California Code, Government Code - GOV § 53363.5

Any refunding bonds issued pursuant to this article may be exchanged for the bonds to be refunded on such basis as the legislative body determines is for the benefit of the district, but shall be issued in compliance with Section 53362.5.  As an alternative to exchanging the refunding bonds for the bonds to be refunded, the legislative body may sell the refunding bonds at public or private sale.  The proceeds of any sale of refunding bonds for cash shall be placed in the treasury of the local agency to the credit of a fund to be established for the purpose of refunding the bonds to be refunded, which fund shall be designated the “refunding fund,” and the proceeds of the sale shall be applied only as permitted by this article.  The funds shall be secured and may be invested in accordance with any other laws applicable to the funds of the local agency.