The proceeds from the sale of bonds issued under ORS 223.725 shall be applied as follows:
(1) The amount provided under ORS 223.705 to be rebonded shall be placed to the credit of the improvement bond sinking fund. Thereafter, as soon as practicable and in so far as possible, there shall be called and paid an equivalent amount of the bonds originally issued and so refunded by new applications to pay in installments.
(2) The balance of the proceeds of the sale shall be placed to the credit of the improvement bond interest fund.