In the authorizing ordinance the governing body of the borrower shall set aside monthly (or more often if deemed advisable) and shall pledge either the gross revenues or net revenues of the system, project, or combined system, as the governing body of the borrower may determine, into separate and special funds as follows: Out of the revenues there shall be set aside a sum sufficient to pay the principal of and the interest upon the bonds as and when they become due and payable. If the revenues of any calendar, operating, or fiscal year shall be insufficient to pay the principal of and interest on the bonds maturing in any such calendar, operating, or fiscal year, an additional amount sufficient to pay the principal of and interest on such bonds outstanding and unpaid shall be set aside out of the revenues of the next succeeding calendar, operating, or fiscal year and applied to the payment of the principal of and interest on such outstanding and unpaid bonds. This fund shall be designated the "bond and interest redemption fund". Out of the revenues there also shall be set aside a sum sufficient to provide for the payment of all expenses of administration and operation and such expenses for maintenance as may be necessary to preserve the system, project or combined system in good repair and working order. This fund shall be designated the "operation and maintenance fund". If the pledge made is of gross revenues, the order of the foregoing set asides shall be first to the bond and interest redemption fund and next to the operation and maintenance fund; if the pledge is of net revenues, the order of the foregoing set asides shall be first to the operation and maintenance fund and next to the bond and interest redemption fund. Out of the remaining revenues there shall be next set aside a sum sufficient to build up a reserve for depreciation of the existing system or combined system. This fund shall be designated the "depreciation fund". Out of the remaining revenues there shall be next set aside a sum sufficient to build up a reserve for improvements, betterments, and extensions to the existing system, project, or combined system, other than those necessary to maintain it in good repair and working order as herein provided. This fund shall be designated the "contingent fund". Any surplus revenues thereafter remaining shall be disposed of by the governing body of the borrower as it may determine from time to time to be for the best interest of the borrower.

In the event the proceedings for the issuance of bonds provide for their repayment in whole or in part from front-foot assessments, the borrower need not make the payments provided for in this section for application for the payment of principal and interest on a monthly basis but may make them at least annually, provided that the payments shall be in such amounts and at such times that sufficient funds will be available to pay the principal and interest upon the bonds as and when they become due and payable.