Public Utility Districts (PUDs), Municipal Utility Districts (MUDs) and Tax Increment Reinvestment Zones (TIRZs) are just a few of the special districts available to Texas developers and municipalities. They are great financing methods that can be used for a range of projects, though a few differences set them apart.

Projects and Financing

The most notable differences between the three districts are the projects they fund and how they are financed. A MUD, for instance, is used to finance the construction of public infrastructure that does not exist, which is typically utility facilities and roadways. Over time, developers within a MUD can be reimbursed for water, sewer, drainage, and sometimes road infrastructure through property taxes.

A PUD, on the other hand, is utilized to make improvements authorized by Chapter 372 of the Local Government Code. Some of the improvements and maintenance projects approved by the state include parking facilities, park improvements, sidewalks, and roadways. However, unlike a MUD, PUD projects are paid for through special assessment taxes, which are separate from property taxes.

Projects within a TIRZ are paid for through tax increment financing (TIF), which is a public financing method used to subsidize community improvements to help spur investments in a certain area. A TIRZ is more flexible than MUDs and PUDs when it comes to the types of projects it can finance. For example, a TIRZ can finance new public utility facilities in addition to area improvements.

Governance

Another notable difference between the three districts is how they are governed. A MUD, for example, is considered a political subdivision of the state and is overseen by the Texas Commission on Environmental Quality (TCEQ). Texas law allows five members to sit on the board, which are typically residents of the MUD, though they are still subject to TCEQ supervision.

A PUD and TIRZ are both components of a city and governed by a city council. City council has the authority to create an advisory board for either special district, but final decisions on the establishment, cost, assessment and budget must be made by members of the city council.

Whether your community needs public utility facilities or roadway maintenance, special districts are a great financing tool to get these projects done. Quiddity has worked alongside multiple MUDs, PUDs and TIRZs. Check out our work with the Montgomery County Utility District (MCUD) No. 3,the N. Houston Redevelopment Corp. (COH TIRZ 11) and Southern Pointe Community where we helped establish the first MUD in Brazos County. You can also consult with our industry experts to learn more about the benefits of a special district.