N.J. Stat. § 40A:31-21
A municipality in which water supply facilities are furnished by a private water company may, in accordance with the provisions of this act, provide for the construction, or construction and operation of an extension to an existing water supply system of a private water company for the purpose of supplying water services for the public and private uses of the municipality and its inhabitants. The cost of construction of the extension may be financed from the tax revenues of the municipality or by the issuance of general obligation bonds secured in any manner provided in N.J.S. 40A:31-9.
The extension may be leased or sold by the municipality pursuant to an ordinance adopted by its governing body to the private water company upon approval of the terms and conditions of the lease or sale by the Board of Public Utilities. If the extension has been financed pursuant to subsection b. or c. of N.J.S. 40A:31-9, the proceeds from the lease or sale shall be refunded or credited pro rata to the ratepayers or the owners of property assessed, or their legal representatives or assigns, in such manner as may be determined by the governing body of the municipality.
N.J.S. § 40A:31-21