Wat. Code, § 72126

On or before July 1st of each year, a district by resolution may authorize public agencies, located wholly or partially within the boundaries of the district, to pay all or any portion of the taxes levied by the district for the fiscal year commencing on July 1st of such year. Following the adoption of such resolution, any public agency located wholly or partially within the boundaries of the district may, as provided in this chapter, utilize funds derived from the sale of water or other funds not appropriated to some other use to pay a district within whose boundaries such public agency is wholly or partially situated such amounts in avoidance of taxes of the district as may be determined annually by the governing body of such public agency. Any such payment shall be credited to the taxable property of the public agency within the district and shall be deducted from the amount of taxes which would otherwise be levied by the district against such property. If any such payment exceeds the amount of taxes which would otherwise have been levied against such property, the amount of such excess, with interest, shall be carried over and applied in reduction of taxes levied on such property during the ensuing year or years.