A Municipal Utility District (MUD) is a special district that functions as an independent, limited government. The purpose is to provide a developer an alternate way to finance infrastructures such as water, sewer, drainage, and road facilities. The MUD is managed by a board elected by property owners within the district and issues bonds to reimburse the developer for the improvements. The MUD will also utilize property tax revenues and fees received from water and sewer to repay the debt. MUDs also may take on the responsibility of providing services for their residents such as parks and recreation, deed restriction enforcement, and solid waste service.
How does the financing work with a MUD?
Typically, a developer will fund the initial cost for roads, water, sewer, and drainage necessary to complete development. A MUD relies on property and ad valorem taxes as well as water, sewer, and other utility revenues to pay off bonds. This can take between 20 and 30 years. As the debt decreases, MUD taxes may also decrease over time.
Are taxes higher in a MUD District?
Tax rates in a MUD, like all property tax rates, vary according to property values and debt requirements. These taxes generally decline over time as the debt service costs are shared by more homeowners.