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Stuck in the MUD

Tricky things, these municipal utility districts.

MUD 187 came to be when a Houston developer arranged for two people to move their trailer onto a 519-acre site on the edge of Richmond in Fort Bend County, which at the time was an empty field.

As the only “residents” within the municipal utility district’s boundaries, the couple headed for the polls in November 2008. The ballot asked whether the state’s approval of MUD 187 should be confirmed and whether the district should be authorized to sell up to $188 million in bonds for water and sewage systems, drainage, parks, recreational facilities, roads and a fire station.

The vote was unanimous – 2-0.

“That’s not how democracy is supposed to work,” said Clifford Gay, a retired construction superintendent who now lives in Del Webb Sweetgrass, a retirement community that owes its existence to MUD 187 – and the taxes it is levying to pay off $24 million in bonds.

Gay and his neighbors wonder how high those taxes might go as more bonds are sold, especially with extraordinary bond issuance costs of 9 percent, according to IRS documents. MUD 187’s bonds are rated Baa3 by Moody’s, which says they may have “certain speculative characteristics.”

[…]

There are 1,751 active water districts in Texas, a class of special purpose districts tracked by TCEQ, ranging from large river authorities to tiny irrigation districts, including 949 MUDs, according to the state.

The epicenter of water district financing: Houston’s suburbs.

Forty-four percent of those 1,751 districts are in Harris, Fort Bend and Montgomery counties. Sixty-five percent of the 949 MUDs are in those three counties – 389 in Harris County, 146 in Fort Bend County and 85 in Montgomery County.

MUDs are the most popular type of water district in Texas with developers, in large part because they hold enormous sway over how they’re created and because MUDs are empowered to issue tax-exempt bonds covering the developers’ infrastructure costs.

Taxpayers’ advocates increasingly view them as a problematic way to pay for infrastructure in the face of climbing local government debt, given their sweeping power to sell bonds and raise taxes.

Since 2000, 207 water districts were created in Harris, Fort Bend, and Montgomery counties, with voters approving more than $39 billion in bonds to be used for various infrastructure projects. There is more than $60 billion in outstanding debt statewide, according to the most recent financial audits that water districts are required to submit to TCEQ.

Water district debt makes up at least 15 percent of Texas’ debt. It’s also the fastest-growing debt, according to recent data from the state Comptroller’s Office.

Read the whole thing – for as dry and wonky a subject as this would seem to be, the behind-the-scenes stuff is quite intricate and rather fascinating. And that’s without taking into account the bizarre voting procedures that “govern” MUDs and related beasts like Road Improvement Districts (RUDs) and Levee Improvement Districts (LIDs). Say what you want about cities, but at least you get to vote for people who are supposed to represent you.

In past discussions of MUDs and RUDs, I’ve been asked what the alternative is, since everyone seems to agree that as things are now, there’s no way for the kind of development that needs to happen to keep up with Texas’ booming population to take place in the absence of this structure. That may be, but let me turn the question around. If we were (as a thought experiment) to do with the state of Texas and the greater Houston region what Metro did with its bus system and redesign it all from scratch, would you set things up the same way they are now, or would you try to come up with something different? I don’t know about you, but I’d lean strongly towards the latter. I freely admit, I have no idea what that might look like, though I’m sure there are actual experts out there who could offer a suggestion or two. My point is, just because this is what we have to work with, doesn’t mean it’s the best way to do it.

One more thing: Given the current Republican obsession with dictating to cities how to run their business as well as their obsession with property taxes and debt of all kinds, you’d think the plight of people like Clifford Gay might interest them a bit. I’ll leave it to you to speculate why cities must be brought to heel, but MUDs and RUDs and so forth can do pretty much what they want. The Chron editorial board has more.

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