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MUD Taxes

2,323 Views | 20 Replies | Last: 3 yr ago by adamrod
ElephantRider
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AG
Saw a Zillow listing in Katy the other day that piqued my interest. Went to check the CAD to see what the taxes were like, and saw that it is subject to MUD taxes and City of Katy taxes. Is that a thing? Is this a situation where the neighborhood was annexed after it was built out? The taxes on this house were astronomical.
nonameag99
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Shadow Creek Ranch in Pearland has City + MUD

Taxes are like 3.5%

City annexed the land before the MUD was created
The Aggie number specified has already been linked with another TexAgs account.
ElephantRider
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AG
I think this one was around 3.6. I guess I always assumed MUDs were in unincorporated areas, and that was the whole point. I hated the MUD taxes on my last house, I can't imagine having city taxes on top of it.
fka ftc
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MUD taxes are going to relate to the initial development of the subdivision as a way for the developer to recover the costs of putting in those roads, utilities, drainage, etc. Regular city taxes will cover schools, road maintenance, city parks, etc. In some areas, particularly in North Texas vs Houston area, the local municipalities are going to charge "impact fees" at permitting to cover many of the costs that are typical in MUDs in Houston area masterplans. Impact fees are part of permitting and can be huge - why you can easily see permits in Frisco cost into the 5 digits, can you can get a permit in some areas of Houston for $1k-$2k, sometimes less.
normaleagle05
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AG
fka ftc said:

MUD taxes are going to relate to the initial development of the subdivision as a way for the developer to recover the costs of putting in those roads, utilities, drainage, etc.

The Houston area has developed a unique and highly localized mental illness that allows home buyers in the area to think this is okay. The rest of the planet views the sale price as covering these costs and the prices aren't really any different.

And those taxes will go on in perpetuity. The big lie is that they'll go away when the bonds are paid down. The big truth is you'll have to pass new bonds to overhaul your aged infrastructure.

It is insanity.
fka ftc
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In absolute agreement with your assessment.
one MEEN Ag
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AG
While I agree whole-heartedly with your comments, the replacement predicament doesn't change if the city has to pay for it. Cities reached out their greedy hands to annex as much tax base as possible, but are ignoring their long term municipality liabilities.

Pensions and municipalities are causing/going to cause a reckoning with city finances.

MUD taxes suck, but they are the fairest forms of tax. Only the exact beneficiaries pay for it.
BQ04
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AG
normaleagle05 said:

fka ftc said:

MUD taxes are going to relate to the initial development of the subdivision as a way for the developer to recover the costs of putting in those roads, utilities, drainage, etc.

The Houston area has developed a unique and highly localized mental illness that allows home buyers in the area to think this is okay. The rest of the planet views the sale price as covering these costs and the prices aren't really any different.

And those taxes will go on in perpetuity. The big lie is that they'll go away when the bonds are paid down. The big truth is you'll have to pass new bonds to overhaul your aged infrastructure.

It is insanity.
False.
normaleagle05
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AG
one MEEN Ag said:

While I agree whole-heartedly with your comments, the replacement predicament doesn't change if the city has to pay for it. Cities reached out their greedy hands to annex as much tax base as possible, but are ignoring their long term municipality liabilities.

Pensions and municipalities are causing/going to cause a reckoning with city finances.

MUD taxes suck, but they are the fairest forms of tax. Only the exact beneficiaries pay for it.

The replacement predicament IS different because you haven't been paying double the taxes to the City for 20 years to increase the City founder's profits. That's what the MUD taxes are for. In other areas the developer gets repaid by selling the land he improved at a higher price than he bought it.
normaleagle05
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AG
Go look at the distribution of MUDs in Texas and tell me this isn't a localized Houston insanity.

Here's the map.
https://www.tceq.texas.gov/gis/iwudview.html
MGS
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one MEEN Ag said:

While I agree whole-heartedly with your comments, the replacement predicament doesn't change if the city has to pay for it. Cities reached out their greedy hands to annex as much tax base as possible, but are ignoring their long term municipality liabilities.

Pensions and municipalities are causing/going to cause a reckoning with city finances.

MUD taxes suck, but they are the fairest forms of tax. Only the exact beneficiaries pay for it.
Except those "beneficiaries" also pay city taxes to support infrastructure where they don't live.
TXTransplant
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normaleagle05 said:

fka ftc said:

MUD taxes are going to relate to the initial development of the subdivision as a way for the developer to recover the costs of putting in those roads, utilities, drainage, etc.

The Houston area has developed a unique and highly localized mental illness that allows home buyers in the area to think this is okay. The rest of the planet views the sale price as covering these costs and the prices aren't really any different.

And those taxes will go on in perpetuity. The big lie is that they'll go away when the bonds are paid down. The big truth is you'll have to pass new bonds to overhaul your aged infrastructure.

It is insanity.


Not entirely true. My MUD taxes have gone down the past few years. There are areas of The Woodlands that have phased out of MUD taxes.
normaleagle05
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AG
I'll admit it's more a general rule than a physical law.
mazag08
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AG
Looks at CAD

Sees 3.5% taxes

Decides to live elsewhere

Profits
TXTransplant
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normaleagle05 said:

I'll admit it's more a general rule than a physical law.


Haha! I will say, I wouldn't buy a house with MUD taxes and expect them to go down or phase out. And you might end up trading MUD taxes for CoH taxes (and water bills)...just ask Kingwood about that.
ElephantRider
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AG
normaleagle05 said:

Go look at the distribution of MUDs in Texas and tell me this isn't a localized Houston insanity.

Here's the map.
https://www.tceq.texas.gov/gis/iwudview.html


My first house was in DFW and had MUD taxes. They sucked and were more expensive than city taxes, but at least I wasn't paying both. That's the insanity to me, that landowners are getting hit twice.
BQ04
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AG
ElephantRider said:

Saw a Zillow listing in Katy the other day that piqued my interest. Went to check the CAD to see what the taxes were like, and saw that it is subject to MUD taxes and City of Katy taxes. Is that a thing? Is this a situation where the neighborhood was annexed after it was built out? The taxes on this house were astronomical.
In some cases there are MUDs formed as "in-city MUDs" for the purposes of a finance vehicle for the developer. These are often accompanied by a relatively lower tax rate because some of the major infrastructure like waste water treatment and water plants are already in place.

The infrastructure costs have to be paid by someone. Be it in the form of higher home price whereby the homeowner pays for it via their mortgage, or by ad valorem tax.
ElephantRider
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AG
BQ04 said:

ElephantRider said:

Saw a Zillow listing in Katy the other day that piqued my interest. Went to check the CAD to see what the taxes were like, and saw that it is subject to MUD taxes and City of Katy taxes. Is that a thing? Is this a situation where the neighborhood was annexed after it was built out? The taxes on this house were astronomical.
In some cases there are MUDs formed as "in-city MUDs" for the purposes of a finance vehicle for the developer. These are often accompanied by a relatively lower tax rate because some of the major infrastructure like waste water treatment and water plants are already in place.

The infrastructure costs have to be paid by someone. Be it in the form of higher home price whereby the homeowner pays for it via their mortgage, or by ad valorem tax.

These didn't look lower to me but I just started looking in Houston so I don't have a good frame of reference. 3.6% just sounds absurd to me.
BQ04
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AG
ElephantRider said:

BQ04 said:

ElephantRider said:

Saw a Zillow listing in Katy the other day that piqued my interest. Went to check the CAD to see what the taxes were like, and saw that it is subject to MUD taxes and City of Katy taxes. Is that a thing? Is this a situation where the neighborhood was annexed after it was built out? The taxes on this house were astronomical.
In some cases there are MUDs formed as "in-city MUDs" for the purposes of a finance vehicle for the developer. These are often accompanied by a relatively lower tax rate because some of the major infrastructure like waste water treatment and water plants are already in place.

The infrastructure costs have to be paid by someone. Be it in the form of higher home price whereby the homeowner pays for it via their mortgage, or by ad valorem tax.

These didn't look lower to me but I just started looking in Houston so I don't have a good frame of reference. 3.6% just sounds absurd to me.
Is the total tax 3.6?

The TCEQ caps the amount of municipal tax (water, sewer, storm) at 1.5. That said, by comparison to a MUD outside of the city limits it will be lower.

Keep in mind the largest culprit to the total tax rate is the ISD. Katy ISD is one of the highest.
ElephantRider
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AG
Total is 3.6.

MUD: 0.95
City: 0.48
KISD: 1.4431
Waller County: 0.630127
Plus a few small things that are under .1

Maybe that's normal for Houston area, just seems high to an outsider
PeekingDuck
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AG
It isn't normal, even in Houston.
adamrod
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Here's my Mud's tax rate every 5 years. We're almost done replacing everything except the pipes. Once you've paid off the infrastructure and you vote for fiscally conservative MUD members, your tax rate falls fast. Of course that would mean buying a house that's more than 10 years old, which seem people can't seem to imagine.


year tax (%)
2020 0.163
2015 0.178
2010 0.215
2005 0.420
2000 0.500
1995 0.488
1990 0.690
1985 1.030
1980 1.150
1977 1.150

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