A further discussion of MUDs

Much discussion continues to center around the use of MUDs as a means of development in both city and county land boundaries.

As discussed in last week’s article, a municipal utility district, or MUD, is a political subdivision of the State of Texas, like a county or school district, created by the Texas Legislature or Texas Commission on Environmental Quality (TCEQ).

MUDs provide municipal services such as water, sewer, roads, recreational facilities, etc., in areas not in a city, or where the city cannot afford to extend these services itself and wants the new development to bear the costs of the new infrastructural.

MUDs are widely used in Texas. For example, there are over 400 MUDs in just the Houston area, supporting a population of over 2.7 million. MUDs exist in Rockwall County and have been a major reason for the rapid population expansion in several cities.

MUDs derive their authority from the Texas Constitution and are regulated by the TCEQ, the Texas Attorney General, cities, counties, and the U.S. Environmental Protection Agency.

A MUD is governed by a five-member board elected by the residents of the MUD. At the direction of the board, the MUD submits a bond application to the TCEQ. The TCEQ then approves the projects for reimbursement to the developer. In this manner, the developer basically is guaranteed to receive his development money back through this process.

Clearly MUDs are extremely advantageous for the developer. But they also have advantages for the potential residents of a MUD.

First, most MUDs provide relatively affordable housing as the cost of the infrastructure is not added to the cost of the individual home; this cost is paid back over time through the bonds.

Second, MUD developments are not as prone to insolvency as other developments could be.

Third, most of the infrastructure for the development, such as water, sewer, roads, parks, drainage is completed before properties within the MUD are sold.

But there are also disadvantages to a MUD.

Probably the biggest disadvantage, from the perspective of county government, is the inability of the local government to control how the development is planned and built. MUDs that are built within city boundaries must meet the building code of the city; in the county there is no building code, by state law, other than a fire code.

The county does have Subdivision Rules and Regulations that address road width, setbacks, etc., but no other ability other than enforcement of the fire code. The county cannot limit the number of houses per acre, nor can they impose any architectural standards. If a sewer plant is being built by the developer, for example, the county has little say in wastewater disposal, etc.

Prior to several years ago, each city had an area called their Extra Territorial Jurisdiction(ETJ). This area was designated as an expansion area for each city. The ETJ was established based upon population and clearly laid out for the cities their future areas. To expand their boundaries, the cities merely had to annex into their ETJ.

However, two Legislative sessions ago, Rockwall County’s state representative, Justin Holland, co-authored a bill that no longer allowed annexation without approval of the majority of the proposed residents. Since most residents object to the annexation process because of their increased tax burden, this law basically stopped the expansion of our cities. This opened the ETJs to the developers and the MUDs.

Some think that MUDs should be discontinued and not allowed in our county. Others believe that history has shown that MUDs offer advantages for homeowners and are not necessarily bad.

Since MUDs are authorized by the Texas Constitution, the likelihood of being able to lobby successfully for their elimination is next to zero. Add to this the fact that developers have a strong lobby and have successfully used this method of development. They would be sure to successfully argue against the elimination of the MUD.

One solution — that, too, has problems — would be to simply annex the area of a potential MUD location. This would require the cooperation of the cities and the county and would require the current limitation on annexation be stopped.

Another tool that could be used in the TCEQ approval process to argue against a MUD would be a county Strategic Plan or Open Space Plan that spelled out the direction the county might be going and how the creation of a MUD would be counter to these long-term plans. Unfortunately, however, neither of these plans currently exist.

An interesting problem for the Commissioners Court of Rockwall County!

Jerry Hogan is a former Rockwall County judge who volunteers to write these articles. He can be reached at jerryhogan@sbcglobal.net or 214-394-4033.