California Streets and Highways Code
Whenever any portion of a district is included within a city by reason of incorporation, annexation, or otherwise, such portion may be withdrawn from the district. Such withdrawal shall be effective upon the filing with the State Board of Equalization, the governing body of the district, and the county assessor, of copies of a resolution of the legislative body of the city, describing the included portion, and declaring such portion withdrawn. Upon the withdrawal of any territory of a district, all property acquired for the district and all unencumbered funds on the date of withdrawal, including all taxes levied and collected by the district in any year in which taxes are levied and collected by the district after the date of withdrawal on property withdrawn from the district, shall be divided between the city and the remaining district in proportion to the assessed value of the real property of the territory so withdrawn and the portion remaining. For the purpose of this article, the unencumbered funds are the sum of money, uncollected taxes, and other uncollected accounts belonging to or due such district, in excess of an amount sufficient to pay all claims and accounts against the district.
If a portion of the territory embraced in any district has been detached therefrom prior to the twenty-ninth day of July, 1927, either by annexation or incorporation proceedings, and the portion of the territory of such district remaining unannexed or unincorporated has been dissolved instead of continuing its existence as a lighting district, and thereafter moneys are paid into the fund of such district by reason of the collection of delinquent taxes or otherwise, such portion of the subsequent fund accretions, as was provided by law at the time of such annexation or incorporation, shall be paid to the city or cities within which the detached portion of such district was included. The remainder of such moneys shall be paid into the road fund of the road district within which the remaining unannexed or unincorporated portion of such district lay.