In any area where service has been extended by a municipal water system or utility district, from a municipality with a population of not less than four thousand seven hundred fifty-five (4,755) nor more than four thousand seven hundred sixty-five (4,765), according to the 1990 federal census or any subsequent federal census, or from a municipality with a population not less than three thousand eight hundred thirty (3,830) nor more than three thousand eight hundred forty-five (3,845), according to the 1990 federal census or any subsequent federal census, using funds received from a community development block grant for such water system, in determining whether a facility has a retained earnings deficit or an operating deficit, depreciation shall not include the depreciation on assets acquired with such grant funds if the number of water customers to be served by such extension is, at the time of the initial extension, seventy-five (75) or fewer.