What Are Mud Taxes?

Municipal utility districts are legal entities established in Texas under the authority of the Texas Commission of Environmental Quality. MUDs are created when the TCEQ approves a petition submitted by property owners or developers planning to build a subdivision. A MUD bears the legal and financial responsibility for providing infrastructure and related services. To that end, MUDs are granted taxing authority.

What MUD Taxes Do

MUD taxes are ad valorem taxes. That is, a MUD tax is a property tax. The amount of tax a property owner pays depends on the assessed value of the property and the rates set by the MUD. The revenue from MUD taxes is typically used to pay for bonds issued to finance infrastructure projects. Providing water, sewer and solid waste disposal services are typical MUD functions. MUDs also build, operate and maintain other projects. These can include conservation efforts, firefighting, irrigation infrastructure and electric power generation. MUDs can also furnish recreational facilities, such as parks, sports venues and swimming pools.