Developer Joe Watson has found a municipal utility district that will annex his 37-acre residential project, TownHarbour Estates.
Bay Colony Municipal Utility District, which is west of Interstate 45, will annex the undeveloped 37 acres east of the interstate on the south shore of Clear Lake.
The two locations are about 9 miles apart.
Watson’s company, Houston-based Axis Point Developers, will turn the 37 acres into a new neighborhood on the south shore of Clear Lake. The Bay Colony homeowners’ association approved the annexation, but state law requires the city to approve it as well.
League City council on Tuesday approved the annexation with a 7-0 vote.
A municipal utility district is a special district that functions as an independent, limited government. The purpose of a MUD is to provide a developer an alternate way to finance infrastructure, such as water, sewer, drainage and roads.
A MUD might issue bonds to reimburse a developer for authorized improvements, and the MUD uses property tax revenues and user fees received from water and sewer services to repay the debt. As the MUD pays off its debt, more of its tax revenue can be directed to other services.
Watson had attempted in 2016 to annex the same property but in a different municipal utility district, South Shore Harbour MUD No. 7. Some residents living in that district protested the annexation in part because the property was not adjacent and in part because they felt a deal was being kept quiet while increasing their debt load, The Daily News reported in October of last year.
“We were not able to find a comfortable solution with the developer, the board and the residents,” Watson told The Daily News. At that time, he said he would rethink how to move forward with the project.
Watson found a way to move forward with the Bay Colony West MUD and had several meetings with key residents, he said.
“We made a considerable effort to meet with the board of directors of the homeowner’s association of Bay Colony,” Watson said. “It was an interesting experience.”
Watson told the association that annexing this new development would cost the district about $200,000 a year and that the taxes paid to the district will be more than $650,000 a year, creating a net $450,000 that would go into the coffers of the district, he said.
“People got that concept very quickly,” Watson said.
The project will be good for the residents in the MUD district because they could possibly pay off their bond debt earlier, he said.
The annexation requires the district to issue an additional $2.4 million in bonds for the proposed development, but it would not be issued until enough tax value is on the ground to pay for all of the principal and interest on the bonds, city staff said.
The project would not extend the term of the district, which will expire in 2036, and it will generate about $6 million for the district over the next 14 to 16 years, city staff said.