Section 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.