and taxing power of the municipality and the holders of bonds and notes so secured shall have the specific right to compel the exercise of the taxing power of the municipality. Any provision of this subdivision to the contrary notwithstanding, any such deficiency in the capital reserve fund so certified by the treasurer or other such financial officer of the municipality shall be satisfied first from the revenues of the development property specifically pledged to the payment of bonds or notes secured by such capital reserve fund, and no holder of any such bond or note may bring any action, suit or proceeding, in law or equity, nor compel by mandamus or injunction the exercise of the taxing power of the municipality, or forfeiture of its property, unless and until all remedies with respect to such pledged revenues have been exhausted. The substance and extent of such covenant and agreement shall be plainly stated on the face of each note and bond to which it is applicable. All amounts paid over from the general fund of the municipality as provided in this subdivision shall, subject to the rights of the holders of any notes or bonds of the municipality theretofore or thereafter issued, be repaid to the general fund from (A) moneys in a capital reserve fund in excess of the maximum capital reserve fund requirement, (B) any revenues not required for any other of the purposes of this chapter and (C) proceeds from the sale or other disposition of the development property acquired from the proceeds of bonds and notes secured by such capital reserve fund. Within fourteen days after the adoption of a resolution pursuant to this subdivision, the resolution or a summary of such resolution shall be published in a newspaper having a general circulation within the municipality in which such resolution was adopted. If, within thirty days of such publication, five per cent of the electors of such municipality, who are registered as electors on the last completed, revised registry list of such municipality, file with the clerk of such municipality a petition requesting a referendum with respect to such resolution, the question of approval of such resolution shall be submitted to the electors of such municipality at a special election called for such purpose to be held not less than thirty days, nor more than sixty days, after the filing of such petition, in conformity with the provisions of section 9-369 , or if a regular municipal election is to be held more than sixty days, but not more than one hundred twenty days, after the filing of such petition, such question shall be so submitted at such regular election and a vote thereon shall be taken in the manner prescribed by said section 9-369 . If a majority of those voting in any such referendum shall vote to approve such resolution, such resolution shall thereupon become effective. If less than a majority of those voting in any such referendum vote to approve such resolution, such resolution shall be null and void. If no such petition is filed within thirty days after the publication of the newspaper notice of adoption of any such resolution, the municipal clerk shall verify that fact to the legislative body of the municipality and such resolution shall thereupon become effective. (5) Notwithstanding any other provisions contained in this chapter, the aggregate amount of bonds secured by such capital reserve funds authorized to be created and established by this section and by such covenant and agreement of the municipality as set forth in this section shall be included in the debt of the municipality as defined in subdivision (1) of subsection (b) of section 7-374 , and shall be subject to the limitations on such debt and on total debt set forth in said subsection (b) of section 7-374 , and the aggregate amount of such bonds shall not exceed five per centum of the grand list, as defined in section 7-374 , and the proceeds of such bonds shall not be used for residential housing development property, except where such residential housing development property is a part of an undertaking designed to accomplish or further one or more purposes of this chapter in addition to the purpose of residential housing. No bonds shall be secured by a capital reserve fund unless the municipality by resolution or resolutions finds and determines that revenues derived from development property financed from the proceeds of such bonds shall be sufficient (A) to pay the applicable principal of and interest on such bonds, (B) to establish, maintain and increase any reserves deemed by the municipality to be advisable to secure the payment of the principal of and interest on such bonds, (C) unless the contract with the governmental unit or sponsor obligates the governmental unit or sponsor to pay for the maintenance and insurance of such property, to pay the cost of maintaining such property in good repair and keeping it properly insured and (D) to pay such other costs of such property as may be required, and further, in the case of sponsors, that such sponsor is found by the municipality to be financially responsible and presumptively able to comply with the terms and conditions of any lease, conditional sale or credit agreement or loan agreement, agreement of sale, mortgage or other agreement as made by it with the municipality with respect to such property. (b) The municipality may create and establish such other fund or funds, including other capital reserve funds with the same force and effect and upon the same terms and conditions and subject to the same limitations as provided in subsection (a) of this section, as may be necessary or desirable in furtherance of the purposes of this chapter.

Legislative History

(July Sp. Sess. P.A. 75-2, S. 13, 25.)