What is a MUD?
A municipal utility district (MUD) is a limited-purpose local government in Texas. It finances water, wastewater, drainage and related infrastructure for a defined area. It can also finance roads. Property owners in the district elect a board of directors to run it. Directors serve staggered four-year terms.
What law governs MUDs?
Texas Water Code Chapter 49 sets rules that apply to all water districts. Chapter 54 sets rules specific to MUDs. The Texas Commission on Environmental Quality (TCEQ) rules for water districts are in Title 30, Texas Administrative Code, Chapter 293.
How is a MUD created?
TCEQ creates MUDs on application, using a checklist of required materials. A city may consent or refuse consent to a MUD inside its limits or extraterritorial jurisdiction. If a city withholds consent, the applicant may seek creation through a petition process under Chapter 54. The Legislature can also create a MUD by special act.
How are developers repaid?
A developer usually pays for the first water, sewer and drainage lines. TCEQ rules bar a MUD from selling tax-exempt bonds until growth is proven. Once it is, the MUD may issue bonds to reimburse the developer for authorized improvements. Bonds secured by property taxes need voter approval. TCEQ must find a bond-funded project feasible, and the Texas Attorney General reviews the bonds.
What makes up a MUD tax rate?
- Debt service. Pays principal and interest on the district’s bonds.
- Contract tax. A separate rate some districts levy for contract obligations.
- Maintenance and operations (M&O). Pays to run the district. A MUD cannot levy an M&O tax until voters approve it.
What is the voter-approval rate?
The voter-approval rate is the current debt service and contract rates plus a capped M&O rate. The cap depends on the district’s stage.
| District type | M&O growth limit on average homestead | Statute |
|---|---|---|
| Developed district (bonds issued for at least 95% of build-out) | 1.035 times the prior year’s tax | Water Code §49.23602 |
| Developing district | 1.08 times the prior year’s tax | Water Code §49.23603 |
If a developed district adopts a rate above the limit, an election is required.
Can a MUD be annexed or dissolved?
Yes. Local Government Code Chapter 43 lets a city dissolve most MUDs in its extraterritorial jurisdiction, usually with voter or landowner consent. The city then takes over the district’s assets and debts. Strategic partnership agreements between a city and a MUD can set different terms.
How do I look up my MUD?
- Appraisal district. In Harris County, the Harris Central Appraisal District property tax database lists each taxing unit on a property.
- Texas Comptroller. The Special Purpose District Public Information Database shows a district’s reported tax rates, bonds and board.
- TCEQ. The Water District Database and Water Districts Map Viewer show district names, counties and service areas.