Health & Saf. Code, § 55114

Refunding bonds may be sold or exchanged for outstanding bonds issued under this part and, if sold, the proceeds thereof may be applied, in addition to any other authorized purposes, to the purchase, redemption, or payment of the outstanding bonds. Pending the application of the proceeds of any refunding bonds, with any other available moneys, (1) to the payment of the principal, accrued interest, and any redemption premium on the bonds being refunded, (2) to the payment of any interest on the refunding bonds, or (3) to any expenses incurred in connection with refunding, the proceeds may be invested in any obligations permitted under the bond resolution authorizing the issuance of refunding bonds.