N.J. Stat. § 40A:2-54
If the local government board shall find that a special refunding program is in the public interest and is based upon a sound financial plan for equalizing or reducing the debt service of a local unit, a refunding bond ordinance may authorize refunding bonds for refunding some or all of any bonds of the local unit which will become due over a period of not exceeding 5 years. Such refunding bond ordinance shall provide for the sale annually during such period, or at such other time or times as the local government board may approve, of blocks or series of refunding bonds to provide funds to pay the bonds and interest to be refunded and such ordinance may also provide for the investment and application of the proceeds of such refunding bonds, pending the maturity or maturities of the bonds to be refunded and for reinvestment or other application of income and realizations upon such investments.
Such investment and reinvestment shall be restricted to (a) purchase and holding of unlimited bonds or notes or other obligations (whether or not interest-bearing) issued or unconditionally guaranteed as to both principal and interest by the United States of America and which mature or which the United States of America is on demand obligated to pay, not later than the end of the respective calendar years of the maturities of the several bonds to be refunded, or (b) purchase and cancellation of any of the bonds to be refunded in the manner or mode of procedure prescribed by the Fiscal Affairs Law.
N.J.S. § 40A:2-54