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Old 04-30-2015, 05:28 PM
 
11 posts, read 44,302 times
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I recently had many questions about the MUD tax (1% tax of total home value)!in these subdivisions so I emailed Little Elm's Mayor this is the response I received:


“ The subdivions of The Preserve, Frisco Ranch, and Frisco Hills are within the extraterritorial jurisdiction (ETJ) of Little Elm. At this time there is not a plan or time line established for the Town to annex these areas into the incorporated limits. As you are aware there is a water district in these areas that has debt and assessment to retire the debt. If the Town annexes the district that debt would be absorbed by the Town and spread accross all current Town tax payers. I do think annexation will occur at sometime in the future when the district has paid down the the debt where the assessment is lowered to an amount closer to the Town's tax rate."

Doing some more digging I discover the original bond issued was in the amount of $43.8 million with a second and third bond being issued creating even more debt.

This seems to be a very crooked system in that the developers are using theses bonds to fund their operations and hanging the bill on the tax payers. Requesting and receiving additional bond money, the last bond approved was for $5.5 million in 2014.

The most interesting part is that the person requesting these bonds is also the reviewing authority... Where are the checks and balances?

Given this information I can see how MUD taxes are often considered forever taxes. My question would be who can I give the information to so that these developers are audited? Or held accountable for using tax payer money as their personal piggy banks.

If you are considered moving into these developments I strongly advise against it, which I should not do since the more of you that buy here the more people to bare the burden. However I can not do that with a clear conscience so if you are considered these developments here is a sample tax bill:

Home Value= $308,000
Taxes= $8,400

For that amount of taxes you can live in a much more expensive home in Frisco, Plano, Allen or McKinney

I hope this helps people
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Old 04-30-2015, 06:03 PM
 
327 posts, read 286,512 times
Reputation: 1419
You don't quite understand.

The developers are the ones who build the utility infrastructure. They then hand over the infrastructure to the MUD. The MUD is obligated to repay the developer for the costs incurred once the development comes on to the tax rolls and they can collect tax.

The MUD is not funding developer operations. The taxpayers are paying for the infrastructure that allows their house to exist. MUD taxes are NOT forever taxes, you'll see the I&S portion of the MUD's tax fall as the debt amortizes.
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Old 04-30-2015, 06:36 PM
 
11 posts, read 44,302 times
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But the debt will never fall if they are collecting $1.5 million annually( 500 homes average home value $300k) and they are receiving excited bonds in the amount of $5.5 million. Simple math says they made $1.5 million but created additional debt of $4 million $5.5 - $1.5.
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Old 04-30-2015, 07:06 PM
 
327 posts, read 286,512 times
Reputation: 1419
Quote:
Originally Posted by Full_of_fit View Post
But the debt will never fall if they are collecting $1.5 million annually( 500 homes average home value $300k) and they are receiving excited bonds in the amount of $5.5 million. Simple math says they made $1.5 million but created additional debt of $4 million $5.5 - $1.5.
OK let's try this again. I'm building a new subdivision. I'm a developer. A MUD is established on that land. I, as the developer, put $10 million in utility infrastructure in. Once the houses are built and the MUD can generate revenue via property tax, the MUD gives me back the $10 million that I paid for the infrastructure. That debt is then amortized over 20 years or so.

I (the developer) don't receive any money for operations. I simply get back the money that I paid for the infrastructure and then transferred to the MUD.

The MUD only issues debt to finance that infrastructure. There are no additional financings once the infrastructure is built (or until it needs to be replaced decades later).

I don't understand your example. There would never be a MUD that continues to issue more and more debt year after year. Why would they? The development is complete. There is no more land within the MUD's boundaries that requires infrastructure.

MUDs have been common for decades now. You can find examples of MUDs that have paid off all their debt.

All of the sources and uses for the bonds issued by a MUD are public records, freely available on Municipal Securities Rulemaking Board::EMMA. Look it up for the developments you're interested in. Developer reimbursement items are listed under "developer contribution items" typically and infrastructure costs paid directly by the MUD are listed under "district items"
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Old 04-30-2015, 08:01 PM
 
Location: Mostly in my head
19,856 posts, read 62,850,642 times
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F4, thank you! I never really understood what a MUD was.
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Old 05-01-2015, 05:00 AM
 
11 posts, read 44,302 times
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Quote:
Originally Posted by f4shionablecha0s View Post
OK let's try this again. I'm building a new subdivision. I'm a developer. A MUD is established on that land. I, as the developer, put $10 million in utility infrastructure in. Once the houses are built and the MUD can generate revenue via property tax, the MUD gives me back the $10 million that I paid for the infrastructure. That debt is then amortized over 20 years or so.

I (the developer) don't receive any money for operations. I simply get back the money that I paid for the infrastructure and then transferred to the MUD.

The MUD only issues debt to finance that infrastructure. There are no additional financings once the infrastructure is built (or until it needs to be replaced decades later).

I don't understand your example. There would never be a MUD that continues to issue more and more debt year after year. Why would they? The development is complete. There is no more land within the MUD's boundaries that requires infrastructure.

MUDs have been common for decades now. You can find examples of MUDs that have paid off all their debt.

All of the sources and uses for the bonds issued by a MUD are public records, freely available on Municipal Securities Rulemaking Board::EMMA. Look it up for the developments you're interested in. Developer reimbursement items are listed under "developer contribution items" typically and infrastructure costs paid directly by the MUD are listed under "district items"
www.14.tceq.texas.gov

Look at at the records for Denton County FWSD 8-C. Clearly you can see the MUD creating more debt for the taxpayers to pay back. What city will want to incorporate or annex these subdivisions and bare the burden of this debt?
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Old 05-01-2015, 07:48 AM
 
420 posts, read 493,309 times
Reputation: 605
F4 is completely right. If you weren't in the MUD district you would still "pay" for the infrastructure in other way such as the price of your home. The developers pass on the impact fees and infrastructure costs upfront in the sales price. It doesnt always even out but it isnt a scam either.
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Old 05-01-2015, 08:48 AM
 
327 posts, read 286,512 times
Reputation: 1419
Quote:
Originally Posted by Full_of_fit View Post
www.14.tceq.texas.gov

Look at at the records for Denton County FWSD 8-C. Clearly you can see the MUD creating more debt for the taxpayers to pay back. What city will want to incorporate or annex these subdivisions and bare the burden of this debt?
The district is not built out with infrastructure.

Exactly like I said above, the MUD will continue to issue debt until all land is served with infrastructure.

The city won't have a problem incorporating this district because the city itself would have had to have paid for this infrastructure anyway! It doesn't really matter to the city. It's the cost of adding that development to their tax base.
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Old 05-01-2015, 10:01 AM
 
450 posts, read 493,891 times
Reputation: 277
Quote:
Originally Posted by Full_of_fit View Post

Home Value= $308,000
Taxes= $8,400

For that amount of taxes you can live in a much more expensive home in Frisco, Plano, Allen or McKinney

I hope this helps people

Good luck finding a cheaper, comparable home in Frisco..... 100% false. You can't find a home less than $100 sq ft in Frisco (and that is being generous, I'd say more like $110-$115)
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