The legislative body of any city, except a city and county, may provide for the funding or refunding of outstanding indebtedness pursuant to this article, if either of the following conditions exist:

By a two-thirds vote of its number, the legislative body may fund or refund the indebtedness at, after, or before maturity and issue bonds of the city for the indebtedness.

The bonds shall be issued in denominations of not less than one hundred dollars ($100) nor more than one thousand dollars ($1,000) each, have not more than 40 years to run, and bear a rate of interest not to exceed 8 percent a year, payable semiannually.

The rate of interest during the entire term of the bonds need not be the same but different rates may be fixed for one or more interest payments.

The bonds shall be serial bonds, and not less than one-fortieth of the principal and interest on all sums unpaid shall be paid each year.

The legislative body may fix a date for the earliest maturity of the principal of the bonds, not more than three years from the date of the issue.

The bonds shall be payable in such money and at such places as the legislative body designates in the bonds.

The bonds may be sold in the manner provided by the legislative body, to the highest bidder, at such price that the interest rate paid by the city, computed on the sale price, will not exceed 8 percent a year, or may be exchanged for the outstanding evidences of indebtedness pursuant to this article.

The proceeds of any sale for cash shall be placed in the city treasury to the credit of the funding fund, and applied only to refunding the indebtedness for which the bonds are issued.

Any proceeds of the refunding bonds remaining after the indebtedness has been paid shall be deposited in the fund established for the payment of principal and interest on the refunding bonds and used only for the purpose of paying such principal or interest as it matures.

At the time of making the general tax levy after incurring the bonded indebtedness and annually thereafter until the bonds are paid or until there is a sum in the treasury set apart for that purpose sufficient to meet all payments of principal and interest on the bonds as they become due, the legislative body shall levy and collect a tax sufficient to pay the interest on the bonds and such part of the principal as will become due before the proceeds of the next general tax levy will be available.

If the earliest maturity of the refunding bonds is more than one year after the date of issuance, the legislative body shall levy and collect annually a tax sufficient to pay the interest as it falls due and to constitute a sinking fund for payment of the principal on or before maturity.

The taxes shall be levied and collected as other city taxes, and are in addition to all other taxes. They shall be used only for the payment of the bonds and interest.

Bonds to fund or refund the indebtedness shall not be issued unless authorized by the electors of the city voting at an election to be called and held for that purpose, in either of the following cases:

The election shall be called and held pursuant to Article 1 of this chapter.

The ordinance calling the election shall recite the object and purposes for which the bonded indebtedness is to be incurred.

When it is proposed to refund any outstanding bonded indebtedness of a city upon terms which permit any number of the refunding bonds to mature more than forty years from the time the original indebtedness was incurred, the proposition of refunding the indebtedness shall be submitted to the electors of the city at an election held for that purpose, and the assent of two-thirds of the electors voting at such election is necessary to authorize the issuance of the refunding bonds. The election shall be called and held in the manner of other elections under this article.

The proceeds from the sale of the bonds shall be applied by the treasurer to the satisfaction of the judgment or the refunding of the indebtedness for which the bonds were issued, or the bonds may be exchanged at their par value for the evidences of indebtedness to be refunded, at their par value.

If the refunding bonds are issued in whole or in part to refund before maturity an indebtedness evidenced by bonds, notes, or other evidences of indebtedness, which according to their terms are subject to call or payment before maturity at a price in excess of par, the refunding bonds may be exchanged at not less than their par value for such other bonds, notes, or evidences at the price specified therein for payment before maturity, subject to adjustment of accrued interest to the date of exchange.