REFUNDING BONDS.

(a) The board may issue refunding bonds to refund like principal amounts of outstanding bonds of the district.

(b) Refunding bonds shall be payable from the same source as the bonds refunded except that bonds payable wholly or partly from ad valorem taxes may be refunded into bonds payable solely from district revenue other than ad valorem taxes, including revenue derived from:

(1) the operation of a facility owned or used by the district; or

(2) oil, gas, or other mineral properties or rights owned by the district, including rentals.

(c) The district may combine into a single issue:

(1) refunding bonds payable solely from revenue other than ad valorem taxes; and

(2) improvement bonds authorized under statutory authority other than this section and similarly payable.

(d) Refunding bonds may be:

(1) delivered in exchange for a like amount of the bonds to be refunded;

(2) sold, and the proceeds from the sale applied to the payment of the bonds to be refunded; or

(3) exchanged in part and sold in part.

(e) If the bonds to be refunded have not matured or become callable for redemption under the terms of the bonds, the proceeds of the sale of the refunding bonds may be deposited with a paying agent for the outstanding bonds. The paying agent shall apply the proceeds to the payment of the outstanding bonds:

(1) at maturity or the first available redemption date; or

(2) on earlier voluntary surrender by the bondholder.

(f) If refunding bond proceeds are deposited as provided by Subsection (e):

(1) interest on the outstanding bonds to maturity or the first available redemption date, together with any applicable redemption premiums, shall be deposited with the proceeds; and

(2) the refunding bond proceeds may, at the direction of the district, be invested by the paying agent in direct obligations of the United States that mature not later than the date on which the bonds to be refunded mature or the first available redemption date of those bonds.

(g) The interest received on refunding bond proceeds invested under Subsection (f)(2) shall be paid to the district to be applied to the payment of the interest falling due on the refunding bonds, and any surplus over the interest falling due may be used by the district for the district's general purposes.

(h) Refunding bonds issued under this section shall be authorized, secured, and issued in the manner provided by this chapter or by pertinent general law for the issuance of other bonds by the district.