(a)  The financial obligation for the upgrading of the public water supply system to be annexed and the continued management and operational responsibility to bring that system into compliance with the applicable regulations and on parity with the existing facilities of the governing agency must be fairly and equitably allocated to the new customers by identifying:

(1)  Capital costs;

(2)  Operational expenses;

(3)  Management support;

and adding the annexation fee to the governing agency’s existing rate structure currently in effect to be applied to the customer’s accounts, to be annexed.

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(b)(1)  Each year the annexation fee to be paid by the new customers shall be added to the rate apportioned to the existing customers of the governing agency and shall represent the amortized cost of the capital expenditures and the appropriate ongoing operational costs adjusted for inflation. The annexation fee shall in no event be less than ten percent (10%) the rate levied on the pre-annexation customer base, nor shall it be more than one hundred percent (100%) of the pre-annexation rate. This legislation is not intended to limit the governing agency from recovering all costs of service from its basic customer base. The annexation fee shall constitute a part of the cost of annexation and shall also be an allocated portion of the cost of annexation and become a debt of each customer from the small public water supply system to the governing agency and be collectible in the same manner and have the benefit of any lien provided for the amounts due for water charges from the small public water supply system to the governing agency. Subject to the provisions of §?39-1.1-1 for those small public water supply systems which are public utilities, all governing agencies may terminate service for failure of the customer of a small public water supply system to pay the annexation fee.

(2)  It shall not be necessary for any small public water supply system or governing agency whose rates may be regulated by the public utilities commission, pursuant to chapter 1 of Title 39, to obtain approval from the commission for billing of the annexation fee. The public utilities commission shall not be required, in determining rates for any governing agency or small public water supply system hereunder, to consider the annexation fees billed hereunder when determining revenue requirements for the governing agency or public water supply system.

(c)  The annexation fee shall terminate when the contractual obligation for amortizing the upgrading of the system petitioning annexation has been discharged or no later than thirty (30) years from the date of financing said improvements, whichever comes first.