Consolidation of Local Governments: Proposals & MUD/PID Financial Impact

Posted by April Reiling on May 30, 2013
Tags: Community, Town News, Government, Government Consolidation

The following article is a continuation of the May 20, 2013 public announcement from the Town Council proposing to consolidate the two local governments in Trophy Club.

Background - How Did We Get Here?

In November 2007, the Town entered into a contract with TC MUD 1 to purchase wholesale water and wastewater services so that in turn, the Town could provide retail water and wastewater services to the residents who live in the Public Improvement District (PID). Last year, MUD 1 approached the Town to develop a PID Committee that would review the existing contract and explore other options for providing utility services to the PID. After the initial meeting, the PID Committee (made up of two MUD 1 Board Directors, two Council Members, the MUD 1 District Manager and the Town Manager) had a basic understanding about how the proposed agreement for the PID residents would operate. MUD 1 subsequently took the lead to propose a draft agreement.

On March 22 the MUD presented an Interlocal Agreement for Retail Water and Wastewater Service to the PID  that outlined a very different proposal than what was previously agreed upon during the PID Committee meeting. Upon review, the initial proposal was rejected by the Town Council for several reasons:

  1. Upon the proposed contract expiration, MUD 1 would own all water and wastewater infrastructure located in the PID.
  2. The proposal provides that MUD 1 would collect 100% of all water and wastewater utility revenue.
  3. The PID water and wastewater infrastructure owned by the Town is valued at  approximately $9 million.  MUD 1 proposed to lease the PID infrastructure for $10 per year for 24 years, at which point MUD 1 would take ownership. In other words, for $240, the MUD would own all PID water and wastewater systems and infrastructure at the end of the contract.
  4. MUD 1 would have sole discretion regarding management, including modifications, made to the PID water and wastewater infrastructure. (3.05 b)
  5. Even though MUD 1 would pay for improvements in the MUD 1 district, any improvements made to the PID would be funded by the Town/Developer. (3.06)
  6. The Town would be solely responsible for any repairs or improvements in PID infrastructure that exceeded $25,000. (3.07)
  7. MUD 1 could establish a separate out-of-district customer class with separate rates. (3.13 b)
  8. MUD 1 could seek water and sewer certificates of convenience and necessity (CCN), without Town intervention, which would allow for a permanent monopoly in water and wastewater service to the PID. (3.10)
  9. The proposal would provide that the Town pay for all ancillary costs associated with this agreement (election costs, title insurance upon conveyance, etc.

The proposal submitted by MUD 1 highlights the many inefficiencies and bureaucratic roadblocks between the two local government organizations. The Town Council delivered a Strategic Partnership Agreement (SPA) as a counter-proposal on May 20 to both MUD 1 and the Town of Westlake. The SPA proposes a retail water and wastewater service agreement to the PID by MUD 1 and a three-year transitional period to consolidate the Town and MUD 1 into one local government. As Mayor White pointed out recently, "The TC MUD 1 board has provided quality utility services for both communities; but we have always discussed merging when the time is right. That time is now."

Financial Impact on MUD & PID Residents

A question every resident should ask is, "If the Town and MUD combined, how would my taxes be impacted?"

Combining the two municipal governments in Trophy Club would create one municipal taxing authority, and therefore one equal tax base, regardless of where you live in town. We do not expect the combined taxes of the MUD 1 and Town to go up due to the consolidation, but becoming a full-service township requires that the taxes collected by MUD 1 roll into the Town's ad valorem tax rate. Overall we anticipate a savings, however, the Town staff, Tax Assessor Collector and Appraisal District are currently working on a mock scenario regarding the financial impact to Trophy Club residents, which we will publish upon completion.

MUD Residents
  MUD Tax The MUD 1 tax would be absorbed by the Town and folded into the Town's ad valorem tax rate 
  Town Property Tax The property tax rate would be calculated using a formula that balances the cost for ALL municipal services equally for ALL residents
  Fire Service The cost for fire service would be spread equally among all Trophy Club residents (MUD & PID residents)
     
PID Residents   
  PID Property Assessment The PID property assessment would not be affected
  Town Property Tax The property tax rate would be calculated using a formula that balances the cost for ALL municipal services equally for ALL residents
  Fire Service  PID residents would no longer have an Emergency Services Assessment, which allows residents to write off their entire tax bill (the Emergency Services Assessment is currently not legally tax deductable) 

We will continue to update our citizens with additional information as it becomes available. If you have any questions that you would like answered privately, please email us at unitetc@trophyclub.org.