How MUDs spur development

How MUDs spur development

By Kimberly Stauffer Friday, 20 November 2009

Utility districts monitor water, wastewater for unincorporated areas

HOUSTON — More than 120 municipal utility districts make up the northwest Houston unincorporated area, but with a name like MUD, its function can be unclear.

The first MUD in Harris County was created in 1955. Now, the county counts more than 400 MUDs that are responsible for water, sewage and drainage. Some also manage recreational and firefighting facilities, hire garbage companies to collect trash and contract with Harris County Sheriff’s Department deputies to patrol their area.

Cypress-Fairbanks ISD audits 124 MUDs that compose the Cy-Fair area. These governmental entities are vital to creating neighborhoods and bringing commercial businesses to an area such as northwest Houston.

“Nothing occurs without water. It is the quintessential element to the development of land,” said Jeanne McDonald, attorney for MUD 168 near Jersey Village. “Without them you don’t have toilets that flush, faucets that flow or anyone to pick up the garbage. Without MUDs, development would not occur.”

MUD works

MUDs are also responsible for proper drainage, a major issue in Houston, which is built on flat coastal plains, making it extremely susceptible to flooding, McDonald said.

Created under Chapter 54 of the Texas Water Code, a MUD is an entity separate from the cities near or surrounding it, authorized by either the Texas Commission on Environmental Quality or the state Legislature to provide water and sewer service, recreational facilities and common area landscaping to residents by levying taxes and issuing bonds.

MUDs work like city public works departments, said Todd Burrer, director of client relations with Southwest Water Company, an operating company that conducts billing and collection as well as running the water and wastewater plants for MUDs.

“A city has a public works department that is responsible for getting clean water to a location and responsible for the wastewater that leaves that location,” he said. “In Harris County in the 1950s, there were a tremendous amount of people who wanted to grow in areas like Cypress, Spring, Klein and Katy, but the city didn’t extend out that far, so there was no way to get utilities to these people.”

Recreation

Beyond the daily mechanics of water and wastewater, MUDs also help beautify a community through recreation projects. Nace Peard, a director on MUD 168’s board, said the MUD has worked with the homeowners’ assocation in the Steeplechase area to add lighting to two different parks. The MUD is also working to install a new sidewalk and fence along Eldridge Parkway.

Peard said all funds that go toward recreation and beautification must be approved with governmental steps to ensure they are being well spent, just like a city.

MUD 168 is currently updating the 30-year-old sewer lines and connections to avoid burst pipes and running new lines throughout the system.

“We’re pretty much updating the infrastructure so it can last another 30 years,” Peard said.

Taxing entity

The elected five-person MUD board of directors runs the MUD like a city council, approving water and sewer plant contracts with operating companies, selling bonds to finance projects and ensuring hired contractors do their jobs.

MUDs were created basically as a financing vehicle for a developer to be refunded for his investment in a community’s utility infrastructure, therefore giving the community the ability to expand and return the money through taxation. Greater Houston area residents enjoy cheaper housing prices, as much as $20,000 worth, McDonald said, because they pay for the utility services through annual taxes.

Residents pay a MUD tax that includes funds for both maintenance and operations and a bond tax. The M&O rate provides money for maintaining the system. The bond tax is used to pay back the bonds originally used to build the system. The daily costs of operating the systems, including the water and wastewater plants, are covered by homeowners’ monthly water bill, said Merry Leonard, executive director of the Association of Water Board Directors-Texas. Tax rates typically decrease as utility districts age and the bonds are paid off.

“The unique thing about MUDs is it’s the developer, not the residents or MUD, who has to put their money at risk,” Burrer said. “The developer has to prove to the state and MUD that his investment is a good financial investment. The homeowner is really protected.”

Land within a city’s corporate city limits or extra-territorial jurisdiction cannot be made into a MUD without the community’s consent. Once an agreement is reached with the city, a majority of property owners in a given area must provide a petition to TCEQ including a description of the proposed MUD boundaries, the nature of the improvements they intend to make, the cost of the project and a proposed name.

The majority of Harris County is within Houston’s ETJ, Leonard said. Any plants built in that area must comply with the city’s codes in the event the land is annexed.

Municipal Utility Districts

MUD facts

• More than 120 municipal utility districts make up northwest Houston
• MUDs work like city public works departments
• MUD taxes typically decrease as utility districts age and bonds are paid off