1. The board of directors of any public water supply district which is dependent upon purchases of water to supply its needs may sell and convey part or all of its water mains, plant, real estate, or equipment to any water corporation as defined in section 386.020 if all bonds of the district, whether general obligation bonds constituting a lien on the property within the district or special obligation or revenue bonds constituting a lien on the income and revenues arising from the operation of the water system:

(1) Are to be paid in full, or

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(2) A sum sufficient to pay all of such bonds together with interest accrued or to accrue thereon, together with all other items of expense incident to the payment of such bonds, shall be set aside from the proceeds of said sale and deposited with the fiscal agent named in the bonds for the purpose of full payment.

2. After the board of directors of any public water supply district has entered into a contract to sell part or all of its water mains, plant, real estate or equipment, pursuant to this section, an application shall be made by said board of directors to the circuit court which originally incorporated the district, which application shall set forth a copy of the contract entered into by the parties, and the facts concerning the bondholders and their rights, and requesting an order of the court approving or disapproving the contract.

3. Upon the filing of the application, the court shall set a time for the hearing thereof and shall order a public notice setting forth the nature of the application, a description of the property to be sold, and the time and place for the hearing, to be published for three weeks consecutively, in a newspaper of general circulation in the county in which the application is pending, the last publication to be not more than five days before the date set for the hearing.

4. If the court finds that the contract provides for the sale of all of the mains, plants, real estate and equipment of the district and protects the bondholders’ rights, and also provides for the rendering of the necessary water service in the territory embracing the district, and is in the best interest of the residents and property owners of the district, it shall, by its decree, approve the contract and order dissolution of the district, provided that such dissolution is assented to by a two-thirds majority of the voters of the district, voting on the question and provided further, that the dissolution of the district shall not become final until after all its debts have been paid and the disposition of funds of the district has been fully carried out as hereinafter provided to the satisfaction of the court, after which a final decree may be entered.

5. Such water supply district shall not be finally dissolved, upon the sale of all of its assets, until final liquidation thereof and until the trustees of the district have first paid to the collector of the county, or counties, in which the district is located all of its remaining funds which shall be applied pro rata toward the payment and satisfaction of the taxes of the residents and property owners of the district on their respective personal and real property tax bills for the next ensuing year or years. In the event that the sum of money so paid to the collector would amount to less than the equivalent of one cent reduction in the tax rate and thus impose upon the collector a cost burden in excess of the money so paid, then and in that event said funds shall be paid over to the treasurer of the various school districts having real estate within the said water supply district in the ratio that the assessed valuation of such school district bears to the whole assessed valuation of the water supply district.