Sec. 12. (a) The proceeds of any bonds issued or loans made under this chapter shall first be applied to the reimbursement of all amounts advanced for preliminary expenses under this chapter. The proceeds shall then be applied solely to the payment of the costs for which the bonds are issued or the loan is negotiated, including incidental expenses and interest during construction.
(b) The bondholders, lenders, or trustees under this chapter have a lien upon the proceeds of the bonds or the loan until those proceeds are applied as prescribed by this section.