MUD Facts

Municipal Utility Districts, MUDs, are a little known taxing entity authorized by state law. In addition to property taxes, MUD residents also pay Emergency Services District (ESD) taxes, school district taxes, county taxes and sometimes other property based taxes.

MUDs are usually established by a developer to establish a taxing authority that allows bonds to be issued for the construction of water, storm drainage and sewer lines including processing facilities. This transfers the initial construction costs from the developer to the home buyer or business operator.

For instance, MUD #25, cited in the previous post, has authority to tax property at $0.92 per $100 valuation. This is more than twice Georgetown's tax rate of $0.42 per $100 valuation.

The law governing MUDs also provides for the election of a board of directors to govern the MUD. Often these boards issue huge amounts of debt for recreational and community facilities, such as are found in the Brushy Creek MUD between Round Rock and Cedar Park.

Brushy Creek MUD incurred large bond debts to preclude them from being annexed by Austin or any other adjoining city, since the annexing city would have to assume the MUD debt.

One consequence of MUDs is that it allows cities to extract money from the MUD residents to support its own utility developments in excess of what a city can charge city residents because of the higher property tax rates that MUDs are allowed to impose. This occurs when MUDs sign agreements with cities for essential services such as waste water and potable water treatment.