(1) If the corporate boundaries of two or more incorporated cities or towns are within five miles of each other, the total number of on-premises consumption alcoholic beverages licenses that may be issued shall be determined on the basis of their combined populations.  The purpose of this provision is to allow the aggregation of the populations of adjacent cities and to determine the quota of the entire populated area.

(2) In order to combine populations both cities and towns must be incorporated and their respective corporate limits must be within five miles of each other at the nearest point.  If these requirements are met the populations of both municipalities are to be combined and the total population figures used to determine the number of on-premises consumption alcoholic beverages licenses available under the quota.