MUD matters ongoing in both cities

MUD matters ongoing in both cities

Written by Kara Vaught Thursday, 07 February 2008

Cedar Park and Leander have MUD on the mind, but not the kind tracked in on clean carpet.

Cedar Park has placed the Ranch at Cypress Creek MUD on a three-year annexation plan, while Leander officials want to prevent a developer from forming a MUD along Ronald W. Reagan Boulevard.

What is a MUD?

MUD stands for municipal utility district — an entity created under Chapter 54 of the Texas Water Code that functions like a tiny town and is separate from the cities near or surrounding it. MUDs are authorized by the Texas Commission on Environmental Quality to provide water and sewer service, recreational facilities and common area landscaping to residents by levying taxes and issuing bonds. MUDs are governed by elected board members who often contract with nearby municipalities for utility service. In 1991, the state legislature also gave MUDs the ability to enforce covenant restrictions similar to those enforced by homeowners associations.

Annexation in Cedar Park

The city council voted at its Jan. 24 meeting to begin the process of annexing the Ranch at Cypress Creek MUD. State law mandates a three-year period for the involuntary annexation of areas with more than 100 residents.

The council postponed the annexation vote in December after several residents and board members requested more time and communication to MUD residents from the city. They said that although the MUD was interested in annexation, residents were concerned about property values declining after the MUD was dissolved.

Covenant restrictions and landscaping

Only two sections of the Ranch have active HOAs, so the MUD enforces covenant restrictions in the other nine. Cities do not have the power to enforce such restrictions, so unless the HOAs in those nine sections become active after annexation, only city ordinances regarding property appearance could be enforced.

For example, the city could not enforce restrictions disallowing the storage of boats or RVs in driveways or flag poles or gym equipment in the front of a home.

“There’s certain decorum. If you understand what a covenant is, it is basically a contract among homeowners that they will maintain certain standards,” said Larry Yetter, assistant secretary of the MUD board.

Landscaping was the other main concern of those who addressed the council. Under MUD management, right of way, park and drainage area landscaping receives attention from maintenance crews 52 weeks of the year. These services in city-maintained areas are conducted 29 times a year.

“We believe that a 52-week program, where a service company is paid and measured on timely clean up, is simply a more productive approach than what the city can offer,” according to the MUD’s Web site, www.ranch-at-cc.org.

Compromise

In a letter to the city read at the Jan. 24 city council meeting, the MUD board requested the council enter into a strategic partnership agreement with the MUD to find a way in which covenant restrictions and landscaping could be maintained after annexation.

If such a solution cannot be found, the board requested a limited purpose district be created for the MUD. Such districts can enforce covenant restrictions and allow residents to pay additional taxes to cover services such as extra landscaping maintenance.

Matt Powell, place one council member, said he prefers to think of the limited purpose district as a safety net for the MUD if another solution could not be reached.

“We’ve got a couple legislative sessions that will take place in the next three years,” Powell said. “Right now, a MUD lacks the ability to turn itself into a mandatory HOA. I think that may be an option.”

Yetter also sees potential for help from the legislature.

“We would like the legislature in the next couple years to empower cities to administer covenants,” he said. “If the city could pick that up, that would be better than forming a separate entity.”

Involuntary annexation of the Ranch is scheduled to take place in 2011. However, the area could be immediately voluntarily annexed if the city and a majority of MUD residents come to an agreement before that time expires.

MUD formation in Leander

In Leander, Houston developer Barkley Wedemeyer recently petitioned for approval of three MUDs south of Hwy. 29 and north of FM 2243. City utility services are not yet available in this area, which is largely undeveloped.

A group of landowners, including Wedemeyer, created the Reagan/Parmer Corridor Association (www.reaganparmer.com) last year to explore ways to spur economic growth along the corridor. Wedemeyer’s MUD petition, though separate from the RPCA, is presumably his way of getting a water and sewer system in place along the corridor. Wedemeyer declined to comment.

MUD developers are required by law to finance 30 percent of the cost of utilities. The MUD’s board of directors, first appointed by the TCEQ and then elected by residents, can issue bonds and levy taxes to fund the remaining costs.

“Because taxes are raised to pay off infrastructure indebtedness, developers may be able to sell lots at more attractive rates than those not in a MUD,” said Wayne Watts, director of public works for Leander. “MUDs are often formed where developers think it’s not going to be effective for them to be part of the city because they have to recover all of that infrastructure cost at the front end through lot sales.”

Negotiation

The city opposes the creation of the MUD, Watts said.

“We feel that many of those residents will use a lot of our city services, but the city will not be able to collect taxes in that area,” he said.

MUD residents, like those in the Ranch at Cypress Creek, often have access to city parks and recreational facilities, water and sewer service, libraries, inspections, roads and fire protection through agreements with the city.

Leander does not have the ability to block the MUD. The city has 90 days after the petition is filed to approve or disapprove it. After that, Wedemeyer can request city utility services for his project. If the city and Wedemeyer do not reach an agreement within 120 days, he can petition the TCEQ for the creation of the MUD. The petition will be granted if the TCEQ finds the city either does not have the ability to provide services or has not committed sufficient funds to do so at a reasonable cost to the landowners.

“We’re trying to work through some issues and create a win-win situation,” said John Cowman, Leander mayor.

MUD FAQs

What is a MUD?

Municipal Utility Districts are entities that can be created by the Texas Commission on Environmental Quality for purposes including control, conservation and distribution of water. MUDs are authorized by the TCEQ to provide water, sewer, drainage and other services to residents by levying taxes and issuing bonds.

How is a MUD created?

A majority of property owners in a given area must provide a petition to the TCEQ including a description of the proposed MUD boundaries, the nature of the improvements they intend to make, the cost of the project and a proposed name. If the MUD is approved, the TCEQ appoints five temporary MUD board of directors who serve until an election can be held to select permanent members.

Who runs a MUD?

The publicly elected board of directors manages all the affairs of a MUD. Board meetings are open to MUD residents.

What services does a MUD provide residents?

MUDs often contract with a nearby city for water and wastewater services, trash collection, recycling, fire fighting and law enforcement. The MUD board can undertake projects benefiting residents including landscaping and maintenance of public areas and installation of recreational facilities.

How are MUDs funded?

The MUD board of directors is responsible for setting tax rates and issuing bonds to fund projects.

Can MUDs regulate how homeowners maintain property?

Yes. In 1991, the state legislature gave MUDs the ability to enforce covenant/deed restrictions/agreements similar to those of homeowners associations. Rules can include restrictions on boats and RVs in driveways, sports equipment, architectural or color changes, lawn decorations and visible garbage cans.

Can MUD residents vote in a city election or use city services?

MUD residents are not considered residents of a city, so they may not vote. Many MUDs, such as the Ranch at Cypress Creek, have arrangements with the nearby city allowing residents to use the library, parks and other public amenities for a fee, often paid with other MUD taxes and fees.

Who maintains the streets in a MUD?

The county in which a MUD is located is responsible for streets.

Must a city consent to the creation of a MUD within its limits?

According to Chapter 54 of the Texas Water Code, land within corporate city limits or ETJ cannot be made into a MUD without city consent. However, if the city refuses to grant consent for the creation of a MUD within 90 days, a majority of landowners of the proposed MUD may petition the city to provide water and wastewater services to the area. If the city and the landowners do not reach an agreement within 120 days, the landowners can petition the TCEQ for the creation of the MUD. The petition will be granted if the TCEQ finds that the city either does not have the ability to provide the services or has not committed sufficient funds to do so at a reasonable cost to the landowners.

What is a developer’s responsibility to a MUD?

Developers must finance 30 percent of the cost of utilities within a MUD they create. No developer, developer’s employee, associate or family member may serve on a MUD board of directors unless they are a resident of the MUD.

Ranch at Cypress Creek annexation

Why is the City of Cedar Park considering annexing the Ranch at Cypress Creek MUD?

The Ranch at Cypress Creek MUD is surrounded by the city, and residents have made numerous requests for annexation. Also, the MUD has a low debt load, which the city considers serviceable.

What benefit do Ranch residents get from annexation?

Benefits include Cedar Park police protection services, street maintenance and the right to vote in city elections.

What changes will there be in police protection?

After annexation, the Cedar Park police will respond to Ranch calls instead of the Williamson County Sheriff.

Will the city enforce deed restrictions?

No. Cities are prohibited by law from enforcing deed restrictions similar to those enforced by homeowners associations.

What are the financial implications of being annexed?

The property taxes for the Ranch at Cypress Creek MUD, currently $.6282 cents per $100 of property valuation, will be replaced by the city’s property tax, currently $.50807 cents per $100. Fire protection is included in city taxes. Bills for trash collection will come from the city in the water/wastewater bill.

Will annexation have any effect on the homeowners associations?

No.

Source: cedarparktx.hbmgproduction.com