Response to E-mail (Part 2)

As for your post on September 22, 2011 on the tax rates remaining the same, you mention that nearly everyone's house value has gone down. HCAD tells us our house went up in 2009 but has remained the same in 2010 and 2011. Has other's in the Brunswick area gone down (without contesting)? With a larger base and I would expect a smaller per-household district expense, I would have expected the rate to decrease. Your explanation of how it really works is great - it's never as simple as it looks! Did the other three board members mention why they voted against it? 

 

I posted about this before being elected to the Board, in part. Click here. 

But since joining the Board I have more insight as to why the other three Board members are so opposed to ever raising taxes. Originally, the District served only Morningside Place and the debt they incurred was resulting in crushing tax rates for their small neighborhood. They were facing tax rates of nearly 2% of their home values. 

 

Developers came to them offering to build Morningside Place 2 and the Brunswick neighborhoods to reduce their tax burden. They jumped at the chance. And their tax rates did fall. But apparently promises made by the developers were overstated and there were many conflicts between the Board members and the developers. Then the economic downturn made the house values fall, which reduced the amount of taxes being collected. But the debt had already been incurred for the new developments and to building the new waste water treatment plant on Fellowes Road as well as the new water well being drilled on Furman. That debt must be paid off and the majority of our taxes goes toward that debt relief.

 

In my humble opinion, the 3 members of the Board from Morningside feel that they were lied to about the tax relief promised and are reluctant to raise tax rates as a result. 

 

Do the bonds end up costing home owners at least as much as raising the tax rate? Does it make sense that after the whole area has been bonded and built out (streets, lights, sidewalks, etc) then we would not need additional bonds and therefore with an even larger base to tax the rate would drop significantly? Or is it typical for a MUD to need to raise additional funds or have a huge debt and therefore need to raise rates further at this point?

 

The bonds are the way the District borrows money to build the infrastructure (new waste water treatment plant and new well) and repay the developers for the infrastructure that they build (streets, sidewalks, detention ponds, lights, etc.) The taxes pay off the debt and the tax rate fluctuates depending on the need for money to repay the debt. When the need for additional bonds ends, the need to pay off the debt remains. So it is possible that the tax rate may increase or decrease in the future. Much has to do with the appraisals of the values of homes in the District, which is of course dependent on the state of the economy.

 

It is mysterious to me as to why we need MUDs in the first place. I understand Texas may be the only state with MUDs so as an out-of-stater I have a lot of learning to do!

 

A brief history of MUDs in Texas:

1925-1971 - The legislature authorized the creation of a group of regulatory agencies and the creation of a variety of types of water districts. A triad, consisting of the Texas Water Rights Commission (TWRC), Texas Water Quality Board (TWQB), and The Texas Water Development Board (TWDB), slowly evolved into The Texas Water Commission. The general laws now provide for 13 different types of water districts.

1971 - The legislature passed the Municipal Utility District Act that added Chapter 54 to the Texas water Code. The Act was modernized and streamlined piece of legislation governing a specific type of district - municipal utility district - which, under supervision of the Texas Water Commission, is designed to be used in conjunction with urban lands.

1993 - A group of regulatory agencies, consisting of the Texas Water Commission, The Texas Air Control Board and The Texas Health Department, were combined and reorganized to form The Texas Natural Resources Conservation Commission (TNRCC) with supervisory jurisdiction over all types of utility districts, including MUDs.

1995 - Chapter 49 was added to the Texas Water Code to provide a common set of laws and procedures governing all types of special water districts. Most, but not all, of Chapter 54 of the Texas Water Code was repealed, but selected portions of Chapter 54 relating specifically to municipal utility districts are still in effect. The result is that both Chapters 49 and 54 of the Texas water Code govern municipal utility districts.

The Texas Water Code has been amended almost every year since 1995 that the legislature has been in session. The TNRCC changed its name to Texas Commission of Environmental Quality, or TCEQ.

WCID#89 started in the 1960s and after the 1971 law, changed to a MUD, but kept the Water Control & Improvement District (WCID) name.

 Are MUDs inherently more efficient than what every other state does? If our MUD taxes are used to pay for infrastructure, why are our water bills five times more expensive than the city of Houston's? When I lived in the Heights in 2009, 2,000 gallons was less than $10. It's almost $50 here. That's a difference of about $500/year. That's on top of a property tax rate of 0.75% more (about $600/year per $100,000 house value after homestead exemption). Tell me again what the long-term benefit is of living in an expensive MUD? 

Having been a Texan all my life I can't really speak to the efficiency aspect compared to other states.  MUDs are more prevalent in Harris County than anywhere else in the state. They were designed to allow developers more power and control over the neighborhoods that they built outside city limits. And any time the Texas Legislature can reduce governmental control and increase power of private enterprise, they'll do it.  

One of the selling points by the developers is avoiding city taxes and laws. That's why we can shoot off fireworks when those who live north of Almeda Genoa can't because they are in the city of Houston. Developers also claim that they can build better infrastructure because they are willing to put the money up front and be repaid rather than wait on the city to raise the money. 

On the other hand, we don't get city services like trash pick up and police protection, which is why we have to rely on Harris County Sheriff, unless we contract for our own services, and why we pay Waste Management to pick up the garbage. Those services are paid out of the operation budget and come from the maintenance taxes - not the debt portion of the taxes.

By law we have to buy 80% of our water from the city of Houston, so whenever they raise their rates, we pass that extra cost on to the residents. The water bills don't have anything to do with the taxes to pay for the infrastructure.  You must remember that the property tax rates are based on the appraisals of the home values and the size of the jurisdiction. Houston can afford lower tax rates and lower water bills because they have millions of homes and taxpayers to share the responsibility. We have only about 2000 sharing the tax burden.

Long term benefit to being in a MUD? None I'm aware of. Only three ways out of the situation. 

1. Move out of the MUD.
2. Have MUD expand when the debt burden gets too crushing.
3. Get annexed by a local city. 

Thanks for the thoughtful e-mail and I hope that I have answered your questions.