in Houston, Texas
Special districts can levy ‘maintenance tax’ after debts are paid, more in Q/A with state oversight agency
Monday, Sep 10, 2012, 10:23AM CST
By Steve Miller
monopoly

The oversight of special districts in Texas is often unclear even to the officials who must navigate the landscape. Most of the time, the fallback agency for information regarding utility districts is the Texas Commission on Environmental Quality. It has the power to approve applications for certain districts related to water, usually presented by developers, and it provides administrative guidance once the districts are established.

We sent an agency spokeswoman some questions. The answers came back in good shape. Check it out.
 
Question: Who has jurisdiction over districts like development districts, tax increment finance zones and public improvement districts?
Answer: The municipality or county which creates the development district, tax increment finance zones and public improvement districts has jurisdiction over the district or finance zone. The Texas Commission on Environmental Quality (TCEQ) has no jurisdiction over development districts, tax increment finance zones, and public improvement districts.

Q: What is the procedure for dissolving a municipal utility district (MUD) or any other district under the auspices of the TCEQ?
A: The procedures/criteria for the dissolution of districts can be found in 30 Texas Administrative Code, Sections 293.131 – 293.136, which are derived from the Texas Water Code Chapter 49, Sections 49.321 – 49.327. The TCEQ’s authority to dissolve a district is limited to districts that have been inactive for at least five years and that have no bonded indebtedness.

Q: Is there any administrative authority and/or oversight of MUDs provided by TCEQ?
A: Although the (Texas Water Code) grants the TCEQ a continuing right of supervision, the extent of this supervision is limited, and does not include the regulation of a district’s daily operations. Issues related to the daily operation and the management of a district are under the authority of the district’s elected board of directors. However, TCEQ staff does assist district board members and/or their consultants to understand the complex and varied laws and regulations under which a district must operate.

Q: Can a utility district operate and tax without any outstanding debt to manage? Can a utility district continue to tax if management of the infrastructure it built is handled by a city or other municipality?
A: Yes, a district can issue a maintenance tax for the operation of the district even if the district has no outstanding debt.  Yes, a district may continue to collect a tax if the management of infrastructure is handled by another entity.  Decisions regarding a district’s operation and taxes are under the authority of the district’s elected board of directors.

Q: What is to prevent a district with no more administrative or management tasks left from refinancing bonds or issuing bonds for something other than it was created for?
A: General Law districts must follow Chapters 49 through 66 of the TWC. These statutes describe the powers and duties of each type of district and establish requirements that these districts must follow.  Additionally, most districts must obtain TCEQ approval before issuing bonds.

Q: How many utility districts have been dissolved since 1980? How long does it usually take for the process to be completed?
A: Based from TCEQ’s water utility database, there have been 681 districts dissolved since 1980. If a dissolution application filed with the TCEQ is complete, staff can process the application within 180 days.

Q: The Corinth MUD #1 taxed residents in 2010 even after its debt had been retired and the city managed the water and sewer system. Is that done in accordance with code? Is that being done anywhere else?
A: Decisions regarding taxation of district residents are under the authority of the district's elected board of directors. The TCEQ is not aware of this occurring anywhere else.

***
Contact Steve Miller at 832-303-9420 or stevemiller@texaswatchdog.org.

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Photo 'Tax Time' by flickr user Images_of_Money, used via a Creative Commons license.

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