In January developer David Nairne plans to break ground on the first phase of Saddlecreek, a 353-acre master-planned community including a mix of single-family and multifamily housing as well as commercial uses, he said.

As part of his development, Nairne plans to fund infrastructure improvements, including a sewer line and other wastewater improvements. The cost of the infrastructure was one of the reasons Nairne sought to create a municipal utility district, or MUD, he said.

Along with bringing nearly 2,000 residences to east Georgetown, the project could bring additional development to the area, which has been mostly undeveloped, Georgetown Planning Director Sofia Nelson said.

“Saddlecreek was really the first [MUD] on the east side of the city,” she said. “In Saddlecreek they provided a utility benefit that opened up a much larger area in terms of wastewater services.”

The project is one of several MUDs under development or review by City Council in the Georgetown area. MUDs are a funding mechanism used by developers to pay for infrastructure improvements.

The city’s planning department is also working with developers on other MUDs, including 454-acre Parmer Ranch at Ronald Reagan Boulevard and Williams Drive and Nairne’s 205-acre Kasper Development located near Westinghouse Road and SE Inner Loop.

Council approved a consent agreement for the Parmer Ranch MUD at its Nov. 24 meeting, and as of press time Dec. 4, the council was expected to discuss the Kasper Development in a workshop session Dec. 8.

“I’m asking for direction to move forward with crafting a consent agreement as an MUD [in the city’s extraterritorial jurisdiction, or ETJ],” Nairne said. “I’m trying to figure out how we can make [the development] affordable for homebuyers and provide the city with sewer and road improvements.”

MUD creation

As the city of Georgetown continues to grow, developers continue to approach the city requesting the creation of MUDs to help fund needed infrastructure, such as roads and water lines, to be able to build their developments.

Created by either the Texas Commission on Environmental Quality or by an act of the Texas Legislature, MUDs are able to take on debt by issuing bonds to pay for parks and roads as well as water and wastewater infrastructure. Those costs are then passed on to the future homeowners, who pay off the debt through property tax payments.

Before a MUD can be created, a developer must enter into a consent agreement with the city, which gives the city authority to set the maximum property tax rate, establish development standards and determine what infrastructure must be built, Nelson said.

In 2014, City Council adopted an interim MUD policy to give direction to developers and help guide MUD decisions in the future, Nelson said.

The interim policy is used to determine if a proposed MUD is the best way to move forward with a development based on several factors, including whether the development has a “unique factor,” she said.

“[Developers have to have] something for us to be able to ensure that the investment that the city is putting into this development—in the sense of allowing them to be in a MUD—[is a good investment], so that when it’s time for the city to take over services in that area, there are the highest assessed values of the properties for the tax base, and … we’re not taking over infrastructure that is so worn down that we as a city have to put our money back into [it],” Nelson said.

In-city vs. ETJ MUDs

Kasper is the first MUD to be reviewed under the interim policy, City Manager David Morgan said during the Oct. 27 City Council workshop.

Morgan said the council should consider if a roadway and an extended sewer line qualify as unique factors.

Nairne said the city’s policy is vague.

“The direction of the policy isn’t very clear,” he said. “It needs to clearly define what ‘unique’ means to the city.”

The policy is also used to determine if MUDs are most advantageous when located in the city’s ETJ—the area that the city has the right to annex—or in the city limits, Nelson said.

Nairne said to make his project viable, the MUD needs to be in the ETJ.

In an ETJ MUD, the developer is reimbursed for infrastructure improvements from property taxes collected; however, if the MUD is in the city limits, the MUD’s property tax rate is added to the city’s property tax rate, and the combined total is still required to stay below the maximum district tax rate, he said.

By adding the city’s portion and lowering the MUD tax rate, developers are reimbursed for a lower amount, he said.

“Doing an in-city MUD … has too great a limitation as to how much we can use that MUD to offset the cost [of putting in the infrastructure],” Nairne said.

Homes in the development are proposed to cost between $200,000 and $300,000. However, Nairne said an in-city MUD could increase each home price by more than $50,000 because the development would require higher property values to fund the infrastructure development.

“We need to try and stay in the lower price category … so people can pay for a nice house they can afford,” he said.

Developing a MUD policy

“The interim MUD policy was supposed to be an interim plan for moving forward with the intention that an annexation policy and plan … was going to follow,” Nelson said, adding that the policy and plan would identify where the city could annex properties in the future. 

Nelson said the plan would also identify where MUDs are most appropriate—in the city limits or the city’s ETJ—as well as how they can be used to grow the city strategically.

“The policy did a good job of saying a developer needs to hang their hat on something that makes their development unique, and the average homeowner can see where their money is going to,” she said. “I would really like to see us focus and spend more time on these unique factors and how [to] use MUDs in strategically identified areas that we want to grow in.”

In 2016 city staff will seek City Council direction in developing the annexation plan, which has been delayed by transitions in city leadership, she said.

“We are identifying the MUD requests we’ve gotten so far since the interim MUD policy has been in place, looking at the areas that we want to grow and starting the discussion so the council can give us clear direction on how to proceed with the annexation policy and plan,” Nelson said.