California Code, Water Code - WAT § 45560

The board may determine to establish a bond reserve fund for the payment of the principal of or interest on the bonds. Such a bond reserve fund may be established from the premium, if any, received upon the sale of the bonds or from tolls or charges levied pursuant to Section 43006, or from both such sources. Except as otherwise provided by the board in the resolution determining to establish a bond reserve fund, any moneys deposited in such a fund shall be used solely for the payment of the principal of and interest on the bonds in the event that other available moneys of the district are insufficient therefor. When all of the principal of and interest on the bonds have been paid, the balance of the money remaining in the bond reserve fund may be applied to any lawful purpose of the district.