(1) Money on hand applicable to the retirement of outstanding securities to be refunded, or from proceeds of revenues pledged for these purposes, or both, shall be applied as provided in the authorizing resolution.

    (2) The proceeds of a refunding security and other available money may be applied to payment of the principal, interest, or redemption premiums, if any, on the refunded outstanding securities at maturity or on any prior redemption date or may be deposited in trust for use to purchase and deposit in trust direct obligations of the United States, direct noncallable and nonprepayable obligations that are unconditionally guaranteed by the United States government as to full and timely payment of principal and interest, noncallable and nonprepayable coupons from the above obligations that are stripped pursuant to United States treasury programs, and resolution funding corporation bonds and strips, the principal and interest on which when due, together with other available money, will provide funds sufficient to pay principal, interest, and redemption premiums, if any, on the refunded outstanding securities as the refunded outstanding securities become due, whether by maturity or on a prior redemption date, as provided in the authorizing resolution.

    (3) The pledge and covenants of a municipality related to refunded outstanding securities for which the municipality has deposited in trust proceeds of a refunding security and other available money as described in subsection (2) is considered to have been fully and legally performed and defeased.