(1)    Each municipality that issues municipal obligations under this chapter, except obligations issued under s. 67.12 (1), (8) and (8m), shall establish and maintain a debt service fund in accordance with generally accepted accounting principles. The fund may include a separate account for each outstanding municipal obligation issue. Revenues from the following sources shall be recorded to the fund accounts as appropriate:

      (a)    All moneys accruing to the borrowed money fund prescribed by s. 67.10 (3) which at any stage are not needed and which obviously thereafter cannot be needed for the purpose for which the money was borrowed.

      (b)    All moneys raised by taxation under s. 67.05 (10) or 67.12 (12) (ee) for the purpose of making principal and interest payments on municipal obligations.

      (d)    The premium, if any, for which the municipal obligations have been sold above par value and accrued interest.

      (e)    Such further sums raised by taxation or otherwise, as may be necessary to make all interest and principal payments due in any year. The levying and collection of the taxes or other revenues are authorized; but the governing body may, in its discretion, levy and collect larger sums than the sums so authorized, in order to speed the payment of municipal obligations.

   (2)   Debt service for municipal obligations issued under this chapter shall be paid from the appropriate debt service fund account created in sub. (1). All investments shall mature in time to make required debt service payments. If invested, the funds to provide for debt service payments due prior to the scheduled receipt of taxes from the next succeeding tax levy shall be invested in direct obligations of the federal government or, if authorized under s. 25.50, in the local government pooled-investment fund under that section. Thereafter, any balance in an account created in sub. (1) may be loaned or invested under the direction of the municipality’s governing body as follows:

      (a)    In any outstanding municipal obligations for the payment of which the debt service fund is required, at any price not exceeding the principal, accrued interest and a premium not to exceed 3 years’ interest on the municipal obligations. These municipal obligations, when purchased, shall immediately have written on the face thereof a statement, signed by an officer of the municipality, that they have been taken up and cannot again be negotiated or made obligatory; and all of these municipal obligations shall be deemed paid and shall be immediately canceled.

      (b)    In obligations of the United States.

      (c)    In any bonds or securities issued under the authority of such municipality, whether the same create a general municipal liability or a liability of the property owners of such municipality for special improvements made therein.

      (d)    In the local government pooled-investment fund, as defined in, and subject to the procedures in, s. 25.50.

   (3)   Investments and earnings under sub. (2) continue a part of the debt service fund account for each issue. The obligations representing these investments may be sold or hypothecated by the governing body at any time, but the money received shall remain, until used, a part of the debt service fund account for each issue. All payments by the municipality of principal or interest of obligations representing investments under sub. (2) shall be paid into debt service fund accounts, and, for the purpose of making these payments, the municipality shall levy every tax that it would be legally obligated to levy if the municipal obligations were still outstanding in the hands of purchasers and had not been purchased as an investment.

   (4)   Money shall not be withdrawn from a debt service fund account and appropriated to any purpose other than the purpose for which the account was instituted until that purpose has been accomplished.

   (5)   Any balance in any debt service fund account after all of the municipal obligations for the payment of which the account was instituted have been paid and canceled, and after all investments under sub. (2) (b) and (c) have been finally disposed of or realized upon, shall be carried into the general fund of the municipal treasury unless transferred as directed by the municipality’s governing body.