AP NEWS

Consulting group not in favor of absorbing MUDs if Woodlands incorporates

September 24, 2018

Local municipal utility districts should remain independent if The Woodlands becomes as a city.

That’s the advice from a consulting group helping The Woodlands Township Boards of Directors weigh the merits of incorporation.

“Our recommendation is to leave the current operational model in place. There are 11 MUDs and they work collaboratively together,” Matrix Consulting Group’s Eric Hall told board members last week during one of the township incorporation study meetings. “We did identify some risks and constraints, which would be typical. The MUDs all function independently but do collaborate via residential and commercial agreements.”

MUDs manage water, sewage and drainage, mostly in unincorporated areas.

The incorporation studies are being done by three different consulting groups — Matrix has combined forces with a second firm called HR Green and the Novak Consulting Group — at a cost of about $875,000, which is coming out of the township’s incorporation reserve fund.

Hall praised officials from all 11 MUDs in The Woodlands, as well as The Woodlands Joint Powers Agency and the San Jacinto River Authority, for their openness and transparency during the consulting firm’s efforts to gather information for the recommendation. Hall also pointed out that none of the 11 MUDs in the township have any staff, and instead those services are provided by the WJPA, which also helps provide a forum for collaboration between the MUDs.

Hall said the recommendation to keep the current MUD system was based on several factors. Each of the 11 MUDs has differing tax rates, debt and infrastructure. In 2017, Hall said, the 11 MUDs generated $65 million in revenue from user charges and taxes. Combined, the 11 MUDs have $500 million in resources such as land and infrastructure, but they also have a combined $40 million in debt.

Hall said if the township incorporated and did decide to absorb the 11 MUDs, the new city would also assume the debt they all carry and would need to find a way to spread out the varying tax rates across the entire community instead of how it is currently structured in which the MUDs have tax rates varying from very low to quite high.

There are also infrastructure needs. Hall said there are gaps in levels of service each MUD currently provides, non-compatible infrastructure and equipment between the 11 MUDs along with different budgets, revenue streams and goals.

“We recommend the (current) system stay in place,” Hall said, adding that the vision The Woodlands founder George Mitchell had for the role of MUDs in the growth of The Woodlands has worked out well.

For township board Chairman Gordy Bunch, that debt burden as well as having to redistribute the taxes from each MUD across the entire community were good enough reasons to not absorb the MUDs if the city does incorporate. Bunch noted that during prior explorations of incorporation by past boards, those elected officials shied away from the issue because, “the absorbtion of the MUDs creates inequity.”

Bunch also said he does not believe taking in the MUDs if the township incorporates is economically feasible in the next few years.

In using the oldest village in the township as an example, Grogan’s Mill, Bunch said the MUD responsible for that area has a low tax rate because it is built out and the residents have, “paid their dues.” To absorb all 11 MUDs, then spread the taxes around to the entirety of The Woodlands, he added, would be, “an inequity for (residents of Grogan’s Mill.)”

“You (would) still have that inequity that as a municipality we have to even out across the board,” Bunch said. “There is no ability to bifurcate the debt. There would be an inequity to the residents of those districts.”

Township board member John McMullan ask Hall and the consulting firms if more time was necessary to examine the issue more thoroughly. Hall agreed that a more in-depth analysis of all 11 MUDs was needed, but also said it is time intensive.

“It requires time (for more analysis) and transition time to come up with equitable solutions for the community,” Hall said.

Township board member Bruce Rieser said he agreed with the assessment.

“As we go through this process, it is an all or nothing. If you do this piecemeal, you set up a double taxation situation,” Rieser said. “I really think this recommendation is correct. By leaving (the current 11 MUDs) in place, there is no impact (from it) on whether we incorporate or not. This will take planning and consideration.”

Future possibilities discussed

After the main portion of the Matrix/HR Green assessment and recommendation on the MUD issue, Bunch took some time to address several other aspects of incorporation, especially when it comes to the fate of the 11 MUDs serving the community.

The incorporation process, Bunch explained, has two steps. The township board of directors would put the issue before voters and voters would decide. If the township voters approve incorporation, The Woodlands would become a general law city, Bunch added. After that, he added, a “home rule” committee would be formed to examine various issues and make decisions on how the new city might want to proceed on governance.

In that home rule committee process, Bunch advocated for addition of regulations or rules mandating that any possible absorption of the 11 MUDs have to be approved by the voters.

“The decision (about absorbing MUDs) should be made by the people, not a board,” Bunch said. “The home rule charter committee should mandate any MUD absorption be fully approved by a vote of the people.”

McMullan echoed Bunch’s comments, saying there is no obligation to absorb the MUDs at this time, or even if the township does incorporate.

“Some of what we thought we knew at the beginning of this process we’ve learned isn’t true,” McMullan added.

James Stinson, general manager of the WJPA, was at the meeting and afterward he said he was pleased with the recommendation that the township not absorb the MUDs if it does eventually incorporate.

“It looked to me like it was a thorough and accurate evaluation, and I respect the township’s decision. We appreciate the opportunity to continue to serve the community,” Stinson said. “If you have a MUD that’s paid off its debt and its tax rate is less than 10 cents, and you have MUDs that still have outstanding debt and a tax rate somewhere above 20 cents, you can see the disparity there and I do not know how to make that equal.”

Stinson said he and other officials were ecstatic at the level of involvement and MUD personnel that showed up at Thursday’s meeting.

“We had encouraged our directors to come and participate, and we had a great turnout,” he added. “From our standpoint, we appreciate the oppportunity to continue to serve the community.”

Directors cancel one Wednesday meeting

At the end of the meetings on last Thursday, township board members decided to cancel the 4 p.m. incorporation planning session scheduled for Wednesday, Sept. 26, because a public forum was scheduled for Tuesday night, Sept. 25, at The Woodlands Waterway Marriott. The three-hour public forum is solely focused on incorporation issues.

The board will still meet at 6 p.m. on Wednesday, Sept. 26, for the regular meeting about township business.

jeff.forward@chron.com

AP RADIO
Update hourly