Have you noticed a portion of your property taxes going to a municipal utility district? Thanks to a recent article by Community Impact Newspaper, here is a break down of MUDS are and why they matter.

MUD —or municipal utility district—is a type of special purpose district authorized by the state purpose Legislature that functions as an independent

The first MUDs came to unincorporated Harris County in the 1960s and 1970s as a result of rapid population growth. Growth was occurring at a rate too fast for the city of Houston to fund, so MUDs were introduced to fund water, sewer and drainage infrastructure for new developments that were beyond the reach of the city’s existing infrastructure.

MUD projects are financed through bond elections, which are called by the board of directors and voted on by anyone who has purchased land within the district. Bond elections can include as few as two voters, but are required by state law regardless. Bonds voted for are not necessarily bonds sold. Boards often vote for the maximum amount they think they might need and end up selling less.

MUDs pay off bond debt by levying property taxes on development within the district.

MUD tax rates are typically higher when they are first established and decrease over time as the MUD is built out and the tax burden is spread to more homeowners.

How are MUDS Created?

Step 1: A majority of property owners within the proposed district must petition the Texas Commission on Environmental Quality to create the MUD. The developer must put up a letter of credit equal to 30 percent or more of the cost of subdivision utilities.

Step 2: The TCEQ evaluates the petition,holds a public hearing and either grants or denies the request.

Step 3: The TCEQ appoints five temporary members to the MUD board of directors until an election can be called to elect permanent members. Elections can be held in November or May. Directors cannot be involved in the development in any way.

Step 4: New sites can be annexed into a MUD through a formal request to the MUD’s attorney or engineer, who analyzes the effect the annexation would have on utilities. The board votes to approve or deny the request.