Is it time for the Texas Legislature to tighten the rules for establishing municipal utility districts and other special purpose taxing districts?
Some taxpayer advocates argue it is, and they very well may be right.
The districts, which are a favorite means among real estate developers for financing roads and water and sewer systems, are proliferating across the state — particularly in the Houston region — and are amassing huge debt.
They also have sweeping power to levy taxes, and subsequently increase tax rates, on property owners in their jurisdictions to service all that debt.
There’s no question MUDs and other special taxing districts offer efficient methods to raise capital needed to develop land into residential neighborhoods and commercial zones. They are useful, having over the years provided the financing mechanisms for many worthwhile developments.
The questions are whether they aren’t a little too handy, just for ease of creation and lack of oversight, and whether they’re being used in the best public interest, or being misused in ways that may be setting up the next great public financial crisis.
Authorities on the districts inside and outside government say they are increasingly worried about high indebtedness among the districts, very limited state oversight, close relationships among developers and district governing boards, a lack of transparency and potential conflicts of interest, according to reports.
There is no doubt the districts are among the least democratic, least transparent and most difficult government subdivisions to monitor.
John Kennedy, senior analyst for the nonprofit Texas Taxpayers and Research Association, told the Houston Chronicle last year the spread of such districts had helped fuel growing unrest about the property tax burden in Texas.
The story of MUD 76, which formed Nov. 7 on the West End of Galveston Island, illustrates just how little it takes for a developer to become a layer of government, able to issue substantial debt and levy taxes to pay for it.
One voter approved creation of MUD 76.
That elector, one of just two registered voters in the proposed MUD, also approved each of the eight propositions related to its creation and its initial debt authority.
State law allows as few as two registered voters to get a MUD proposal on a ballot, and one voter is all it takes to do the rest.
“As long as majority of the votes cast are in favor, then that proposition passes, whether there are one, 10 or 1,000 votes,” Sam Taylor, the Texas secretary of state’s chief spokesman, told a Daily News correspondent.
Two is exactly the number of voters residing in MUD 76, Galveston County Assistant Elections Coordinator Susan Williams said.
The drill, apparently, goes like this: A developer buys some land and hires a couple — an actual couple in many cases — to reside there in a trailer house for long enough to become eligible to vote. These two employees of the developer then petition for a referendum to create a district, then vote to create the district and elect the governing board, which, of course, is selected by the developer.
The single voter who approved MUD 76 also empowered it to issue $116.1 million in bonds to create roads and to bring water and sewer mains to the proposed Sweetwater Cove subdivision.
MUD 76 joins no fewer than three dozen MUDs approved in Galveston County.
There are at least 949 MUDs statewide carrying a total of $60 billion in bond debt.
All this is perfectly legal, of course, but it strikes us as a perfect system for misuse and eventual trouble. Lawmakers should take a hard look at tightening oversight and enacting democratic reforms.
• Michael A. Smith