1. 1. At or before the issuance of any such bonds the governing body shall by ordinance create a sinking fund for the payment of the bonds and the interest thereon and the payment of the charges of banks or trust companies for making payment of such bonds or interest, and shall set aside and pledge a sufficient amount of the net revenues of the works, hereby defined to mean the revenues of the works remaining after the payment of the reasonable expense of operation, repair and maintenance, such amount to be paid by the board into said sinking fund at intervals to be determined by ordinance prior to issuance of the bonds, for

   1. (1) The interest upon such bonds as such interest shall fall due; and
   2. (2) The necessary fiscal agency charges for paying bonds and interest;
   3. (3) The payment of the bonds as they fall due, or, if all bonds mature at one time, the proper maintenance of a sinking fund sufficient for the payment thereof at such time; and
   4. (4) A margin for safety and for the payment of premiums upon bonds retired by call or purchase as herein provided, which margin, together with any unused surplus of such margin carried forward from the preceding year, shall equal ten percent of all other amounts so required to be paid into the sinking fund.
2. 2. Such required payments shall constitute a first charge upon all the net revenues of the undertakings. Prior to the issuance of the bonds, the board may by ordinance be given the right to use such sinking fund or any part thereof in the purchase of any of the outstanding bonds payable therefrom at the market price thereof, but not exceeding the price, if any, at which the same shall in the same year be payable or redeemable and all bonds redeemed or purchased shall forthwith be cancelled and shall not again be issued. After the payment into the sinking fund as herein required, the board may at any time in its discretion transfer all or any part of the balance of the net revenue, after reserving an amount deemed by the board sufficient for operation, repair and maintenance for an ensuing period of not less than twelve months and for depreciation, into the sinking fund or into a fund for extensions, betterments and additions to the works.

(L. 1941 p. 493 § 7)