Notwithstanding the provisions of sections 7-264 and 7-378, and any other public or special act or charter which limits the renewal of temporary notes issued in anticipation of the receipt of the proceeds of bond issues to two years or any lesser period of time from the date of the original notes, any municipality, as defined in section 7-369, may renew any temporary notes for a period of not more than ten years from the date of the original issue of such temporary notes if the municipality promptly applies all project grant payments toward project costs or toward payment of such temporary notes as the same shall become due and payable or deposits such grants in trust for such purposes and if the legislative body of such municipality (1) authorizes the inclusion in the annual budget for each year or otherwise appropriates sufficient sums, from funds other than project grants or note proceeds, to retire notes equal to at least one-twentieth of the town’s estimated net cost of the project no later than three years from the date of the original issue of such temporary notes and again for each subsequent year during which such temporary notes remain outstanding; (2) reduces the principal amount of each bond issue when sold by the amount spent under subdivision (1) of this section, and provides for the payment or amortization of the principal of such bonds in annual installments commencing no later than eleven years from the date of original issue of the temporary notes being permanently financed by such bonds; (3) reduces the maximum authorized term of the bonds when sold by not less than the number of months by which the date of issue exceeds two years from the date of the original notes. For sewer projects or school building projects, as defined in section 7-380c, the annual payments required under said subdivision (1) shall be at least one-thirtieth of the town’s estimated net cost of such sewer or school building project. Any federal or state grants which are to be paid over a period of years to reimburse the municipality for a portion of principal due on bonds or notes may be used in computing the municipality’s net cost of the project. That portion of the proceeds of the issue of any such temporary notes being issued as part of a common sale, which portion is not used to refund outstanding temporary notes, shall be deemed a separate loan and be considered to have a separate original issue date. Each such portion of any such temporary notes may be renewed in accordance with the provisions of this section.