Page 53 - ABHR MUD BOOK 2022

95% complete or available in existing plants. Additionally, all street and road construction to
provide access to the areas provided with utilities financed by the bonds or necessary to serve the
projected build-out to support feasibility must be 95% complete.

Generally speaking a MUD may reimburse a developer for water, sewer and drainage facilities
that serve the property in the MUD. Certain expenses incurred by a developer are 100%
reimbursable, including the costs of creating and organizing a district. Additionally, the costs of
constructing wastewater treatment plant facilities, water supply and storage facilities, storm
water pump stations associated with levee systems, regional water and wastewater lines, regional
pump stations and alternate water supply interconnects with other water users are all eligible for
100% reimbursement. Several items are considered to be “developer contribution items,” which
are reimbursed at 70%, unless the district qualifies for a waiver—based on the district’s financial
strength—to be able to reimburse at 100%. These items include internal water distribution lines,
internal wastewater collection lines and internal storm sewer lines.

All of the projects and their costs described above are meticulously reviewed by the TCEQ upon
the submission of a bond application to the agency. This process starts when a MUD board
passes a resolution to make application to the TCEQ for the issuance of a bond. The district’s
engineer then works with the TCEQ staff to provide extensive engineering background on each
project listed in a bond application. The TCEQ staff ultimately issues a technical memorandum,
which is forwarded to the office of the Executive Director. After receipt and review by the Office
of the Executive Director, an order is issued, usually approving the expenditures authorized
under the technical memorandum and instituting certain terms and conditions relating to the
issuance of the bonds. After this order is issued, a period of 23 days must pass before bonds may
be issued. This enables the TCEQ to hear any objections that any party may have to the issuance
of the bonds. The TCEQ technical memorandum and order from the Executive Director are both
reviewed by the Public Finance Division of the Office of the Attorney General as part of the
bond approval process.

Assuming the AG’s Office issues an opinion approving the issuance of the bonds, the bonds are
registered with the Comptroller’s Office and sold a day or two later. As demonstrated, the
TCEQ’s approval—from both a technical and financial perspective—is absolutely elemental to a
MUD issuing utility bonds and reimbursing a developer for expenses incurred during the
construction of a community. As a result of the stringent standards applied by the TCEQ, MUD
utility bonds are used to reimburse a narrow class of developer expenditures for water, sewer,
and drainage facilities that support the development of new housing, at affordable prices, for
citizens throughout the State. Additionally, the TCEQ review ensures the market for MUD utility
bonds is healthy by applying strict financial guidelines to each MUD utility bond issuance. There
has not been a single default of a MUD bond issued in the State of Texas that was reviewed
pursuant to this process at TCEQ that was implemented in the late 1980’s.

Open Government

MUDs are subjected to significant standards relating to open government to ensure its residents
can easily monitor the financial standing and legal actions of the district. Districts must keep a
full and itemized account of district funds available for audit. The TCEQ shall have access to all

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