What's a MUD?
If you're thinking about buying property in Texas, particularly in the greater Houston area and other large metropolitan areas, sooner or later you'll hear the word MUD. A MUD (Municipal Utility District) is a special governmental entity created by the State of Texas whose main functions are to provide water and wastewater services and to maintain drainage facilities within its boundaries. A MUD may levy and collect taxes, issue bonds, charge for services, condemn property, enforce restrictive covenants and make regulations to accomplish its purposes. MUDs come in a variety of names - MUD, WCID (Water Control & Improvement District), WSD (Water Supply District), PUD (Public Utility District), etc. The list of acronyms is almost endless!
MUDs were created to allow unincorporated areas the financial and legal wherewithal to provide services to commercial and residential customers when comparable services are not readily available (or financially feasible) through municipal providers like the City of Houston. In the greater (unincorporated) Houston area, there are more than 600 MUDs, most of which provide services to one or two subdivisions/residential developments and the commercial properties immediately surrounding those developments.
As a Texas real-estate owner, your local MUD will affect your life in two ways - first, you'll get a bill from your MUD each month for your water and wastewater treatment services and drainage control services; and second, you'll receive a property tax bill from your MUD each year to pay for its bonded indebtedness and general maintenance and operating expenses.
Since your biggest tax burden in Texas comes in the form of property (ad valorem) taxes, your MUD tax rate can be a major or minor component of your overall property-tax burden. MUD tax rates can range from zero to $1.50 (or more) per $100 of your property's assessed value. An average MUD tax rate is probably in the $0.50 to $0.75 range. Putting it into real dollars - if your MUD tax is $0.75 and your property's assessed value is $150,000, then your annual MUD tax burden (before allowances for Homestead and/or other exemptions) would be $1,125. You'll have to check with each MUD as to what (if any) exemptions they allow.
As onerous as some of this may sound, just remember - if you live in an incorporated area where services are provided by the city, your monthly and annual burden for these services can and probably will be even higher!
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