Putting it Simply
The simple answer to that question is that it is a local political subdivision of the State, governed by a board of directors. Also known as MUDs — Municipal Utility Districts — they are authorized under the Texas Constitution, Article III, Section 52, or Article XVI, Section 59.
Enabling Laws
With the passage of the municipal bond law in 1895, cities were given the authority to issue tax-supported bonds to acquire a water supply. This financing had to be within the tax limits prescribed by the Constitution.
In 1904, Section 52 of Article III authorized the Legislature to pass laws permitting counties, districts and all other political subdivisions of the state to issue bonds in an amount not to exceed one-fourth of the total assessed value of real property for the “improvement of rivers, creeks, and streams to prevent overflows and to permit the navigation thereof or irrigation thereof….” This amendment also authorized the Legislature to permit any county, district or political subdivision to levy a tax at a rate sufficient to pay the principal of and interest on such bonds.
After the terrible floods in Texas during 1912-14, people across the state realized there was a real need to confirm the State’s duty to not only prevent floods but, also through the storage of flood waters, to conserve the water for beneficial usages. This was the genesis for the passage of Section 59 of Article XVI in 1917, which allowed water districts to operate with unlimited bonded indebtedness.
In 1925, legislation was passed which authorized the creation of Water Control and Improvement Districts — WCIDs — with the same bonded indebtedness and taxing authority.
How Water Districts Are Created
To create a new water district, a developer files an application through the Office of the State Attorney General to the Texas Commission on Environmental Quality (TCEQ). The application outlines the developer’s plans for providing various services such as water, sewer and drainage to areas where municipal services are not already in place. A Board of Directors is established, which is assisted by qualified professionals who provide services on a fee basis.
One of the most important features about water districts is that they are governed by a board of directors elected by the voters in the district. This board is responsible for conducting all the business of the district, including services or functions contracted to other parties.
Water districts must comply with the Texas Open Meetings Act and the Texas Open Records Act and have an annual audit performed by an independent auditing firm. The best way to learn about the function and responsibilities of your water district is to attend a meeting.
Not all water districts are created equal. Some are established under General Law by the Texas Commission on Environmental Quality (TCEQ); some by Commissioners Court; and others are created by the governing board of a city. Special law districts are created by an act of the State Legislature. All water districts, however, must comply with the laws contained in the Texas Water Code.
MUD Rights and Responsibility
While the powers and responsibilities of a specific water district are determined when it is created, water districts are generally empowered to:
- Incur Debt: Most districts can issue bonds and other forms of debt. If that debt is to be secured by tax revenues, voters in the district must approve the plan. In most cases, bonds secured in this manner must also be approved by the TNRCC.
- Levy Taxes: If voters approve unlimited tax bonds, a debt service tax to pay the bonds is also approved. Each year, the water district board is obligated to levy a property tax adequate to cover the debt. This tax is levied on all property in the district based on appraised value, regardless of services received, and must comply with the Property Tax Code. The tax rate must be published each year and public hearings held if the effective tax rate increases more than three percent over the previous year. District voters may also approve a maintenance tax.
- Adopt Rules and Charge for Services: The district adopts rules which specify the method, terms and conditions of water supply and sewage treatment service.
- Expend Public Funds: Districts can spend public funds for authorized district activities.
- Contract for Goods and Services: For contracts more than $15,000, the district must obtain three competitive bids. For those more than $25,000, the district must advertise for competitive bids.
- Obtain Easements: In order to install, inspect, repair and maintain water distribution and collection lines, a district may obtain and use easements to access land owned by another person; and to
- Right of Eminent Domain: Purchase property for district purposes under this legal provision if deemed necessary and approved by the board.