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  1. #1
    Join Date
    Feb 2013

    Default Can You Avoid a Municipal Utility District Tax if Not Using City Services

    This questions seems to me like it belongs in the Real Estate forums, but I can't find an applicable sub-category over there, so I'm going to try it here first.

    We are looking at buying a piece of property that has been "released" (for lack of a better term) from an adjoining neighborhood. Long story short, it was originally part of the development, but was then sold to a third party who had plans to sub-divide. Looks like 3rd party plans cratered and ownership reverted to bank (this is speculation on my part - the Realtor forwarded a court order that was the result of a suit by the bank ordering the adjacent community to release the property from all covenants, creeds, and restrictions etc. - basically removing it from the subdivision).

    This area (and the adjacent community) are served by a Municipal Utility District (MUD) and the tax burden is not insignificant. My question is, since the land I am looking at is no longer a part of the adjacent community, if I install a water well and a septic system and am therefore not using any of the developer's utilities, would I then be exempt from the MUD tax?

    Thanks in advance for any insight you can provide.

  2. #2
    Join Date
    Sep 2010

    Default Re: Can You Avoide a Municipal Utility District Tax if Not Using City Services

    Well since you decided to delete the information where we asked WHERE this was all taking place, we would have no idea.

    Most likely unless the municpality would allow you to forgo paying the tax, it's unlikely you can get out of it. Getting excluded from a covenants/HOA is an entirely different thing that vacating tax. Further, it sounds like you aren't really moving the property out of the district just that you want to not pay taxes because you aren't planning to use them. First off, if municipal sewer/water is available, you may not even be legally allowed to put in a private septic system. Second, just because you don't care to use a service is not usually a basis for getting out of paying a tax, even one for a special purpose. I don't use mass transit, but I get stuck with a regional tax for that, etc...

  3. #3
    Join Date
    Feb 2013

    Default Re: Can You Avoide a Municipal Utility District Tax if Not Using City Services

    Thanks for the input. Couple of things.

    First, I didn't delete anything. The property is in Magnolia, Texas and is just shy of 24 acres. My understanding is that a MUD (in Texas, at least) is created to help the developer of a community recoup his investment in utilities services - i.e. water, sewer, etc. - and that when the money has been recovered, the MUD is dissolved. This is also generally the time when the local community annexes the neighborhood in question; they don't do it before, because they don't want to pay the MUD debt, but after the debt is satisfied, they want the tax revenues from the residents. Again, just my understanding from a bit of Googling.

    That having been said, armed with that understanding of a MUD and its purpose - namely to help a developer recover costs of building a neighborhood from residents of said neighborhood through future tax revenues - it seems an easy leap to the conclusion that since the subject property is not, by rule of the court, part of said neighborhood then the tax might not be applicable.

    All of THAT having been said...I'm no lawyer. That's why I asked...

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