When a city or town that owns and operates a waterworks system that supplies the city or town and its inhabitants with water finds it necessary to increase its water supply such that it requires impounding the water of a stream outside the corporate limits of such city or town by means of a dam erected in such stream and the impounding of the water thereof would result in the overflow, or flooding, of a section or sections of a highway or highways within the secondary state highway system that necessitates the alteration and relocation of the highway or highways and the governing body of the city or town by ordinance declares (i) such necessity and (ii) that it is the intention of such city or town to comply with the requirements of this article, then the highway proposed to be flooded may be discontinued and abandoned but only after the city or town has complied with the provisions and requirements of this article.