What is a municipal bond?
Municipal bonds are a long-term funding mechanism that allow municipalities to develop various types of infrastructure, such as roads, utilities, and facilities.
How do municipal bonds work?
Municipalities receive a credit rating from a third-party agency who reviews their financial history and publish an opinion detailing various aspects of the municipality so investors can make an educated decision on purchasing bonds from that particular municipality. (Moody’s recently upheld their rating for San Leon as a mid-level, long-term investment.) When a municipality wants to sell bonds, they are advertised on the open market for a period of time and different investors or investing groups supply bids for those bonds. After the financial advisor has reviewed the bids, a recommendation is given for the best deal that grants the municipality the funds requested without being burdensome on repayment schedule or interest rates. Once sold, the bond funds are placed in a special account that can only be utilized for work detailed in the bond. The bonds are then repaid over time through tax revenues. Bonds also include a period of capitalized interest in the total amount to delay the impact on taxes, allowing for development to increase the tax base and additionally decrease the impact of the additional debt obligation.
Why is San Leon asking for additional bonds?
Over the years, the development of San Leon has resulted in increased flows at the wastewater plant. The deterioration of our aging sewer pipes has also allowed a significant amount of rainwater and groundwater, called inflow and infiltration (I&I), to get into the wastewater plant. This has caused us to exceed the amount of permitted flow we’re granted by the state regulatory agency, the Texas Commission on Environmental Quality (TCEQ). While the District has done significant amounts of repair to the system using funds from the 2017 bond in an effort to hold off expansion of the wastewater plant, we’ve only seen minimal decreases in the amount of I&I at the plant. As a result, we’ve been required by the state to begin design and development of a wastewater expansion to accommodate the flows we’re currently processing. The proposed plant expansion will cost nearly $20 million, with additional bond funds to be used for projects such as $5 million dedicated to upgrade the 2” water lines that have been a hindrance on tap capacity and development, $5 million for rehabilitation and replacement projects on much of our sewer system to continue reducing the I&I, and close to $3 million for improvements at our facilities to increase efficiency. The remaining bond funds cover the legal and regulatory origination fees plus one year of capitalized interest payments for the bond.
What happens if the bond election doesn’t pass?
In the event the District is unable to secure funding for the expansion, TCEQ will begin imposing fines on the District for non-compliance. (They’ve not done so to date as they know we’re in the process of finding a solution for the excessive flows.) Additionally, they will most likely exercise their right to come down to the District and use state funding to design, construct, and bill the District for the expansion of the wastewater plant. San Leon will have no control over the development process or terms of the repayment, which would have to be repaid however and whenever the state feels appropriate. This debt obligation differs from bond debt because it would have to be repaid via our water and sewer rates, potentially tripling them.
Where can I get more information?
The District will be holding town hall meetings at the San Leon Fire Station April 9th & April 22nd at 6:30 PM and all residents are encouraged to attend to hear from and ask questions of the District’s board members and consultants. Residents can also attend the monthly meeting the District holds at the San Leon Fire Station every third Wednesday at 6:30 PM.
Board meetings are regularly scheduled on the 3rd Wednesday of each month at 6:30 p.m. at the San Leon Volunteer Fire Department 337 12th Street, San Leon, Texas 77539. Meetings are conducted in accordance with the Texas Open Meetings Act and Robert’s Rules of Order. Residents of the San Leon MUD are welcome to attend and observe. A Board of five (5) Directors, elected by the voters in the District, manages and controls all of the affairs of the San Leon MUD under the guidance and supervision of the Texas Commission on Environmental Quality (TCEQ). The Board establishes policies and lawfully enforceable ordinances in the interest of its residents and utility customers. San Leon MUD may adopt, enforce and collect all necessary charges and fees in order to provide and maintain District facilities and service. The Board of Directors of the San Leon MUD is a duly authorized government under the laws of the State of Texas. Like all elected public officials, their eligibility for this office, their term, conduct and responsibilities are set by law.
Joe Manchaca, President, May 2022
Tyson Kennedy, Vice President, May 2022
Kenneth Bishop, Treasurer, May 2020
Kelly Neason, Asst. Secretary, May 2022
Keith Gossett, Secretary, May 2020
What is the San Leon Municipal Utility District (MUD)?
The San Leon Municipal Utility District (MUD) is a political subdivision of the State of Texas. It is a government authorized to provide water, sewage and other services within the MUD boundaries or “District”. The MUD is responsible for constructing, maintaining and operating the physical plants, systems and procedures that provide these services. The standards for these services are set and supervised by the Texas Commission on Environmental Quality (TCEQ). Texas laws and statutes, including the Texas Water Code, Texas Government Code and others are the authorities by which the MUD is empowered and by which it operates.
How does the MUD work?
Board of Directors; elected by the voters in the District, manages and controls all of the affairs of the MUD under the guidance and supervision of the Texas Commission of Environment Quality (TCEQ). The Board establishes policies and lawfully enforceable ordinances in the interest of its residents and utility customers. A MUD may adopt, enforce and collect all necessary charges, fees and taxes in order to provide and maintain district facilities and services.
Can I have a say in how the Board manages the MUD or in the decisions it makes?
The Board holds regularly scheduled monthly meetings, special and workshop meetings when necessary. Board meetings are conducted under the Texas Open Meetings act and Robert’s Rules of Order. Residents of the District are welcome to attend the meetings. If a resident has an issue or matter to present to the Board, he or she must contact the District office prior to a meeting to be placed on the agenda.
What about MUD taxes?
As a government, the MUD is authorized to raise taxes. MUD tax rates, like all property tax rates, vary according to property values and debt requirements. Initial construction of MUD facilities and replacement of obsolete or exhausted facilities is paid for by bonds (a form of borrowing). The MUD collects taxes from property owners who are served by those facilities to settle or “pay off” the bonds. In general, the day to day cost of operating the facilities, i.e. providing the water, sewer and related services is paid for from the fees the MUD collects for permits, inspections and the revenues from the sale of water and sewer services.
Can the MUD provide for parks, pools and recreation facilities?
In addition to their common functions of water and wastewater service, MUD’s are legally empowered to engage in conservation, irrigation, electrical generation, firefighting, solid waste collection and disposal, and recreational activities (such as parks, swimming pools, and sports courts). A MUD can even commission a police department.
Does the MUD make a profit by selling water and sewer services?
No. The MUD is not a business. Like any other government agency that collects revenues, it is only permitted to collect what it needs to operate.
There are only 2 people in my home but my bill is always the same amount. Why is that?
There is a minimum charge for water and sewer for each meter in the District. The minimum is based on two thousand gallons (2,000). If you use less, you still must pay the minimum amount. If you use more than the minimum, your bill will increase.
What if my water meter fails?
If the water meter were to fail, it might restrict or block the water from getting to your building. But it CAN NOT register more water than passes through it. In other words, if the measuring mechanism fails, it will just stop measuring, it will not count more water than you receive.
Where does the water I purchase from the MUD come from?
The San Leon MUD purchases the water it delivers to you from the Gulf Coast Water Authority. It is surface water (not well water) and is processed and treated under strict supervision of the Texas Commission on Environmental Quality (TCEQ) and the U.S. Environmental Protection Agency (EPA). Our planet is 90% water which is constantly being recycled.