(a) Upon the issuance and delivery of any municipal refunding bonds to the state by any municipality, that municipality is deemed to agree that on the failure of that municipality to pay interest or principal on any of the municipal refunding bonds owed or held by the state when payable, all defenses to nonpayment are waived.

(b) If at any time a municipality is in default on the payment of the principal of or interest on any municipal refunding bonds of such municipality then held or owned by the state, upon demand by the Treasurer, the officer of such defaulting municipality empowered by law to receive revenues or tax receipts shall set apart from the first revenues or tax receipts not pledged or otherwise required by law to be applied to another purpose thereafter received by such municipality an amount sufficient to pay the principal and interest due and owing on such bonds and shall immediately apply such amount to cure such default.

(c) Notwithstanding any other law as to time or duration of default or percentage of holders or owners of bonds or notes entitled to exercise rights of holders or owners of bonds or notes in default, or to invoke any remedies or powers thereof or of any trustee in connection therewith or of any board, body, agency or commission of the state having jurisdiction in the matter of circumstance, the Treasurer, acting on behalf of the state, may thereupon avail himself of all other remedies, rights and provisions of law applicable in that circumstance, and the failure to exercise or exert any rights or remedies within any time or period provided by law may not be raised as a defense by the defaulting municipality. The Treasurer may carry out the provisions of this section and exercise all of the rights and remedies and provisions of law herein provided or referred to.

(d) To the extent that the Treasurer or any other officer of the state is the custodian of any moneys made available by reason of any grant, allocation or appropriation by the state or agencies thereof payable to a municipality at any time subsequent to the failure of such municipality to pay the principal of or interest on municipal refunding bonds of such municipality then owned or held by the state, the Treasurer or such officer shall withhold the payment of that money from that municipality until the amount of the principal or interest then due and unpaid has been paid to the state, or until the Treasurer or such officer shall determine that arrangements, satisfactory to the Treasurer, have been made for the payment of such principal and interest provided, however, that such moneys shall not be withheld from such defaulting municipality if such withholding will adversely affect the receipt of any federal grant or aid in connection with such moneys.