MUD taxes in Texas: municipal utility districts and the notice to purchasers
A municipal utility district (MUD) is a Texas district that may build and operate facilities to supply water, to collect and dispose of wastes, and to control local storm water. A home in a MUD may pay the district's tax as well as the county and school district taxes, and each district sets its own rate. This page covers how a MUD is created and starts to tax, how its rate is set and when voters decide, the notice to purchasers that a seller gives the buyer, and how to find a district and its rate. Every fact comes from a Texas statute, a TREC form, or the website of TREC, TCEQ, or the Comptroller, and links to its source.
Every fact links to its source. Checked Oct 9, 2026
What a MUD is and how its taxes start
A municipal utility district (MUD) may be created under Article XVI, Section 59, of the Texas Constitution. A MUD may buy, build, own, and operate works and facilities inside and outside its boundaries, including those needed to supply water, to collect, process, and dispose of wastes, and to control local storm water. (Source: Texas Statutes)
A petition to create a MUD, signed by a majority in value of the holders of title of the land in the proposed district as the central appraisal district's tax rolls show, is filed with the Texas Commission on Environmental Quality (TCEQ). TCEQ grants the petition if it finds that the petition meets the requirements of Water Code 54.015 and that the project is feasible and practicable, necessary, and a benefit to the land. Among other things, TCEQ considers the reasonableness of the projected construction costs, tax rates, and water and sewer rates. (Source: Texas Statutes)
A MUD issues no bonds payable wholly or partly from ad valorem (property) taxes, other than refunding bonds, until a majority of the district's resident electors voting at an election called for that purpose authorize them. The board may issue bonds payable solely from revenues without an election. (Source: Texas Statutes)
When the district issues bonds payable from taxes, the board levies a continuing direct annual ad valorem tax on all taxable property in the district for each year the bonds are outstanding, enough to pay the interest, create a sinking fund for the principal, and pay the expenses of assessing and collecting the taxes. The board levies a tax in the first full year after it issues its first series of bonds. (Source: Texas Statutes)
A district may levy and collect a tax for operation and maintenance, including for planning, building, maintaining, and operating its facilities and for its administrative expenses. It may not levy this tax until a majority of the electors voting at an election held for that purpose approve it. The proposition on the ballot is for a stated maximum rate per $100 of valuation of taxable property, or for an unlimited rate. A district's authorization from its voters to issue bonds remains in effect after the election unless the district is dissolved. (Source: Texas Statutes)
How the rate is set and when the tax is due
Counties and school districts tax all nonexempt property in their area. A home may also pay a city and special districts, such as a hospital, junior college, or water district, and each of these sets its own tax rate. (Source: Texas Comptroller)
When a district's board adopts a combined debt service, contract, and operation and maintenance tax rate, the election rules depend on the district. A low-rate district is one whose adopted operation and maintenance rate is 2.5 cents or less per $100. For a low-rate district, if the combined rate would impose more than 1.08 times the district's tax of the preceding year on a residence homestead at that year's average appraised value, an election is held to approve the rate. If the voters do not approve the adopted rate, the district's rate is the voter-approval tax rate. (Source: Texas Statutes)
A developed district is one that has financed, completed, and issued bonds for the facilities to serve at least 95 percent of its projected build-out. A developed district that is not a low-rate district holds an election when its adopted combined rate is above both its mandatory tax election rate (the rate that would impose 1.035 times the district's tax of the preceding year on a residence homestead at that year's average appraised value, plus the unused increment rate) and its voter-approval tax rate. If the voters do not approve the adopted rate, the district's rate is the voter-approval tax rate. (Source: Texas Statutes)
If, during the current tax year, the governor or the President declared a disaster area that includes part of a developed district, its board may use the 1.08 test and the voter-approval tax rate of a low-rate district for a limited time. For any other district, if the combined rate would impose more than 1.08 times that tax, the qualified voters may, by petition, require an election to reduce the rate to the voter-approval tax rate. (Source: Texas Statutes)
The assessor for each taxing unit prepares a tax bill and mails it to each person in whose name the property is listed on the tax roll, and to that person's authorized agent, by October 1 or as soon after as practicable. (Source: Texas Statutes)
Taxes are due when the owner receives the tax bill, and they are delinquent if not paid before February 1 of the year after the year they are imposed. (Source: Texas Statutes)
Paragraph 13 of the TREC resale contract, TREC No. 20-19, prorates the current year's taxes, interest, rents, and regular periodic maintenance fees, assessments, and dues through the Closing Date. The tax proration may take into account a change in exemptions that will affect the current year's taxes. If the current year's taxes differ from the amount prorated, the parties adjust when the tax statements are available. If the taxes are not paid at or before closing, the buyer pays the current year's taxes. (Source: TREC)
The notice to purchasers
Water Code 49.452 covers a district governed by Local Government Code chapter 375, and a district created under Water Code Title 4 or a special act whose main function is water, sewer, drainage, or flood control facilities or services financed with bonds payable from its taxes or with a standby fee, and that includes less than all of a county (with a further size limit inside a city). (Source: Texas Statutes)
A seller of property in a district this law covers gives the buyer the written notice to purchasers before the contract is signed, separately or as an addendum or paragraph of the contract, and the buyer signs it. If the contract is signed without the notice, the buyer may terminate the contract. A buyer who gets the notice at or before closing and closes waives that right. At closing, the seller and the buyer sign a separate copy of the notice with current information, which is acknowledged and recorded in the county deed records. (Source: Texas Statutes)
The notice to purchasers has the title "NOTICE TO PURCHASER OF SPECIAL TAXING OR ASSESSMENT DISTRICT" in at least 24-point bold type. As they apply to the district, its statements say that the property is in the named district and may be subject to district taxes or assessments, and that "The district may, subject to voter approval, impose taxes and issue bonds. The district may impose an unlimited rate of tax in payment of such bonds." (Source: Texas Statutes)
As they apply to the district, the notice also states the current district property tax rate on each $100 of assessed valuation or, if the district has not yet imposed taxes, the projected rate. It also states the total amount of bonds payable wholly or partly from property taxes that the voters approved, and the total initial principal amount of those bonds issued, each listed for water, sewer, and drainage facilities, road facilities, parks and recreational facilities, and any other facilities, with the exclusions the form names. (Source: Texas Statutes)
Where it applies, the notice states that the district got TCEQ approval for a standby fee, the amount of the fee, that an unpaid standby fee is a personal obligation of the person who owned the property when it was imposed and is secured by a lien on the property, and that any person may request from the district a certificate of the unpaid standby fees on a tract. A standby fee is a charge, other than a tax, on undeveloped property for the availability of potable water, sanitary sewer, or drainage facilities and services. (Source: Texas Statutes)
The notice also states the purpose of the district and that "The cost of district facilities is not included in the purchase price of your property." In capital letters, it tells the purchaser that the information is subject to change by the district at any time, that the district sets its tax rates each year, and to contact the district about current or proposed changes. The seller and the purchaser date and sign the notice. (Source: Texas Statutes)
TREC's contracts page lists the Notice to Purchaser of Special Taxing or Assessment District, TREC No. 59-0, with an effective date of February 12, 2024. (Source: TREC)
How to find a district and its rate
A district covered by Water Code 49.452 posts signs at two principal entrances to the district. It files with the county clerk of each county it is in, and with TCEQ's executive director, an information form and a map or plat of its boundaries. The form includes the district's most recent tax rate, the bonds the voters approved, the tax bonds it has issued, any standby fee, and the completed notice to purchasers. The district files an amendment within 7 days after any of this changes. (Source: Texas Statutes)
On written request, the district issues the completed notice form. It may charge a fee of not more than $10 and, for delivery by another method that the requester asks for, not more than the actual cost of that delivery. A district that must keep a website under Tax Code 26.18 posts the notice on that website, or creates a process for posting it there. (Source: Texas Statutes)
Sellers, title companies, real estate brokers, and examining attorneys may rely on the form and map last filed, or on a notice form the district issued, to complete the notice signed at closing. For the notice before the contract, information from the form on file on January 1 is conclusively presumed correct from January 1 through December 31 of that year. The seller may give more recent information but has no duty to. (Source: Texas Statutes)
TCEQ's Water Districts Map Viewer lets you search and view water districts on an online map, and it links to the Integrated Water Districts Database (iWDD) for more detail. TCEQ says the viewer is for informational purposes and may not be suitable for legal, engineering, or surveying purposes. It is not an on-the-ground survey, and it shows only the approximate relative location of property boundaries. (Source: www.tceq.texas.gov)
The chief appraiser of each appraisal district keeps a public property tax database, searchable by property address and owner except where the law restricts access. For each property, it shows the name of each taxing unit in which the property is located, each unit's proposed tax rate, the taxes each unit would impose at that rate, and a link to each unit's website. (Source: Texas Statutes)
Texas.gov/PropertyTaxes lists each of these databases and helps an owner find the right one. Each taxing unit posts on a website its adopted maintenance and operations and debt service tax rates for the preceding two years and its proposed rates for the current year. (Source: Texas Statutes)
Not on this page
The tax rate, the bonds, and any standby fee of one district: the district's notice to purchasers (from the district, its website, or its information form at the county clerk), the property tax database for the property's county at Texas.gov/PropertyTaxes (the tax rate only), or the district's tax assessor and collector.
A typical MUD tax rate: Reddy has none. Each district sets its own rate each year.
The notice of the hearing on a district's proposed tax rate (Water Code 49.236): read the section.
The notice's statements about a city's corporate limits or extraterritorial jurisdiction and a strategic partnership agreement, and the annexation or dissolution of a district by a city: read the statute.
A buyer's suit for damages when a sale does not comply with the notice rule (Water Code 49.452(n) to (s)): read the section, or ask an attorney.
A district created by a special Act of the legislature: read that Act, and Water Code 49.002 for how chapter 49 applies to it.
How TREC No. 20-19 refers to the statutory tax district notice (Paragraph 6E(3)) and the title policy exception for standby fees, taxes, and assessments (Paragraph 6A(2)): read the contract.
A statewide list of special district total tax rates for a past year, and the bond and tax rate elections that taxing units report: the Comptroller's Tax Rates and Levies page and its Local Government Bond, Tax and Project Database.
Reddy handles the paperwork side of real estate: deadlines, documents, drafts, and reminders. Ask it something like:
“This home is in a MUD. Remind me to have the buyer sign the notice to purchasers before the contract is signed.”
“Read this Notice to Purchaser of Special Taxing or Assessment District and tell me the tax rate, the bond amounts, and any standby fee it states.”
“Draft a short email to my buyer that explains the MUD tax on this notice and tells them to contact the district about current or proposed rate changes.”
