Municipal utility district taxpayers lack protection

October 9, 2016 GMT

HOUSTON (AP) — Houston’s unincorporated and rapidly growing northern suburbs lie in hundreds of special taxation districts called municipal utility districts that provide little in the way of government oversight and accountability.

Lawmakers who carried legislation to create hundreds of the so-called “MUDs” and other water districts collected $3.5 million in campaign contributions since 2001 from law firms wanting to do their bond work or represent developers wanting the districts, the Houston Chronicle (http://bit.ly/2dUlsCS ) reported.

Lt. Gov. Dan Patrick and state Comptroller Glenn Hegar, the leading Texas tea party conservatives, embrace the districts, which have almost unlimited power to sell bonds and levy property taxes. They say the districts have been crucial in developing public-service infrastructure for new developments and creating jobs. They deny any link between their advocacy and campaign contributions, but both have voiced concern over surging property tax levies by school districts, municipalities and the less accountable, mostly anonymous municipal utility districts.

MUDS and other water districts have taken on more than $60 billion in outstanding debt so far with almost no government oversight. Critics note that while taxpayers know the names of their mayors and city council members, many are unaware of who runs their MUDs — or even what a MUD is.

The U.S. Census Bureau in 2012 reported that Texas had about 2,600 special-purpose taxing districts ranging from agricultural development districts to tollway authorities. Among them were 949 municipal utility districts with powers unlimited by state law to issue tax-exempt bonds and raise taxes to cover infrastructure costs.

Developers and their attorneys dominate these MUDs, pushing for legislation to create them, assembling their boards and organizing “electors” whose votes ratify their existence and authorize maximum bond sales. A handful of these electors often are responsible for authorizing hundreds of millions of dollars in tax-exempt debt, the Chronicle reported.

The Association of Water Board Directors-Texas, a MUD trade group, contends that empowering developers to recover their infrastructure costs through bond sales lowers home prices in their developments because costs are not passed on to buyers. Homebuyers, however, pay those costs, plus interest, through higher taxes levied to pay off those bonds over 25 years.

“You have got to tell people what you are doing and how you are spending money, and you owe it to them to be transparent,” said former state Comptroller Susan Combs, a Republican.

Proposals are beginning to surface for tightening public scrutiny of these districts. One advanced by conservative groups would form a state board to review the original goals of special purpose districts and decide whether to dissolve them or if other local governments could provide the services at less cost. Another proposal would allow district residents to vote 10 years after creation of a special purpose district whether to reauthorize or disband it.

At the very least, MUDs and other special purpose district should be required to maintain websites so citizens can check district financial data, said James Quintero, director of the Center for Local Governance for Texas Public Policy Foundation, an Austin-based conservative think tank.

“Where there is a lack of transparency, there oftentimes is a lack of accountability and good governance,” he said.


Information from: Houston Chronicle, http://www.houstonchronicle.com