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What are PID and MUD Districts

Moving to Allen, Celina, Frisco, Lucas, McKinney, Murphy, Plano, Prosper, Wylie

Tips You Need to Know Before Buying a House in Collin County


I thought I had a pretty good handle on things I needed to know before purchasing a home north of Dallas, but then I learned about PIDs and MUDs-- and they are an assessment or tax levied against a homeowner when they purchase a home in certain districts. Being a researcher, I had to learn more.

Public Improvement District (PID)

A Public Improvement District (PID), is a defined geographical area established to provide specific types of improvements or maintenance which are financed by assessments against the property owners within the area.

A PID can provide a means to fund supplemental services and improvements to meet community needs which could not otherwise be constructed or provided. PIDs can include both residential and commercial property.

In the past, these areas were generally within city limits, with city resources available if the assessments aren't adequate. But increasingly, the PID is within the city's extraterritorial jurisdiction, with annexation of the area the goal if the development is successful. However, there is nothing in statute that compels the city to assist. That would (hopefully) be part of the development agreement. And development agreements typically aren't subject to state scrutiny.

Suppose a residential development is going up, PID-style, in a city's ETJ. There will be 100 houses, and each will pay an assessment of $2000. Bonds are sold with the understanding that they will be paid back with the future assessments. Currently, the developer pays the assessments. As each house is built, the homeowner takes $2000 of that total off of the developer's hands.

But there's a downturn in the economy. Ten houses are built, no more. The developer won't (or can't) continue paying his share of the assessments on the houseless lots. Without that income, the bonds fail. What happens to the bondholders? What happens to the homeowners in the ten existing houses? And the city has no desire to annex a failed development.

Additionally, that type of financing, typically associated with PIDs, is beginning to ooze over into MUDs and management districts.

Click on the report below and read page 28 for potential implications. All of the information above relating to PID is excerpted from this report.

[Interim Report to the 86th Texas Legislature, House Committee on Special Purpose Districts p.26]


Municipal Utility District (MUD)

Likewise, a Municipal Utility District (MUD) is formed under specific circumstances to provide utility services to a designated area. [Texas Commission on Environmental Quality (TCEQ)]

TCEQ's Texas Water Districts: A General Guide

Municipal utility districts provide water, wastewater (sewage), drainage, and other services within the district's boundaries. These other services can include water conservation, irrigation, firefighting, solid-waste (garbage) collection and disposal (including recycling activities), and recreational facilities.

A MUD can require its customers to use its solid-waste services as a condition for receiving its other services. A MUD may provide solid-waste and recycling services through a private company.

MUDs can acquire, develop, or maintain parks or recreational facilities. In certain counties, MUDs may levy taxes to pay for recreational facilities and set and charge user fees.

State law gives [water] districts the power to establish the authority, rights, and duties necessary to accomplish the specific purposes for which they are created. The powers of a district created under general law are determined by the type of district it is. The powers of a district created by special law are determined by its enabling legislation. Most districts have the power to: incur debt, levy taxes, charge for services and adopt rules for those services, enter into contracts, obtain easements, and exercise eminent domain.

Water Districts Map Viewer

There are only about a half dozen MUDs in Collin County on this map; most of these are "out in the country." If you click on the district outlined on the map, you'll see a listing of what items are covered by the MUD (example: drainage, eminent domain, flood control, hydroelectric, irrigation, special law, navigation, recreation and parks, road powers, retail wastewater, street lighting, wastewater, tax bond authority.) You can find further details, such as the population served and water sample results. You can also pull up a District Information Report detailing the date the district was created, the acreage of the district, and the total amount approved by voters.

More About MUDs

Excerpted from Interim Report to the 86th Texas Legislature, House Committee on Special Purpose Districts MUDs are the only bond issuer in the state that is required to obtain state agency approval, making it a highly regulated process. These rules have produced investment grade debt. A rating directly relates to lower borrowing costs. Those lower costs relate to lower interest rates, which results in lower tax rates, which results in fewer costs passed on to the homeowner.


PIDs and MUDs Explained

While I would suggest reading through the information above to understand your potential liability in a PID or MUD, during researching this article, I came across the following two pages that offered an easy explanation on PIDs and MUDs. Although I have not personally verified the details cited in the following articles, I did find them helpful to gain a general understanding of the differences.

PIDs, PUDs, and MUDs, Oh, My!

by Melissa Condensa.
As this is posted on the Collin County Association of Realtors, there is some credibility established. The article explains how these district assessments could impact a buyer's qualification to purchase a home and future marketability of the home.

MUD vs PID...What You Need to Know

by The Marr Team.
What I liked about this article is that it brings together a lot of legal information and explains what is tax deductible and in which of these districts the assessment could end.


If this article is helpful, let us know. Sitting on a sunny day staring at a screen is only possible when we are encouraged by knowing we have helped others.
July 27, 2019

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