A property in a Texas Municipal Utility District (MUD) has a significantly higher tax rate than a comparable property inside city limits. A buyer asks the license holder to explain. Which response is most accurate?
Correct Answer
C) MUD tax rates fund infrastructure debt (water, sewer, roads); as debt is paid off, rates typically decrease
MUDs are special-purpose taxing districts created to finance infrastructure for new developments. The MUD issues bonds to build water, sewer, and road infrastructure, and levies taxes to repay those bonds. As bonds are retired, rates may decrease. MUD taxes are in addition to county, school, and any other applicable taxes.
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