What is the Difference Between a PID, MUD and a TIF in North Texas
Dallas Fort Worth (DFW) area is home to some of the largest master planned communities and subdivisions in the country. Availability of abundant land, world class infrastructure that keeps on growing, rising demand due to a strong economy and migration from other parts of the country results in over 30,000 new construction homes built every year in DFW. These master planned communities have a lot of amenities like parks, streets, trails etc.
These communities are developed by developers like Hanover Property Co., Hines & Trammell Crow Company buy hundreds of acres of land and “develop” this land by planning the master planned communities and developing them after approvals from the cities. This includes adding utilities, streets, developing lots etc. If you are moving to Allen, Celina, Frisco, Lucas, McKinney, Murphy, Plano, Prosper, Wylie or any other city in North Texas, make sure that you understand how MUD, PID or TIF can impact you! A top Dallas real estate agent can help you learn more about these taxes and a top Dallas real estate agent can identify whether a community has a PID or MUD assessments so that you can avoid an expensive surprise.
WHAT ARE PIDS AND MUDS in North Texas?
PIDs and MUDs are used by developers to raise funds for the needed development of these communities including the utilities/amenities and pass on the cost to the final homeowners in the form of additional taxes that are paid over 20-40 years after a community is developed and sold. So it is important for new home buyers in Texas to understand about MUDs and PIDs (two financing mechanisms for developers) and not have a surprise after closing as these can impact the cost of owning a home in Dallas, Texas.
A MUD IS A “MUNICIPAL UTILITY DISTRICT” OR AN OFFICIALLY CLASSIFIED POLITICAL SUBDIVISION OF THE STATE OF TEXAS
A Municipal Utility District (MUD) is one of several types of special districts that function as independent, limited governments. MUDs are generally found in new communities that are developed outside of normal city limits where there is lack of basic infrastructure or utility services are not provided by the city. A MUD provides vital infrastructure to the community such as water, sewer, drainage, roadwork, landscaping and related services. A MUD is local, it serves the local community and is readily available to residents. Because all decisions are made locally, a MUD is able to respond to a community’s unique needs.
MUDs are created under the authority of the Texas Commission of Environmental Quality (TCEQ) and provide water, sewage, drainage or other utility-related services to new developments.
MUDs are regulated by the state, require a local election to issue bonds, and exist separately and out of the control of a city or county government.
Debt service on MUD bonds come from property taxes. The homeowners within the MUD pay off the bonds and pay for utility services through a MUD tax. A MUD tax will be in lieu of a city tax. In theory, a MUD tax will go down over time because the initial infrastructure costs are eventually repaid, so only money to maintain services would be collected after the original bonds are paid.
The only way a MUD tax is eliminated is if the MUD area is annexed by the city. If this happens, the city pays off the MUD debt and the utility payments are paid to the city.
The MUD is a political entity that can levy taxes, but a PID is not a political entity.
MUDs support economic development by boosting local economy and the creation of new jobs. MUDs also offer advantages that attract new businesses to the area.
A few recent North Texas master planned communities that are MUD neighborhoods include Trinity Falls (McKinney), Light Farms (Celina), Artesia ( Prosper). The following table shows the MUD taxes for a home in Forney, TX in Kaufman County listed on the Kaufman County Appraisal District website. You can see that the MUD taxes are almost 33% of the total property taxes for this property! A good Dallas real estate agent can help you learn more about MUDs in Texas. Call us today!
A PID IS A “PROPERTY IMPROVEMENT DISTRICT”
A PID is a special district created by a city or county under the authority of Chapter 372 of the Texas Local Code. This law allows a city or county to charge a tax against properties within the designated area, or district, to pay for improvements. PID debt service comes from an initial assessment that does not change over time. PIDs can be used to finance the same infrastructure a MUD would finance but are more commonly used to fund additional infrastructure items.
PID Improvements Typically Include:
Additional open space
Lakes and fountains
Improved city parks
Distinctive entries and various recreational and pedestrian improvements
Some developers will use a PID instead of an HOA to fund infrastructure within a development. One reason for using a PID rather than an HOA is that PID assessments are tax deductible whereas HOA dues are not. Most PID assessments run 20-40 years and payments end when the bonds are paid. PID assessments can also be paid in full up-front by a buyer.
Although PID bonds are issued by cities or counties, they are special assessment revenue bonds backed only by assessments and not by the local government's general obligations. They carry separate ratings from the government's credit.
Here is a list of PIDs in North Texas as of 2020:
There are no Public Improvement Districts within Allen currently. Any data regarding the requirements associated with the creation and management of a Public Improvement District can be found in Chapter 372 of the Local Government Code, available here.
-Downtown Business Improvement District applies to commercial properties only
-Arlington Tourism Public Improvement District applies to hotels 75 or more rooms only
-Viridian Public Improvement District created by the Viridian Municipal Management District, not the City.
City of Arlington does not have any residential PIDs.
Here is a list of the City of Celina PIDs:
The Lakes at Mustang Ranch
Creeks of Legacy
The Parks at Wilson Creek
Sutton Fields II
G Bar 7/Glen Crossing
Chalk Hill II
Glen Crossing West
Wilson Creek Meadows
Mustang Lakes Annex
More information is available here
601 Fort Worth PID #1 (Downtown)
605 Fort Worth PID #6 (Park Glen)
608 Fort Worth PID #7 (Heritage)
613 Fort Worth #11 (Stockyards)
615 Fort Worth PID #12 (Chapel Hill)
616 Fort Worth PID #6 (Commercial)
617 Fort Worth PID #7 (Heritage Commercial)
621 Fort Worth PID #14 (Trinity Bluff)
640 Fort Worth PID #20 (East Lancaster)
The Town of Flower Mound currently has one PID, in the River Walk at Central Park development. A map of its boundaries is located here.
The Town does not have any formal requirements for builders regarding how a potential homebuyer is informed the property they are interested in is part of a PID. However, the PID paperwork is part of a homebuyer’s closing documents.
The following webpage has the information.
Garland doesn’t have any PIDs at this time.
632 Haslet #2 (The Bluffs Fee Based PID)
633 Haslet #3 (North Glenn Fee Based PID)
634 Haslet #4 (Regal Ridge Fee Based PID)
636 Haslet #6 (Caraway)
The City of Plano has two PIDs and plans to approve another in a few months.
The Downtown Plano PID was established by a petition of the property owners (approx. 55) in Downtown. This PID helps Downtown fund events and marketing. The other PID, and the future one, cover the 99 acres of the Collin Creek Mall. Again, established by petition.
Bridges of Las Colinas
The Town of Prosper does not have any Public Improvement Districts (PIDs).
No such areas.
TAX INCREMENT FINANCING DISTRICTS (TIFS)
A Tax Increment Financing district (TIF) is a special purpose district; a way for the cities to reinvest added tax revenue from new development back into the area where it originated. The TIF program is used to finance new public improvements in designated areas. The goal is to stimulate new private investment and thereby increase real estate values.
Any increase in tax revenues (caused by new development and higher property values) is paid into a special TIF fund to finance improvements. Potential improvements include wider sidewalks, utilities, public landscaping, lighting, environmental remediation, demolition, and historic facades etc.
North Texas PID FAQ
What are PID Assessments?
What are PID Taxes in Texas?
PID Assessments are payments made to cover the costs associated with improvements and services in the District. Haslet PIDs are the type that are known as a fixed assessment that is allocated to each lot located within the District to pay for improvements that provide a special benefit to the properties within the District.
Can you provide an example of PID in North Texas?
Mustang Lakes is located in a PID (Public Improvement District) – which is a special governmental entity created by the State of Texas that allows cities to fund public infrastructure through the sale of bonds. The Mustang Lakes PID will construct infrastructure to supply water for homes and fire protection, sanitary sewer, storm drainage, and public streets. Unlike other governmental districts, such as MUDs, PIDs are within the city limits and that ensures Mustang Lakes residents will always be entitled to standard city services.
What do the PID Assessments pay for?
The fixed assessments levied against properties in the public improvement districts pay for improvements to the properties that may include: Roads, Water Distribution Lines, Wastewater Collection Lines, and Drainage Improvements, Landscaping and Irrigation, Trails, Parks, Open Space, and Monuments and Entry Features. Each PID document lists the improvements to be paid for by that district's assessment.
How are the PID Assessments calculated?
Fixed assessments are based on size of the lots located within the District.
How do residents pay their assessments?
PID Assessments can be paid in full at any time by contacting the City's Finance Department or through annual installments in conjunction with your annual property taxes. Generally residents may pay their annual PID Assessment along with their regular ad valorem tax payment.
Is a Public Improvement District (PID) and a Homeowner’s Association (HOA) the same thing?
No, they are different. Here is a comparison of the two entities:
Type of Property Maintained Public Private
Governed by City Council Yes No
Deals with Deed Restrictions No Yes
Enhances Public Property Maintenance Yes No
Collect through Mortgage Payment Yes No
Cash Held in Separate City Fund Yes No
PID Expenses Exempt from Sales Taxes Yes No
North Texas MUD FAQs
WHAT IS THE BENEFIT OF HAVING NO MUD TAXES?
They say there are two guarantees in life: death and taxes. Taxes are a huge factor when considering where to live, from which city and even down to which neighborhood. E.g. Windsong Ranch offers one of the lowest tax rates and the highest quality lifestyle available in any master-planned community in North Texas. Windsong Ranch residents only pay standard city, school and county taxes. No MUD or other special utility taxes.