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 that 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 newer 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 they pass on this 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.
Typical MUDs range from 200 to 400 acres, with the District covering water, sewer and drainage facilities. Some MUDs also cover major roading thoroughfares, and also parks and recreational facilities. They result in masterplanned communities where the community’s residents bear the costs of their infrastructure and take over the management of their infrastructure. There are more than 900 MUDs in Texas, with many of them sitting outside city limits in extraterritorial jurisdictions (ETJ) where municipal services are not provided.
MUDs are created under the authority of the Texas Commission of Environmental Quality (TCEQ). 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. 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.
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 collected after the original bonds are paid off would be to maintain services.
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.
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.
The MUD is a political entity that can levy taxes, but a PID is not a political entity and a PID uses assessments to pay off the bonds.
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 (listed as MUD04) are almost 33% of the total property taxes for this property!
The various online Tax Appraisal Districts (links below) will reveal if MUD or PID taxes apply. Many times, communities with PID's or MUD taxes, have slightly lower competitive home pricing to reflect the added tax burden.
A good Dallas real estate agent can help you learn more about MUDs in Texas. Call us today at 469-269-6541!
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 an assessment 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. A homeowner would know the annual assessment bill at the time of purchase.
The PID assessment, once repaid, is never charged to that property again. The PID Assessment can be prepaid at any time or over a period of number of years. The PID Assessment amount varies by lot size.
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
Here is a sample tax bill with PID assessment included in it for Mustang Lakes.
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
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 TIF district is an economic redevelopment tool used by communities to spur investment in new development or improvements in a particular geographic area. 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.
When a TIF district is established, the “base” amount of property tax revenue is recorded using the status quo before improvements. To the extent such efforts are successful, property values rise, leading to an increase in actual property tax receipts above the base. While the base amount of property tax revenue (the level before redevelopment investments) continues to fund city services, the increase in tax revenue is used to pay bonds and reimburse investors and is often captured as city revenue and allocated toward other projects.
Alternatively, municipalities can issue bonds, backed by the expected TIF revenue, in which case the TIF proceeds are used to pay back the bonds. The incremental increase in sales taxes in the district can also be either captured by the district as revenue or used to pay back the bonds. The lifespan of most TIF districts typically range from 20 to 30 years—enough time for incremental property tax increases (due to increases in assessed property values) to pay off the initial improvements.
Planned Development District
A Planned Development District (PDD), is a type of zoning district in a city but unlike the other zoning districts, PDD's can be very unique from one another. A PDD is custom made by developers, residents and/or the City etc. E.g. there are 1,000+ PDDs in the City of Dallas with different shapes and sizes. It is important to also know that each PDD can be split into multiple subareas, also called tracts, and can have different zoning requirements for each tract.
The (PDD) Planned Development District is intended to provide for combining and mixing uses into integral land use units such as industrial parks; industrial, office and commercial centers; residential developments with multiple or mixed housing types; or any appropriate combination of uses which may be planned, developed or operated as integral land use units, whether by a single owner or a combination of owners.
PDD boundaries and composition are decided and adopted by the City Councils.
Here is a link to PDD Map for City of Dallas
Here is a map of a sample PDD in city of Dallas. Click on the map for details about this PDD.
What is a PUD?
The term “PUD” is the abbreviation for “Planned Unit Development.” A Planned Urban Development is akin to a small self-contained town. PUDs often take the form of a condominium building, but also include single-family and townhome communities. PUDs usually include several amenities and can include both residential and commercial units A PUD property may be an attached or detached single family dwelling within a project or subdivision that typically involves a cluster of attached or detached homes with common shared spaces such as walkways, cul-de-sacs, walking trails, parks, playgrounds, club houses, recreation centers or other types of mixed property use.
The secondary market (HUD, GSEs, etc.) defines a "PUD" development as a development where membership in a HOA/POA is mandatory and where there is a mandatory fee paid by the property owner to that association. Contrary to popular belief, the zoning district of the property is actually irrelevant. In the context of the secondary market definition, a "PUD" could exist in any zoning district.
How is a PUD Different from an HOA?
There are several similarities and differences between a PUD and an HOA. A PUD is a community in which individual unit owners have ownership of their home, their lot, and the common area. The difference between an HOA-run condo townhome and a PUD townhome is who owns the land on which the structure sits.
In a condo situation, the association owns the land. In a PUD, the homeowner owns the land and is free to use the land more or less when and how they wish. Although, as within an HOA community, the PUD may come with certain rules that the homeowner must abide by in order to maintain a certain standard within the community.
A PUD is operated by an HOA and, as such, it is governed the same as any other HOA community. All residents are required to pay fees and abide by community rules. It is important for potential buyers to know that PUDs do not have to be FHA approved; only condominiums need FHA approval.
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.