§ 708. Assumption of debt. 1. Except as may be provided in an
agreement among any of the affected local governments as authorized by
subdivision two of this section concerning the apportionment of any
indebtedness and any contract or other liabilities, and interest
thereon, any such indebtedness or liabilities, or interest, in the event
of such annexation, shall be a charge upon and shall be paid by a local
government to which the territory is annexed, as the same shall become
due and payable, to the other affected local government in the same
proportion to the whole of any such indebtedness or any such liability
as the full valuation of the taxable real property of the territory to
be annexed bears to the full valuation of the taxable real property of
the local government in which the territory was situated prior to the
annexation. Any such proportions shall be computed as of the date of the
annexation. In the case of an annexation of territory of a town by a
village located in the same town, any such apportionment of town
indebtedness and contract or other liabilities shall not include any
indebtedness or contract or other liabilities of the town in relation to
which the debt service or payments thereon would, in the first instance,
be required to be raised in some manner other than by taxes, special ad
valorem levies, or assessments, on real property located in whole or in
part inside such territory to be annexed. Full valuation of taxable real
property shall mean the valuation derived by dividing the assessed
valuation of the real property concerned, as shown by the last completed
assessment roll of, or utilized by, the local government in which it is
situated prior to such annexation by the equalization rate established
by the authorized state officer or agency for such roll.

2. At any time prior to the making of their final determinations as
provided by section seven hundred eleven of this article, the governing
boards of the affected local governments, or their designated
representatives, shall have power to agree as to the proportions, if
any, of the various types of indebtedness and contract or other
liabilities, and interest thereon, if any, which the local government to
which territory is proposed to be annexed will assume and agree to pay
in the event of such annexation. Such proportions may be based on the
full valuations of taxable real property, or on the basis of services
which will continue to be rendered or will cease to be rendered, or on
the basis of benefits to be received or conferred or will cease to be
received or conferred, or on any other equitable basis, and may provide
how such costs shall be raised, levied and collected. Such agreement
shall be followed in the local law to be adopted pursuant to section
seven hundred fourteen of this article.

3. Notwithstanding the foregoing provisions of this section, a local
government to which territory is annexed shall not be required to pay
any portion of any indebtedness or contract or other liabilities, and of
any interest thereon, which it has agreed to assume or will be required
to assume pursuant to the provisions of this section, if the
indebtedness or such liabilities have been contracted or incurred in
relation to a revenue-producing public improvement or service which is
not located in such territory and such revenues, after providing for all
costs of operation, maintenance and repairs thereof, required in any
fiscal year are not used, or credited as between such local governments,
to pay the interest on and amortization of, or payment of such
indebtedness or liabilities contracted for such public improvement or
service, but to the extent that any such revenues are so used or
credited, and are not sufficient to provide in full for any such debt
service, then the local government to which the territory is annexed
shall pay its proportionate amount of such deficiency.

4. The provisions of any agreement made and executed pursuant to
subdivision two of this section shall not affect the contract liability
of the area of any affected local government under any obligation or
contract entered into prior to the effective date of the annexation, but
any such agreement may provide that as to any such contract liability,
the local government annexing such territory shall not be compelled to
pay any portion of the debt service thereon except in the event of
default in the payment thereof, or interest thereon, by the local
government in which such territory was located prior to such annexation.

5. The terms "indebtedness" and "contract or other liabilities", as
used in this section, shall not include any indebtedness (a) evidenced
by tax anticipation notes, revenue anticipation notes or budget notes,
or (b) evidenced by serial bonds or capital notes having a maximum
maturity of less than three years which were issued or are to be issued
to finance an object or purpose other than a capital improvement, or
other than the acquisition of equipment, for which a period of probable
usefulness is provided in paragraph a of section 11.00 of the local
finance law.