The county board may, by resolution approved by the Department, designate a route on existing streets in a municipality as a municipal extension of a county highway or may designate a route for a municipal extension of a county highway on a new location in a municipality. Such designation shall be made so as to form a continuous route for a county highway through the municipality or so as to end a route for a county highway at a point within the municipality, as the case may be, as will best serve traffic needs.
     Routes designated as municipal extensions of a county highway as provided in this Section shall not, by virtue of such designation, become a part of the county highway system. However, for the purposes of preparing plans and specifications, acquisition of right-of-way, the performance of all things necessary to the commencement of a construction or improvement project on a part or all of such a route by the county and the use of county highway or motor fuel tax funds therefor, such route shall be treated and considered as though it were then a part of the county highway system.
     Upon the commencement by the county of a construction or improvement project on a part or all of a route so designated as such a municipal extension, the part so to be constructed or improved shall thereupon become a part of the county highway system.