70 ILCS 3705/40
When part of the territory of a district organized under this Act is annexed by a municipality, the board of trustees may enter such agreements as are permitted under Section 11-151-5 of the "Illinois Municipal Code". If all of such territory is annexed by a municipality, the district shall be abolished as provided in Section 11-151-4 of that Act and this Act then becomes inapplicable to that territory. This Section does not apply to any district whose territory is situated in 2 or more municipalities, except where one of the municipalities is incorporated after June 1, 2004 pursuant to the amendatory changes to Section 2-3-5 of the Illinois Municipal Code made by this amendatory Act of the 93rd General Assembly.
Nothing in this Section authorizes a public water district to provide water service to residents in territory within one mile or less of the corporate limits of a municipality that operates a public water supply and furnishes water service.
70 ILCS 3705/40