Dodging Mud Slingers: An Analysis and Defense of Texas Municipal Utility Districts

By Bumgardner, David; Hemyari, Keyavash | Texas Review of Law & Politics, Spring 2017 | Go to article overview

Dodging Mud Slingers: An Analysis and Defense of Texas Municipal Utility Districts


Bumgardner, David, Hemyari, Keyavash, Texas Review of Law & Politics


INTRODUCTION

The most common form of government in the United States is the special district.1 The United States has around 40,000 special districts, and special districts spend over $100 billion every year.2 In March 2016, political commentator and television host John oliver dedicated an entire episode to special districts in an at-tempt to educate his audience on the unique entity. "Think of a special district like a cult," Oliver cautioned; it can "take your money and you may not even be aware that you are in one."3 Texas, like the rest of the country, relies heavily on special districts, using special-purpose districts to provide a variety of services, such as "water conservation, toll roads, hospitals, libraries, utilities and fire control efforts."4 Oliver is not alone in his criticism: special-purpose districts in Texas have been subject to much criticism in recent years, with critics citing lack of voter accountability and growing debt.5

Even in light of the recent attention that special districts have received in the media, the process involving special districts remains obscure. Often, the loudest critics have only a cursory understanding of why special districts are employed, how they work, and whether they are beneficial. This Article reviews Texas's most popular form of special district, the municipal utility district ("MUD"), and illustrates its importance in the Texas economy.

MUDs are a form of special district used primarily as a vehicle for population and economic growth in Texas.6 Most Texans have heard or seen the end result of MUD formation, with little behind-the-scenes knowledge of how or why MUDs are utilized. There are roughly 1,100 special districts in Texas today, and a majority of them were created in undeveloped land owned by developers outside of city limits.7 Notable examples include The Woodlands, Clear Lake City, and Sugar Land: these are all successful MUDs with significant economic growth and success.8 Proponents of the Texas MUD system will reference the abovementioned communities as evidence of Texas's strong economy and surging population growth. But, is this truly the case?

There are many critics of the Texas MUD process. These opponents will point to negative effects of the MUD system, citing urban sprawl, growing local debt, and lack of transparency as reasons to rethink how Texas uses special districts.

Unfortunately, critics have failed to fairly analyze both sides. This Article discusses the Texas MUD system as a vehicle for urban growth, arguing that the Texas MUD is a beneficial form of government that efficiently and quickly provides financing. Furthermore, the MUD system of government embodies Texas's ideals of local government and just taxation. Thus, this Article argues in favor of MUDs by: (1) illustrating the inherent difficulties of urban-growth financing; (2) discussing the Texas MUD process; (3) highlighting the economic and political benefits that the Texas MUD system provides; and (4) responding to common criticisms of the Texas MUD system.

I. IDENTIFYING THE PROBLEMS: ISSUES ASSOCIATED WITH URBAN DEVELOPMENT

Throughout its history, Texas has experienced many periods of rapid population growth.9 More recently, in the first part of the twenty-first century, Texas again experienced large population growth, and ranked as the number one destination for United States migrants.10 During times of rapid growth, a response that quickly creates new housing communities solves the surge of housing prices due to a lack of proper supply. 11 To accommodate new communities in unincorporated areas, "[m]assive capital outlays must be made in order to provide quality water, sewer, drainage, and other municipal services."12 However, Texas quickly discovered that finding the capital necessary to finance large projects is often too difficult, prompting developers and financiers to help.13

Historically, both private and public attempts to finance these projects have failed. …

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