Magnolia  After more than a year of preparation, Magnolia City Council unanimously approved the creation of its first in-city municipal utility district at a Jan. 12 meeting.

MUD No. 108 encompasses less than 50 acres of the Public Improvement District No. 1 in the existing Magnolia Ridge subdivision as well as PIDs Nos. 2 and 3 on a yet-to-be-developed 550-acre property on FM 1488, Magnolia City Attorney Leonard Schneider said.

In addition, MUD No. 108 will include the proposed 103-acre, 258-home Reynolds Reserve subdivision near Spur 149 and FM 1488. Although Magnolia Ridge and the proposed Reynolds Reserve are located several miles apart, MUDs do not have to service a contiguous area, Magnolia City Administrator Paul Mendes said.

“Normally a MUD takes revenue both from taxes and water and sewer revenues, but [instead the city is] going to take all of the water and sewer revenues,” said Katie Sherborne, legal counsel for Houston-based Harrigan Development Partners, the developer for the remaining portions of Magnolia Ridge and Reynolds Reserve.

The MUD will fund the construction of internal infrastructure through bonds in the two subdivisions, including groundwater and sewer drainage, roads and landscaping, Sherborne said.

The bonds will be paid off through MUD taxes, which could mean an extra $10 tacked onto residents’ monthly water bills, Schneider said. Once the infrastructure has been installed and an annexation petition for the 103-acre tract is approved, the MUD will turn over operation of the water and sewer services as well as MUD property tax funds to the city, he said.

“The term of the agreement is 45 years, and we do have the option that when the development is fully built out, we can shut down the MUD,” he said.

During the Jan. 12 meeting, council members approved the development and utility agreements for Reynolds Reserve.

By April, Harrigan Development plans to finalize its purchase of the 103-acre tract and possibly open its first homes as early as summer 2017, Harrigan Development partner Brian McGown said. The proposed price of the homes will be in the $200,000s to $400,000s range, he said.