Cal. Gov. Code § 54672

A city to which any territory has been annexed, whether or not said territory has been withdrawn from a local agency which has authorized the issuance of bonds pursuant to this chapter, and which territory shall continue to use the services, facilities, or water of the enterprise, may contract with the local agency to pay the local agency annually or at lesser intervals a sum or sums in lieu of the payment by the owners or residents within said territory of the rates and charges imposed by the local agency for such use.